Court Opinion

ID: 4776068
Source: CourtListenerOpinion
Date Created: 2021-08-18 15:07:20.929271+00
Date Added: 2024-06-11T08:09:31.931533
License: Public Domain

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
                              FOURTH DISTRICT

                     MARINO PERFORMANCE, INC.,
                             Appellant,

                                      v.

           JOSE CARLOS ZUNIGA and JUAN C. ZUNIGA, JR.,
                           Appellees.

                               No. 4D20-1463

                             [August 18, 2021]

  Appeal of a nonfinal order from the Circuit Court for the Fifteenth
Judicial Circuit, Palm Beach County; Howard K. Coates, Jr., Judge; L.T.
Case No. 50-2018-CA-015200-XXXX-MB.

  Hinda Klein and Samuel B. Spinner of Conroy Simberg, Hollywood, for
appellant.

   George W. Kramer and Debra D. Klingsberg of the Law Offices of Kramer
& Klingsberg, Delray Beach, for appellees.

WARNER, J.

    Marino Performance (“Marino”), an automobile dealer, appeals a
nonfinal order granting the plaintiffs’ Jose Zuniga and Juan Zuniga’s
(“plaintiffs”) motion to certify a class in an action against Marino for unfair
and deceptive trade practices. In the order, the circuit court also found
that Marino waived its right to compel arbitration as to both the named
plaintiffs and the unnamed class members. Marino contends that the
court erred in denying the motion to compel arbitration as to the unnamed
class members. The trial court concluded that Marino waived its right to
arbitrate because it failed to provide fair notice of its intent to rely on the
arbitration provision during litigation and only raised it on the eve of the
class certification hearing. We agree and affirm.

                                Background

    In December 2018, after purchasing vehicles from Marino, plaintiffs
filed a class action complaint alleging that Marino engaged in deceptive
practices regarding certain fees. Marino answered the complaint and
raised seven affirmative defenses. At no time did Marino raise the issue of
arbitration even though an arbitration provision was included in the
contract between Marino and each vehicle purchaser. The parties engaged
in discovery, with both sides serving interrogatories and requests for
production of documents. Plaintiffs filed a motion to compel responses
from Marino, but again Marino did not raise the existence of an arbitration
agreement.

   In April 2019, Marino moved for judgment on the pleadings, arguing
that the type of damages sought in the class action were unavailable under
the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”). The
circuit court denied the motion.

   In November 2019, plaintiffs moved to certify the class, and the court
set a hearing on the motion. Days before the hearing, in January of 2020,
Marino filed its motion to compel arbitration “in opposition to plaintiff’s
motion for class certification,” raising arbitration as an issue for the first
time fourteen months after the class action complaint had been filed.
Marino contended that it did not waive its right to arbitrate because its
prior filings were defensive in nature.

   Following the hearing, the court entered an order on the motion for
class certification, determining:

      [T]here has been a waiver of the right to compel arbitration
      in this case. Whether the state or federal test for waiver
      applies is immaterial as both standards have been met. The
      Answer did not demand arbitration[;] discovery was tendered
      and responded to. There was a delay of 14 months before the
      motion to compel was filed on the eve of the hearing on the
      motion to certify.      Therefore, the arbitration issue is
      insufficient to defeat numerosity. . . .

    At a later hearing on an issue related to the element of representation
as to one of the class representatives, Marino argued that even if the court
previously found a waiver of its right to arbitrate as to plaintiffs, it did not
follow that a waiver occurred as to the unnamed class members.

   After supplemental briefing on the issue of whether the waiver should
also apply to the unnamed class members, the court entered its
supplemental order on motion for class certification. The court ruled that
Marino waived its right to arbitrate as to the unnamed class members. In
so ruling, the ultimate question for the court was whether:

                                       2
      [B]y its actions in the litigation, [Marino] provide[d] fair notice
      to Plaintiffs that it intended to enforce its rights to arbitration
      in this case, or at a minimum that it intended to treat the
      named Plaintiffs differently from the unnamed putative class
      members with respect to its decision or not to seek
      arbitration.

    The court emphasized that Marino did not raise arbitration as an
affirmative defense in its answer or affirmative defenses “or otherwise
reserve the right to assert arbitration as an affirmative defense against
either the named Plaintiffs or the unnamed putative class members.”

    The court discussed Marino’s filing of a motion for judgment on the
pleadings, where Marino “took the chance of seeking a dismissal of all
claims without advising the Court or the Plaintiff that if it lost it would
then seek arbitration of the claims of the unnamed putative class
members.” The court emphasized that Marino did nothing prior to the
filing of its motion to compel arbitration to indicate that it was preserving
its rights to seek arbitration in the event of class certification.

    The court ultimately concluded that Marino “substantially invoke[d] the
litigation machinery prior to demanding arbitration.” The main concern for
the court was that Marino engaged in class discovery without objecting or
preserving its right to compel arbitration as to the unnamed class
members.

