Agreements must be amended to include statute of limitations

BY: JOSE M. FERRER

In a case of first impression for Florida courts, the 2nd District Court of Appeal ruled that the state's statutes of limitations do not apply to arbitrations unless the arbitration agreement expressly provides for their application.

Specifically, the court in Raymond James Financial Services, Inc. v. Phillips, no. 2D10-2144, found that arbitrations are not "actions" or "proceedings" for purposes of Florida Statutes section 95.011, which requires a party to sue within a certain period of time. The decision is of critical importance — particularly to companies whose standard contracts contain agreements to arbitrate governed by Florida law — because it may allow parties to bring claims in arbitration years after they would have to be brought in court.

THE DECISION

The dispute involved claims by several Raymond James account holders for negligence, misconduct, breach of fiduciary duties, and state and federal securities violations. Each of the account holders had signed identical account-holder agreements with Raymond James, which required them to submit any disputes to the National Association of Securities Dealers under its code of arbitration procedure. The agreements also provided that "nothing in [the] agreement shall be deemed to limit or waive the application of any relevant state or federal statute of limitation, repose or other time bar," and that "any claim made by either party to the agreement which is time barred for any reason shall not be eligible for arbitration."

In response, Raymond James filed a motion to dismiss arguing the claims were barred by Florida's statutes of limitations. Based on a contractual provision in the account holder agreements, which required timeliness issues to be resolved by a court, the account holders filed an action seeking a declaration that the statute of limitations did not apply to the arbitration proceedings.

The trial court ultimately agreed with the account holders, and Raymond James appealed.

In determining whether the statute of limitations applied to the arbitration proceeding, the appellate court analyzed the Florida Supreme Court's decision, Miele v. Prudential-Bache Securities, Inc., which addressed limitations on punitive-damage awards in the context of arbitration proceedings.

While acknowledging that Miele was not a statute-of-limitations case, the 2nd DCA nevertheless found the Supreme Court's limitation of the term "civil action" to proceedings filed in a court — and not in arbitration — applicable. The DCA concluded that the phrase "civil action or proceeding," as used in Florida's statutes of limitations, meant a court proceeding and not arbitration.

Therefore, the court held, "Florida's statutes of limitations do not apply to arbitrations where the arbitration agreement does not expressly provide for their application." The language in the account-holder agreement, which stated that the agreement would not "limit or waive the application of any relevant state or federal statute of limitations," was insufficient to "affirmatively incorporate Florida's statutes of limitations into the agreement."

THE EFFECT

The importance of the court's decision in Raymond James cannot be overstated. The decision allows parties to bring claims under arbitration agreements governed by Florida law long after they would be time-barred if brought in court.

Believing arbitration to be a more private, cost-effective, and efficient alternative to traditional litigation, companies often include arbitration provisions in their agreements.

Construction contracts, for example, commonly specify arbitration as the exclusive means for parties to resolve their disputes. The court's decision in Raymond James could leave parties to such contracts "on the hook," arguably forever, for a variety of construction-related issues, including construction defects and payment claims.

Companies that want the Florida statutes of limitations to apply to their existing arbitration agreements need to consider amending their existing agreements and drafting all future agreements by explicitly saying so.

Jose M. Ferrer is a partner in Bilzin Sumberg Baena Price & Axelrod's litigation group and focuses on complex commercial and business litigation and international arbitration. He represents multinational clients in international disputes and has counseled clients in matters involving civil asset forfeitures, real estate litigation and business torts.

It is important to review your contracts to determine whether this change in law will affect you or your business.  Essentially, what this means is that if there is no statutes of limitations provision in the contract, someone could bring forth a lawsuit at any given point in the future. Keep this provision in mind when drafting contracts in the future.

Jose M. Ferrer is a partner in Bilzin Sumberg Baena Price & Axelrod's litigation group and focuses on complex commercial and business litigation and international arbitration. He represents multinational clients in international disputes and has counseled clients in matters involving civil asset forfeitures, real estate litigation and business torts.

If you are interested in learning more about the provision, contact Jose M. Ferrer at 305-350-7210 or jferrer@bilzin.com.

About Bilzin Sumberg

Bilzin Sumberg Baena Price & Axelrod LLP is a commercial law firm, with  extensive experience in the areas of commercial finance, corporate and securities, environmental, distressed property, government relations, land use and zoning, litigation, real estate, restructuring and bankruptcy, tax and wealth transfer.  For more information, please visit our website at www.bilzin.com.