IN THE SUPREME COURT OF FLORIDA CASE NO. SC03-67 DISTRICT COURT CASE NO. 3D02-90 CONSOLIDATED WITH CASE NO. 3D PHIL GEVAS AND MONIQUE GEVAS,

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1 IN THE SUPREME COURT OF FLORIDA CASE NO. SC03-67 DISTRICT COURT CASE NO. 3D02-90 CONSOLIDATED WITH CASE NO. 3D PHIL GEVAS AND MONIQUE GEVAS, PETITIONERS, v. TED FERNANDEZ, RESPONDENT. PETITIONERS AMENDED BRIEF ON JURISDICTION JEFFREY C. CROCKETT Florida Bar No ARAGON, BURLINGTON, WEIL & CROCKETT, P.A. Attorneys for Petitioners 2699 South Bayshore Drive Penthouse Miami, Florida Telephone: (305) Facsimile: (305)

2 TABLE OF CONTENTS PAGE TABLE OF CONTENTS... i TABLE OF AUTHORITIES... ii STATEMENT OF THE CASE... 1 SUMMARY OF ARGUMENT... 3 ARGUMENT... 3 THIS COURT HAS JURISDICTION OVER THIS CAUSE... 3 THIS COURT SHOULD EXERCISE ITS JURISDICTION... 6 CONCLUSION CERTIFICATE OF SERVICE CERTIFICATE OF COMPLIANCE i

3 TABLE OF AUTHORITIES PAGE Cases Apex Realty Inc. v. Schick Realty Inc., 577 A.2d 534 (N.J. App. 1990), cert. denied, 127 N.J. 321 (1990)... 8 Baird v. Camp City of Orlando, Inc., 760 So. 2d 285 (Fla. 5th DCA 2000)... 8 Cargill Rice Inc. v. Empresa Nicaraguense, 25 F.3d 223 (4th Cir. 1994)... 8 Charbonneau v. Morse Operations Inc., 727 So. 2d 1017 (Fla. 4th DCA 1999)... 5 Complete Interiors, Inc. v. Behan, 558 So. 2d 48 (Fla. 5th DCA), review denied, 570 So. 2d 1303 (Fla. 1990)... 5 Computer Task Group, Inc. v. Palm Beach County, 782 So. 2d 942 (Fla. 4th DCA 2001)... 5 Craig v. Barber, 524 So. 2d 974 (Miss. 1988)... 8 Dasso v. Fernandez, 831 So. 2d 714 (Fla. 3d DCA 2002)... 1, 2 Davis v. Chevy Chase Fin. Ltd., 667 F.2d 160 (D.C.Cir. 1981)... 8 ii

4 Gonce v. Veterans Administration, 872 F.2d 995 (Fed. Cir. 1989), cert. denied, 493 U.S. 890 (1989)... 8 Green v. Ameritech Corp., 200 F.3d 967 (6th Cir. 2000)... 7 Hartford Steam Boiler Insp. and Ins. Co. v. Underwriters at Lloyd s, 32 Conn. Super. Lexis 2634, 2002 WL (Sup. Ct. 2002)... 7 Johnson v. Wells, 72 Fla. 390, 73 So. 188 (1916)... 4 Klinefelter v. American Employers Ins. Co., 438 So. 2d 864 (Fla. 4th DCA 1983)... 5 Moser v. Barron Chase Securities Inc., 783 So. 2d 231 (Fla. 2001)... 1, 5, 6 New Elliott Corp. v. Man Gutehoffnungshutte, 969 F.Supp. 13 (S.D.N.Y. 1997)... 7 Reicks v. Farmers Commodities Corp., 474 N.W.2d 809 (Io. 1999)... 8 Schurmacher Holding, Inc. v. Noriega, 542 So. 2d 1327 (Fla. 1989)... 1, 4 Trafalgar House Const. Co. v. MSL Enterprises Inc., 128 N.C. App. 252, 494 S.E.2d 613 (N.C. App. 1998)... 8 Western Employers Ins. Co. v. Jefferies & Co., 958 F.2d 258 (9th Cir. 1992)... 7 iii

5 Other Authorities American Arbitration Association Rule Hayford, A New Paradigm for Commercial Arbitration: Rethinking the Relationship Between Reasoned Awards and Judicial Standards for Vacatur, 66 Georgetown L.R. 443 (1998)... 9 Rules Fla. R. Civ. P (a)(2)(iv)... 3 Constitutional Provisions Florida Constitution, Article V, section (b)(3)... 3 iv