   This timely appeal followed.

                                  Analysis

   “The question of waiver [of arbitration] is one of fact, reviewable for
competent substantial evidence.” Marine Env’t Partners, Inc. v. Johnson,
863 So. 2d 423, 426 (Fla. 4th DCA 2003) (citations omitted). “A party
claiming waiver of arbitration must show: 1) knowledge of an existing right
to arbitrate and 2) active participation in litigation or other acts
inconsistent with that right.” Id. (citation omitted).

   Marino argues that the circuit court did not have jurisdiction over the
unnamed class members until after the class was certified, and therefore,
prior to certification, Marino had no right to demand arbitration against
the unnamed members. Thus, Marino contends that its pre-certification
conduct could not operate to waive its right to arbitration since the right
did not exist at that time.

                                      3
   In response, plaintiffs argue that the circuit court correctly determined
that Marino waived its right to compel arbitration as to the unnamed class
members. Plaintiffs maintain that Marino acted inconsistently with its
arbitration rights and did not assert its intent to arbitrate prior to engaging
in extensive discovery.

    We agree with the circuit court that the reasoning in Gutierrez v. Wells
Fargo Bank, NA, 889 F.3d 1230 (11th Cir. 2018), is instructive in analyzing
this case. In Gutierrez, Wells Fargo appealed the district court’s denial of
its motion to compel arbitration with the unnamed plaintiffs comprising
the classes after the bank’s customers filed five class actions. Id. at 1233.
The Eleventh Circuit ultimately reversed the district court’s finding of
waiver as to the unnamed plaintiffs, determining that Wells Fargo did not
waive its right to arbitrate as to the unnamed class members, because it
had provided fair notice that it reserved its right to arbitrate against the
unnamed class members. Thus, it had not acted inconsistently with its
arbitration rights.

    In order to find a waiver of arbitration, the Eleventh Circuit concluded
that the trial court must find that the party attempting to invoke
arbitration acted inconsistently with the arbitration right. “A key factor in
deciding this is whether a party has ‘substantially invoke[d] the litigation
machinery prior to demanding arbitration.’” Id. at 1236 (quoting S & H
Contractors v. A.J. Taft Coal Co., Inc., 906 F.2d 1507, 1514 (11th Cir. 1990).
It also explained:

      [T]he key ingredient in the waiver analysis is fair notice to the
      opposing party and the District Court of a party’s arbitration
      rights and its intent to exercise them. If the court and the
      opposing party have such notice at an early stage in
      litigation, they can manage the litigation with this contingency
      in mind. For example, if the court knows a party has
      potential arbitration rights that could throw the case out of
      court, it can limit the scope of early discovery with this
      possibility in view, in order to avoid significant expenditures if
      it turns out that the arbitration provision governs.
      Accordingly, fair notice at a relatively early stage of litigation
      is a primary factor in considering whether a party has acted
      inconsistently with its arbitration rights.

Id. at 1236–37 (footnote omitted) (emphasis added).

   In finding that Wells Fargo did not waive its right to arbitration as to

                                      4
the unnamed class members, the Eleventh Circuit emphasized that Wells
Fargo’s “conduct with respect to the unnamed Plaintiffs differed starkly
from its conduct as to the named Plaintiffs.” Id. at 1237 (emphasis added).
Specifically, Wells Fargo:

      [S]tated expressly in its response to the District Court’s
      scheduling order that it did not plan to seek arbitration with
      the named Plaintiffs, and it thus joined other defendants in
      filing an omnibus motion to dismiss the complaints. In that
      same response, however, which it filed well before any
      discovery had been conducted, Wells Fargo explained to the
      District Court that it was not in a position to assert its
      arbitration rights against the unnamed Plaintiffs but wished
      to preserve those rights for when the matter became ripe for
      the Court to consider them . . . .

Id. (emphasis added). The court further discussed the fair notice factor:

      [W]e have found no authority that requires a party to file a
      conditional arbitration motion against possible future
      adversaries—at a juncture in which adjudicating, much less
      exercising jurisdiction over, those claims is impossible—in
      order to avoid waiving its rights with regard to those parties.
      Because the District Court lacked jurisdiction over such
      motions until the class was certified, such a placeholder
      document could only serve the purpose of putting the Court
      and the parties on notice of the moving party’s intent to
      invoke its arbitration rights upon certification of the class.
      But that same purpose was served by Wells Fargo’s express
      reservation of its arbitration rights as to future plaintiffs in
      response to the Court’s scheduling order. Accordingly, we
      conclude that Wells Fargo did not act inconsistently with its
      arbitration rights, and, consequently, it did not waive those
      rights.

