Florida Appellate Court Remands for Evidentiary Hearing to Determine Whether Non-Signatories Bound by Agreement to Arbitrate

Courts frequently compel persons who are not named parties to arbitration agreements to, nonetheless, participate in arbitration proceedings. Various legal doctrines—such as incorporation by reference, agency and alter ego—support this result. However, if the facts supporting arbitrability are disputed, then according to a recent Florida appellate decision, the trial court should hold an evidentiary hearing to resolve those disputed facts. See Massa v. Michael Ridard Hospitality LLC, — So. 3d —, Case No. 3D20-0357 (Fla. 3d DCA Aug. 19, 2020) (reversing and remanding to trial court).

In Massa, a former employee, his employer, and their affiliated entities sued one another. Claims were brought pursuant to multiple agreements. One of the agreements contained an arbitration provision; however, not all of the litigants were named parties to that agreement. One of the parties filed a motion to compel arbitration, which was opposed by the litigants who were not named parties to that agreement. The trial court held a hearing, but it was not an evidentiary hearing, following which the trial court granted the motion to compel arbitration on the basis that the agreement that contained the arbitration provision was broad enough to encompass the other parties and claims. An appeal followed.

In concluding that the trial court should have held an evidentiary hearing, the appellate court explained:

Under the Florida Constitution, state courts are “open to every person for redress of any injury.” Art. I, § 21, Fla. Const. Thus, the first element to consider in determining whether the parties should be compelled to arbitrate is whether a valid arbitration agreement exists between the parties. See Coventry Health Care of Fla., Inc. v. Crosswinds Rehab, Inc., 259 So. 3d 306, 307 (Fla. 3d DCA 2018) (citing Seifert v. U.S. Home Corp., 750 So. 2d 633, 636 (Fla. 1999)); see also Infinity Design Builders, Inc. v. Hutchinson, 964 So. 2d 752, 755 (Fla. 5th DCA 2007) (“In deciding whether arbitration is required, therefore, one must necessarily begin by asking whether the parties contractually agreed to arbitrate.”). A party who has not agreed “to be bound by an arbitration agreement cannot be compelled to arbitrate.” Sitarik v. JFK Med. Ctr. Ltd. P’ships (JFK), 7 So. 3d 576, 578 (Fla. 4th DCA 2009) (quoting Regency Island Dunes, Inc. v. Foley & Assoc. Constr. Co., 697 So. 2d 217 (Fla. 4th DCA 1997)).

“Nonsignatories have been held to be bound to arbitration agreements under the theories of (1) incorporation by reference; (2) assumption; (3) agency; (4) veil piercing/alter ego; and (5) estoppel.” Liberty Comms., Inc. v. MCI Telecomms. Corp., 733 So. 2d 571, 574 (Fla. 5th DCA 1999) (citations omitted). “[A] nonsignatory to an arbitration agreement may be bound to arbitrate if the nonsignatory has received something more than an incidental or consequential benefit of the contract, or if the nonsignatory is specifically the intended third-party beneficiary of the contract.” Germann v. Age Inst. of Fla., Inc., 912 So. 2d 590, 592 (Fla. 2d DCA 2005) (citations omitted).

“[W]here the facts relating to the elements the trial court is required to consider in determining a motion to compel arbitration are disputed, the trial court is required to hold an evidentiary hearing in order to resolve the matter.” Tandem Health Care of St. Petersburg, Inc. v. Whitney, 897 So. 2d 531, 533 (Fla. 2d DCA 2005) (citations omitted).

In the instant case, there is no evidence in the record that would permit the trial court to compel the nonsignatories to arbitrate their disputes. Mr. Massa, Massa Investment and 1111 disputed the facts that would have permitted the trial court to find otherwise. Thus, the trial court was required to hold an evidentiary hearing prior to entering an order compelling Mr. Massa, Massa Investment, 1111, and Ridard Hospitality—all nonsignatories to the employment agreement—to arbitrate in this case. See Doctors Assocs., Inc. v. Thomas, 898 So. 2d 159, 163 (Fla. 4th DCA 2005) (Whether “[n]on-signatories may be bound to an arbitration agreement … is an issue of fact that does not appear to have been addressed by the trial court. Accordingly, we reverse ….”). As such, we reverse the order granting the motion to compel arbitration.

Id. at 2.

The motto of this story: if the motion to compel arbitration requires the trial court to reach conclusions regarding disputed facts, then it may be necessary to set an evidentiary hearing in accordance with the applicable Rules of Civil Procedure.