6 STATEMENT OF THE CASE Petitioners, Philip and Monique Gevas, seek to invoke this Court s discretionary jurisdiction to review the Third District Court of Appeal s decision in Dasso v. Fernandez, 831 So. 2d 714 (Fla. 3d DCA 2002) based on its express and direct conflict with this Court s opinions in Moser v. Barron Chase Securities Inc., 783 So. 2d 231 (Fla. 2001) and Schnurmacher Holding, Inc. v. Noriega, 542 So. 2d 1327 (Fla. 1989) and with other similar decisions of other district courts of appeal to the same effect. This case arises from the flawed arbitration of a contractual dispute. The underlying issue is whether arbitrators must follow the submission agreement of the parties, in this case, a contract calling for findings of fact and a specification of the contractual basis of the decision by the arbitrators resolving any dispute between the parties. The contract in question provided, in unambiguous language, for compulsory arbitration under the following terms: The award will be based on the greater weight of the evidence and will state findings of fact and the contractual authority on which it is based. (R1-55). The case involved dozens of specific construction disputes between the parties relating to the large home the building of which was the subject of the contract. It is undisputed that the eventual arbitration award in favor of Respondent for nearly one million dollars contained no findings, and no explication of contractual authority. The award instead was

7 conclusory and contained dollar amounts only, with no statement of the decisional basis of the arbitrators. The decision of the Third District Court of Appeal in the instant matter, Dasso v. Fernandez, 831 So. 2d 714 (Fla. 3d DCA 2002) 1, held that notwithstanding the unambiguous contractual requirement that arbitrators include findings of fact and an explanation in their award, the circuit court was correct to confirm the award without them. The complete non-compliance with the parties contract was neither ground for vacatur nor remand for findings in the view of the Third District. The Third District s thus held that parties to a contract do not have the ability to control the arbitration process specifically in this case, by requiring a fully reasoned decision resolving issues in dispute. 2 The malignant underlying premise is that the courts should ignore any defect in the arbitration process, 1 A conformed copy of the Third District s opinion is included in the Appendix hereto. 2 The Third District (following the circuit court) held that the rules of the American Arbitration Association (AAA), which the court interpreted to require that both parties again (after the contract) ask for an explanation by the arbitrators, negated the parties contract, notwithstanding that the AAA rules themselves require that in any conflict between the AAA rules and the parties contract, the parties contract governs. AAA Rule 1 ( parties, by written agreement, may vary the procedures set forth in these rules ). Under the Third District s reasoning, either party had the right, by breaching the contract, to void the findings requirement under the AAA rules. The fact that the AAA rules gave parties the post-contract right to require an explanation from the arbitrators was thus transmuted, by the error of the Third District, into a holding that a specific contractual requirement for findings and conclusions meant nothing. The underlying basis for the Third District decision and the basis for this Court s jurisdiction is the premise that the parties arbitration agreements need not be followed by arbitration organizations or arbitrators, nor enforced by courts in confirmation proceedings.

8 including fundamental failure to follow the contractual rules of the game set by the parties in their pre-dispute arbitration agreement. SUMMARY OF ARGUMENT Because the decision expressly and directly conflicts with the teaching of Florida law on the same point of law in prior cases; because the decision conflicts with the unanimity of law across the nation that parties to a contract requiring arbitration are the masters of the process and can control it through their contract; and because the decision is seriously flawed as a matter of law and public policy applicable for contractual arbitrations, and therefore is of great public importance, this Court has, and should exercise, its discretionary jurisdiction under Fla. R. Civ. P (a)(2)(iv) and the parallel provision of Art. V, Fla. Const. ARGUMENT THIS COURT HAS JURISDICTION OVER THIS CAUSE This Court has jurisdiction over this cause based on Article V, section (b)(3) of the Florida Constitution, which provides in pertinent part that this Court may review any decision of a district court of appeal... that expressly and directly

