Arbitration & Mediation

Tort Claims Continue to Be Arbitrable Despite Complaint Not Referencing Contract

By Christopher B. Hopkins, Esq.

Frequently a plaintiff will bring a tort claim and the defendant will respond seeking arbitration and, for the first time, will interject a contract between the parties into the pleadings. The plaintiff often responds, like in Seifert v. U.S. Homes, that the tort claim has no "significant relationship" or "nexus" to the contract. The court then has to decide whether the tort claim is arbitrable. Key issues involve the breadth of the arbitration clause and the nature of the allegations but, generally, arbitration is enforced. Unless, of course, the defendant waived their right to arbitrate, like they did in the Third DCA's Michael D. Burke v. Windjammer Barefoot Cruises.

We are fairly certain there is a lengthy and interesting story behind this case involving a dispute between a Windjammer Barefoot Cruises, a recreational boat/tourism company, and its former CEO. The opinion gives little facts except that a captain's son was made the CEO and then a dispute arose where the company sought to bar him from the premises. Suit was filed seeking, among other things, a claim of breach of fiduciary duty. Counterclaims were also filed.

The question for the Burke Panel (Cope, Ramirez, and Suarez) was whether the breach of fiduciary duty claim was arbitrable and, if so, was there still an issue of waiver of arbitration. The answer was "yes" and "yes." In Windjammer's complaint (again, which did not attach the employment contract), they stated that Burke was the CEO and delineated his employment responsibilities which mirrored the terms of the employment contract. The Court discussed the Seifert test and concluded that the tort claim arises from and bears a significant relationship to the contract as to mandate application of the arbitration clause. More specifically, the Court held, "[i]n fact, the Employment Agreement created the relationship between Windjammer and Burke. Before the agreement, the parties had no relationship."

The Third DCA compared this situation to a 2001 5th DCA case, Hirshenson v. Spaccio, where a plaintiff sued an investment counselor for various torts when she lost her investment and the court concluded that the dispute by the investor involved the suitability of the investments, an issue clearly related to the contract.

In the end, litigating for five months was deemed waiver but the lesson about tort claims being arbitrable is probably the "take away" message of this case.

Full post as published by Florida Arbitration Law on February 21, 2008 (boomark / email).