Court Opinion

ID: 9925327
Source: CourtListenerOpinion
Date Created: 2024-01-19 15:03:51.413517+00
Date Added: 2024-06-11T09:20:00.831628
License: Public Domain

FIFTH DISTRICT COURT OF APPEAL
                STATE OF FLORIDA
                  _____________________________

                       Case No. 5D22-2859
                   LT Case No. 2022-CA-001062
                  _____________________________

MICHELE PAQUIN, JORDAN
JOHNSON, JUSTIN JOHNSON,
JOEL JOHNSON and JARED
JOHNSON,

    Appellants,

    v.

ANDREW CAMPBELL, LPL
FINANCIAL, LLC and THE
PRIVATE TRUST COMPANY, N.A.,
AS TRUSTEE OF THE MARLENE
MCLEOD REVOCABLE TRUST
DATED APRIL 30, 2008 AS
AMENDED OCTOBER 30, 2018,

    Appellees.
                  _____________________________

Nonfinal appeal from the Circuit Court for Marion County.
Steven G. Rogers, Judge.

Thomas E. Bishop and Alexander Briggs, of Bishop & Mills,
PLLC, Jacksonville, for Appellants.

Gerald A. Giurato and Niels P. Murphy, of Murphy & Anderson,
P.A., Jacksonville, for Appellees.

                        January 19, 2024
WALLIS, J.

      The daughter and four grandchildren of Marlene McLeod
(“Appellants”) appeal a nonfinal order compelling them to
arbitrate their claims against McLeod’s investment advisor and
his employer (“Appellees”), asserting that they were not parties to
the arbitration agreements entered into between Appellees and
McLeod and are not equitably estopped from litigating their
claims. We agree and consequently reverse and remand for further
proceedings.

       McLeod died in 2021 leaving Appellants as her only
surviving heirs. In 2022, Appellants brought a complaint in the
trial court against Appellees alleging tort claims for negligence and
tortious interference with an inheritance, and a claim for
declaratory relief. Appellees motioned the trial court to either
compel arbitration or dismiss the complaint, alleging that
McLeod’s financial accounts were governed by arbitration clauses
which expressly bound Appellants to arbitrate disputes with
Appellees. 1 Alternatively, Appellees argued that even if they did
not sign the arbitration agreements, they were subject to them
under equitable estoppel because they were seeking to directly
benefit from the contractual customer/advisor relationship
between McLeod and Appellees. The trial court granted the
motion to compel arbitration without a hearing, findings, or
elaboration.

                         Governing Law

       As a threshold matter on appeal, the parties disagree about
what law governs the issue of whether a nonsignatory to an
arbitration agreement can be compelled to arbitrate. Appellants
argue that because this case sounds in tort, Florida law applies
under the “significant relationships” test. See Bishop v. Fla.
Specialty Paint Co., 389 So. 2d 999, 1001 (Fla. 1980) (adopting
“significant relationships” standard for determining law applicable
to tort claims). Appellees argue that the Federal Arbitration Act

    1 We reject this contention on appeal because Appellants were

not parties to the contracts containing the arbitration provisions,
nor can those provisions be construed as binding on Appellants.

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(“FAA”) governs this issue because the contracts containing the
arbitration clauses are agreements “evidencing a transaction
involving commerce,” which are governed by 9 U.S.C. section 2.
Additionally, they claim that Massachusetts law “informs” the
FAA because the contracts containing the arbitration provisions
contained Massachusetts choice of law provisions. Both parties
are mistaken.

      It is well-established that state contract law governs the
issue of whether a contact may be enforced against a nonparty to
the contract. See Arthur Andersen LLP v. Carlisle, 556 U.S. 624,
630–31 (2009) (stating that state contract law, not the FAA,
governs issue of whether a contract may be enforced against
nonparty); Leidel v. Coinbase, Inc., 729 F. App’x. 883, 886 (11th
Cir. 2018) (“State law controls on the issue of whether an
arbitration clause in a contract can be enforced against a
nonsignatory to that contract.”).

       In determining whether Florida or Massachusetts contract
law applies, “[t]he forum court applies its own conflict of law rule .
. . to make the initial determination of the law to be applied.”
Jemco, Inc. v. United Parcel Serv., Inc., 400 So. 2d 499, 500 (Fla.
3d DCA 1981). In Florida, that rule involves a three-step analysis:

     The first step in choice of law analysis is to ascertain the
    nature of the problem involved, i.e. is the specific issue at
    hand a problem of the law of contracts, torts, property,
    etc. The second step is to determine what choice of law
    rule the [forum state] applies to that type of legal issue.
    The third step is to apply the proper choice of law rule to
    the instant facts and thereby conclude which state's
    substantive law applies.

Acme Circus Operating Co., Inc. v. Kuperstock, 711 F.2d 1538, 1540
(11th Cir. 1983); Beattey v. Coll. Ctr. of Finger Lakes Inc., 613 So.
2d 52, 53 (Fla. 4th DCA 1992) (following three-step analysis in
Acme Circus); Aetna Cas. & Sur. Co. v. Huntington Nat’l Bank, 587
So. 2d 483, 485–86 (Fla. 4th DCA 1991), approved, 609 So. 2d 1315
(Fla. 1992) (same).

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      Although three of Appellants’ four claims against Appellees
sound in tort “the nature of the problem,” i.e., the “specific issue at
hand” is whether Appellants, as nonsignatories, can be compelled
to arbitrate under equitable estoppel, which is a matter of contract
law. Florida has “long adhered to the rule of lex loci contractus,”
which is that the law of the state where the contract was executed
governs the rights and liabilities of the parties to the contract.
State Farm Mut. Auto. Ins. Co. v. Roach, 945 So. 2d 1160, 1163
(Fla. 2006); see also Higgins v. W. Bend Mut. Ins. Co., 85 So. 3d
1156, 1158 (Fla. 5th DCA 2012) (“Questions bearing on the
interpretation, validity, and obligation of contracts are substantive
and governed by the rule of lex loci contractus.”). The contracts in
question were executed in Florida.

