Opinion ID: 1940044
Heading Depth: 2
Heading Rank: 6

Heading: The Majority's Reliance on Party Yards

Text: The majority also relies on and approves Party Yards, Inc. v. Templeton, 751 So.2d 121 (Fla. 5th DCA 2000). The court in that case, however, did not have the benefit of the three federal cases I have discussed  Bess, Snowden , and Burden  which are precisely on point and dictate the outcome here. Moreover, the court's analysis is based on the presumption that the contract at issue was illegal (an analysis later rebutted). See 751 So.2d at 123 (The issue here ... is whether a contract that violates state law and is criminal in nature, can be referred to arbitration.). [2] The court expressed the unwarranted fear that without a court determination of the legality of the now-presumptively illegal contract, the court could breathe life into an illegal contract by sending the case to arbitration. 751 So.2d at 123. This simply is not so. In Lawrence v. Comprehensive Business Services Co., 833 F.2d 1159 (5th Cir.1987), the Fifth Circuit rejected a similar argument. The plaintiffs claimed that their franchise agreement, which contained an arbitration clause, was illegal under Texas state law and that if the court ordered arbitration it would `in essence ... effectuate an illegal agreement.' Id. at 1162. The court noted that the argument presumes that the contract is illegal and that presenting the dispute to the arbitrator somehow effectuates an illegal contract. The flaw in the argument is that the legality of the contract has not yet been decided. Id. The court also rejected the plaintiffs' claim that the issue was one of law to be decided by a court because they d[id] not contend that the agreement did not allow the arbitrator to decide purely legal questions. Id. Because there was no attack on the arbitration clause itself, the court held that  Prima Paint requires that their claim of illegality be arbitrated pursuant to the contract. 833 F.2d at 1162. Finally, the court rejected the claim that enforcing the arbitration provision of the allegedly illegal contract would contravene state law, saying that the argument forgets that the arbitrability of an issue under the Federal Arbitration Act is a matter of federal law. Id. Contracts are presumed valid until held to be illegal. In National Railroad Passenger Corp. v. Consolidated Rail Corp., 892 F.2d 1066, 1070 (D.C.Cir.1990), the court held it error to treat an arbitration clause as unenforceable merely because the substantive contract may  if the district court is correct about public policy  be unenforceable.  Citing the FAA's sole exception to arbitration, a flaw in the formation of the agreement to arbitrate, the court explained its holding as follows: For a court to intervene before the arbitrator has determined what the contract means, and what it requires in the particular circumstances of their dispute, because he may determine that it requires the performance of an unlawful act, prematurely disrupts the system of private ordering upon which public policy  as declared in the Arbitration Act and in the Supreme Court cases liberally interpreting it  places maximum possible reliance.... In sum, if parties have validly agreed to submit a dispute to arbitration, we see no reason not to enforce that agreement. If the arbitrator construes the contract so as to require someone to commit an illegal act, a court can then refuse to enforce the arbitrator's decision. A court cannot, however, bypass the arbitration process simply because a public policy issue might arise. Id. at 1071 (emphasis added). The majority here commits the same error as did the court in Party Yards. The majority holds that an arbitration provision contained in a contract which is void under Florida law cannot be separately enforced while there is a claim pending in a Florida trial court that the contract containing the arbitration provision is itself illegal and void ab initio. Majority op. at 861 (emphasis added). Thus, the majority assumes the illegality of the contract in determining that a court should decide the legality of a contract. Under the parties' arbitration agreement, however, that issue is for the arbitrator. Finally, the court in Party Yards relied on cases such as Three Valleys, 925 F.2d at 1136, and Chastain, 957 F.2d 851. As explained above, in each of these cases the parties' assent to the contract was at issue. Here, on the other hand  and in cases such as Bess, Snowden , and Burden  the parties assented both to the contracts and to the arbitration clauses. At their heart, Party Yards and the majority opinion evince a basic distrust of arbitration and place the court as jealous guardian of the determination of legal issues. By endorsing Party Yards, the majority not only disregards controlling federal law and the federal preference for enforcing arbitration clauses, but it has created a new analysis for arbitration claims. Under the express terms of the FAA, a party opposed to arbitration must challenge the making of the arbitration agreement itself. Under the majority's reasoning, the opponent need only allege that the underlying contract violates a state statute or public policy in a way that renders it void. Because the majority's decision contradicts federal law favoring arbitration and fails to follow federal cases directly on point, I respectfully dissent.