Id. at 1239 (emphasis added); see also In re Checking Acct. Overdraft Litig.,
780 F.3d 1031, 1035 (11th Cir. 2015) (finding that a defendant did not
waive its right to arbitrate claims against unnamed class members, but
specifically noting that when the defendant filed its answer, it twice gave
notice that it was reserving its right to arbitrate the claims of any future
plaintiffs, stating that, “[a]bsent members of the putative classes have a
contractual obligation to arbitrate any claims they have against Wells
Fargo”).

                                     5
    The Gutierrez court acknowledged that Wells Fargo could not have
moved to compel arbitration prior to the certification of the class, because
the court would not have had jurisdiction to impose arbitration on the
unnamed class members. Further, the court determined under the totality
of the circumstances that Wells Fargo’s litigation strategy and conduct
prior to class certification were not inconsistent with its right to
arbitration. Because the Gutierrez court found that Wells Fargo had not
acted inconsistently with its right to arbitration, Wells Fargo could assert
its right once the class was certified.

    In this case, by contrast, Marino did nothing to signal that it was
preserving its arbitration right in the event of class certification prior to
filing its motion to compel on the eve of the certification hearing. When
Marino filed its answer and affirmative defenses, it did not raise its
arbitration right or otherwise reserve the right to assert arbitration as
an affirmative defense as to the unnamed class members. Further, in
responding to plaintiffs’ interrogatories and document requests, Marino’s
responses were not limited only to its vehicle sales to the class
representatives but were also directed at sales to proposed class members.
Marino did not object to the discovery of unnamed class members on
the basis that Marino intended to enforce its rights to arbitration when
the matter was ripe for the court to consider it.

   Notably, Marino attempted to have the entire action dismissed on the
merits, and then, when that was unsuccessful, it attempted to compel
arbitration, months later but just days prior to the hearing on the motion
for class certification.        This is the type of “outcome-oriented
gamesmanship” which the Eleventh Circuit criticized in Gutierrez, where
one acts “in a manner inconsistent with one’s arbitration rights and then
change[s] course mid-journey” and pursues arbitration “when its
prospects of victory in litigation dim.” Gutierrez, 889 F.3d at 1236.

   We also note that other jurisdictions have embraced a position
consistent with the fair notice reasoning in Gutierrez. For example, in
Tennyson v. Santa Fe Dealership Acquisition II, Inc., 364 P.3d 1273, 1277
(N.M. Ct. App. 2015), the defendant presented the same argument that
Marino presents here. Specifically, the defendant argued that, because an
order compelling arbitration would not bind absent class members until
the class was certified, moving to compel arbitration as to unnamed class
members would be futile. Id. The court disagreed and determined that
the defendant waived its right to compel arbitration against absent class
members who were joined by the district court’s certification order despite
the fact that the court would not have jurisdiction to compel members to
arbitrate prior to certification. Id. at 1277. The court explained:

                                      6
      Defendants retort that an order compelling arbitration would
      not bind absent class members until the district court entered
      an order certifying this case as a class action, so moving to
      compel arbitration before this case was certified as a class
      action would have been futile. But the question is not whether
      or when absent class members would be bound by an order
      compelling arbitration; the question is whether Defendants
      waived their right to invoke their right to arbitrate disputes with
      absent class members. Simply because the district court did
      not have jurisdiction to compel absent class members to
      arbitrate their claims does not mean that Defendants had no
      obligation to rely upon the clause before the district court
      granted Plaintiffs’ motion to certify. See [In re Cox Enters., Inc.
      Set-Top Cable Television Box Antitrust Litig., 790 F.3d 1112,.
      1119 (10th Cir. 2015)] (“The [district] court may not have been
      able to compel arbitration of absent class members [before it
      certified a class], but [the defendant’s] assertion or mention of
      its right at that point would have fundamentally changed the
      course of the litigation, ensured a more expedient and efficient
      resolution of the trial, and prevented [the defendant’s]
      gamesmanship.

Id. at 1279–80 (emphasis added); see also Elliott v. KB Home N. Carolina,
Inc., 752 S.E.2d 694, 703 (N.C. Ct. App. 2013) (holding that a defendant
waived its rights to compel unnamed class members to arbitration, noting
that the defendant “litigated this case . . . while sitting on any contractual
rights it had to arbitrate . . . [and] [t]he fact that [plaintiffs’ and their
attorney’s investment of significant time and sums of money] occurred
before the class was certified does not negate the fact that, upon
certification, the class became tangible beneficiaries of that expenditure”).

                                 Conclusion

   In sum, consistent with the reasoning in Gutierrez, we hold that under
the totality of circumstances, the circuit court correctly determined that
Marino waived its right to arbitrate as to the unnamed class members. It
never provided fair notice to plaintiffs or the court of its right and engaged
in a litigation strategy of “outcome oriented gamesmanship.”

   Affirmed.

GROSS and DAMOORGIAN, JJ., concur.

                                      7
                      *        *        *

Not final until disposition of timely filed motion for rehearing.

                               8