Compelled Arbitration of Dispute between Homeowners Associations Upheld

In Ibis Lakes Homeowners Ass'n, Inc. v. Ibis Isle Homeowners Ass'n, Inc., 4D12-1273 (Fla. 4th DCA, Dec. 12, 2012), Ibis Lakes Homeowners Association, Inc. (“Plaintiff”) sought review of a non-final order of the trial court granting Ibis Isle Homeowners Association, Inc.’s (“Defendant”) motion to compel arbitration.

The Plaintiff and the Defendant, adjoining homeowner's associations located within a residential community, shared a common entrance way, and the Defendant’s residents were to use a common roadway located on the Plaintiff's property to reach their residences. Because of this, the Plaintiff and the Defendant entered into a Shared Common Expense Agreement (“Agreement”). Under the Agreement, the Plaintiff was responsible for the maintenance and repair of the common areas following certain budgetary procedures. The Agreement also assigned specific percentages of expenses to be shared, such as irrigation electric, annual flowers and general liability insurance. The Agreement contained three arbitration clauses: Paragraph 9, Paragraph 10 and Paragraph 20. Paragraph 9 provided for binding arbitration in the event that the Defendant failed to pay its share of the expenses. Paragraph 10 provided for binding arbitration in the event that the Plaintiff failed to perform its maintenance obligations. Paragraph 20 provided for binding arbitration of any dispute arising out of the Agreement. Pursuant to the Agreement, the Defendant sought arbitration to obtain a refund of $7,122.68 for insurance overcharges made by the Plaintiff. The Plaintiff filed a complaint to enjoin arbitration alleging that this dispute was not one covered by the arbitration clauses. The Defendant motioned to abate and compel arbitration. Thereafter, the Defendant requested production of all of the quarterly shared expense statements or invoices prepared by the Plaintiff with regard to the insurance policies. The Plaintiff objected to this request. The trial court sustained the Plaintiff’s objection and stayed the request to produce pending the ruling on the motion to abate and compel arbitration, which was granted. The Fourth District Court of Appeal affirmed the order finding that an arbitrable issue existed and the Defendant had not waived arbitration.

In its reasoning, the Fourth District Court of Appeal discussed the standard for ruling on a motion to compel arbitration, focusing on the second and third elements: Florida courts have recognized that “there are three elements for courts to consider in ruling on a motion to compel arbitration of a given dispute: (1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived.” Id.

With regards to the second element, “where an arbitration agreement exists between the parties, arbitration is required only of those controversies or disputes which the parties have agreed to submit to arbitration.” Id. The Plaintiff invoked the doctrine of ejusdem generis to avoid the application of Paragraph 20. Under this doctrine, “when a general phrase follows a list of specifics, the general phrase will be interpreted to include only items of the same type as those listed.” Id. However, the doctrine only applies to enforce specifically defined contract provisions that conflict with general provisions that would otherwise control. Therefore, Paragraph 20 would control where it did not conflict with Paragraph 9 and Paragraph 10. Such was the case at hand.

With regards to the third element, in determining whether a party waived its right to arbitrate, it must be determined whether, under the totality of the circumstances, the defaulting party has acted inconsistently with the arbitration right. “A party claiming waiver of arbitration must demonstrate: 1) knowledge of an existing right to arbitrate and 2) active participation in litigation or other acts inconsistent with the right.” Id. It has been held that “propounding discovery directed to the merits of pending litigation before moving to compel arbitration results in a waiver of the right to arbitration.” Id. However, the request for production was “nipped in the bud” by the trial court's stay, so the Defendant's “waiver” conduct was not extensive. Furthermore, the Defendant first filed for arbitration then later to move to compel arbitration. Therefore, arbitration was “pending” when the limited discovery request was made.