      Of course, “Florida courts will generally enforce choice-of-
law provisions ‘unless the law of the chosen forum contravenes
strong public policy.’” Walls v. Quick & Reilly, Inc., 824 So. 2d
1016, 1018 (Fla. 5th DCA 2002) (quoting Mazzoni Farms, Inc. v.
E.I. DuPont De Nemours & Co., 761 So. 2d 306, 311 (Fla. 2000)).
However, “[a] choice of law clause, like an arbitration clause, is a
contractual right that cannot ordinarily be invoked by or against a
party who did not sign the contract in which the provision
appears.” Cooper v. Meridian Yachts, Ltd., 575 F.3d 1151, 1169
(11th Cir. 2009). Accordingly, in the absence of a choice-of-law
agreement between the parties, Florida contract law governs
because the contracts were executed in Florida.

                       Equitable Estoppel

      Florida courts are required to consider three elements when
ruling on a motion to compel arbitration: (1) whether a valid
written agreement to arbitrate exists; (2) whether an arbitrable
issue exists; and (3) whether the right to arbitration was waived.
Seifert v. U.S. Home Corp., 750 So. 2d 633, 636 (Fla. 1999). Our
focus is on the first element. We have previously recognized that,
generally speaking, “one who has not agreed to be bound by an
arbitration agreement cannot be compelled to arbitrate.” Liberty
Commc’ns, Inc. v. MCI Telecomm. Corp., 733 So. 2d 571, 573 (Fla.
5th DCA 1999). “While it does not follow that an obligation to
arbitrate attaches only to the signatories, ordinary contract
principles determine who will be bound by such an agreement.” Id.

                                  4
at 574. Non-signatories may be bound to arbitration agreements
under theories of (1) incorporation by reference; (2) assumption; (3)
agency; (4) veil piercing/alter ego; and (5) estoppel. Id. Of these
theories, only equitable estoppel is at issue in this case.

       In the arbitration context, equitable estoppel provides that
“[a] party [to a lawsuit] may not rely on a contract to establish his
claims while avoiding his obligation under the contract to arbitrate
such claims.” BDO Seidman, LLP v. Bee, 970 So. 2d 869, 875 (Fla.
4th DCA 2007). Equitable estoppel binds a non-signatory to a
contract to arbitration in two situations. First, if a nonsignatory
sues a signatory to a contract for breach of contract, the
nonsignatory is estopped from denying the arbitration clause in
the contract. See Mendez v. Hampton Court Nursing Ctr., LLC,
203 So. 3d 146, 149 (Fla. 2016) (“[W]hen a plaintiff sues under a
contract to which the plaintiff is not a party . . . we will ordinarily
enforce an arbitration clause contained in that contract, absent
some other valid defense.”).

       Appellants cannot be compelled to arbitrate under this rule
because they did not sue Appellees for breach or enforcement of
the contracts containing the arbitration provisions; they sued in
tort for negligence and tortious interference with an inheritance,
based on common law elements and actions independent of the
contracts. 2 See Leidel, 729 F. App’x. at 888 (“Because Leidel’s
claims rely on obligations allegedly imposed by law and in
recognition of public policy to persons who are strangers to the
User Agreements, his claims neither rely on nor bear a significant
relationship to those agreements.”); R.J. Griffin & Co. v. Beach
Club II Homeowners Ass’n, 384 F.3d 157, 162 (4th Cir. 2004)
(stating homeowners association not compelled to arbitrate under
estoppel theory because its claims against builder for negligence
and breach of implied warranty alleged breach of duties under
South Carolina common law, not under contracts containing
arbitration provisions).

    2 We express no opinion about the sufficiency of the Complaint

allegations regarding Appellant’s causes of actions, which is the
subject of Appellees’ pending motion to dismiss.

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       Second, a nonsignatory to a contract will be estopped from
denying an arbitration provision in the contract when the
nonsignatory has directly benefitted from the contract. See BDO
Seidman, 970 So. 2d at 875 (applying direct benefits theory).
Direct benefits are benefits “flowing directly from the agreement.”
Taylor Grp., Inc. v. Indus. Distribs. Int’l Co., 859 F. App’x. 439, 447
(11th Cir. 2021) (quoting MAG Portfolio Consult, GMBH v. Merlin
Biomed Grp. LLC, 268 F.3d 58, 61 (2d Cir. 2001)). In contrast,
indirect benefits from a contract, which are insufficient to compel
a nonsignatory to arbitrate, are those “where the nonsignatory
exploits the contractual relation[ship] of parties to an agreement,
but does not exploit (and thereby assume) the agreement itself.”
Id. (quoting MAG Portfolio, 268 F.3d at 61).

      Appellants cannot be compelled to arbitrate under “direct
benefits” estoppel because they have not directly benefitted, and
do not seek to directly benefit, from the contracts containing the
arbitration provisions. See BDO Seidman, 970 So. 2d at 875. To
the extent that Appellants rely on the relationship between
Appellees and McLeod to allege negligence or interference with an
expectancy, such reliance is insufficient to compel arbitration
under equitable estoppel. See Taylor Grp., 859 F. App’x. at 447.

      Because equitable estoppel does not compel arbitration, we
reverse the order on appeal and remand for further proceedings.

      REVERSED and REMANDED.

EDWARDS, C.J., and LAMBERT, J., concur.

                  _____________________________

    Not final until disposition of any timely and
    authorized motion under Fla. R. App. P. 9.330 or
    9.331.
               _____________________________

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