9 conflicts with a decision of another district court of appeal or of the supreme court on the same question of law. The question of law here is whether arbitrators must follow the parties submission agreements on the arbitration process, and whether arbitrators must provide a reasoned basis for their decision when required. This Court s teaching on this issue arises, in the main, from two cases. In Schnurmacher Holding Inc. v. Noriega, 542 So. 2d 1327 (Fla. 1989), this Court listed the bases for vacating awards, including among them the ground most pertinent to this case: the arbitrator exceeded his powers. Id. at This Court noted that this standard is met when he or she goes beyond the authority granted by the parties or the operative documents and decides an issue not pertinent to the resolution of the issue submitted to arbitration. Id. at The entire basis of this Court s reasoning in Schnurmacher for allowing limited review of arbitration awards is that the parties have by agreement substituted a tribunal of their own choosing for the courts, a decision the courts should respect. Id. at 1328 (citing Johnson v. Wells, 72 Fla. 390, 73 So. 188, (1916). However the Court expressly stated that an award would only operate as a valid judgment if the award is within the scope of the [parties ] submission. Id. This Court s plain statement that arbitrators exceed their powers where they fail to comply with the parties agreement submitting to arbitration could not be in more glaring contrast with the Third District s opinion in this matter. The Third District s opinion is also in conflict with the following decisions of the other courts of appeal: Computer Task Group, Inc. v. Palm Beach County, 782 So. 2d 942 (Fla.

10 4th DCA 2001)(arbitrators exceed their powers by going beyond the authority granted by the parties or the operative documents ); Klinefelter v. American Employers Ins. Co., 438 So. 2d 864 (Fla. 4th DCA 1983)(vacating decision not made within the time required by the parties contract); Complete Interiors, Inc. v. Behan, 558 So. 2d 48 (Fla. 5th DCA)(arbitrators exceeded powers by award of punitive damages where not allowed in contract), review denied, 570 So. 2d 1303 (Fla. 1990); Charbonneau v. Morse Operations Inc., 727 So. 2d 1017 (Fla. 4th DCA 1999)(arbitrators exceeded powers by ruling on attorney s fees where not allowed in contract). Each of these cases justifies conflict jurisdiction here. This Court addressed the specific issue of mandated arbitral findings in the case of Moser v. Barron Chase Securities Inc., 783 So.2d 231 (Fla. 2001). In Moser, the Court required arbitrators to provide even in the absence of a contractual requirement findings bearing on the parties right to attorney s fees. This Court relied on the Florida arbitration code which provided the courts with the duty to require modification of awards which were unsatisfactory as a matter of form, id. at , as well as the parties due process rights. This Court noted that the NASD (the arbitral forum in that group) had the same practice as the AAA in this case emphasiz[ing] to both arbitrators and staff that they should not specify the decisional bases of their awards. Terming this practice arbitrary, id. at 236, the Court noted that The NASD s practice of discouraging disclosure of the

11 basis of an award... also raises concerns as to the due process rights of the parties.... Id. This Court held that In effect, then, the arbitrators arbitrary action in failing to indicate the basis of an award would effectively deprive [the party] of not just a meaningful, full, and fair hearing, [citation], but any hearing at all [on attorney s fees]. Id. The property interest in proper dispute resolution identified by this Court in Moser applies here as well in light of the duty of fidelity to the submission and the operative documents identified in Schnurmacher and other cases from the Florida courts. While Moser involved attorney s fees, the Court s holding that the arbitrators arbitrary failure to provide a decisional basis where required by law is grounds for vacatur or remand to arbitrators is a proposition in express and direct conflict with the decision of the Third District, thus allowing discretionary review of this cause on this ground as well.

12 THIS COURT SHOULD EXERCISE ITS JURISDICTION The decision of the Third District is a very unfortunate, yet important decision, which sends precisely the wrong signals to parties and arbitrators. The Third District has held that contractual requirements of findings of fact and reasoned decisionmaking may be ignored by the courts and by arbitrators. The Third District s decision stands completely alone in support of the proposition that arbitrators need not follow such requirements for a reasoned explanation in their award when so required by the contracting parties. Parties have legitimate reasons for such request, including a desire for a complete and reasoned explanation, both to improve the decisionmaking process and allow for effective review where appropriate in confirmation proceedings. 3 Every case on the point, as cited by any party in the courts below, is to the contrary. Western Employers Ins. Co. v. Jefferies & Co., 958 F.2d 258 (9th Cir. 1992)(leading case; vacating award where findings were not provided as required on the ground that the arbitrators exceeded their powers; each party had a right to arbitration according to the terms for which it contracted. ); New Elliott Corp. v. Man Gutehoffnungshutte, 969 F.Supp. 13 (S.D.N.Y. 1997)(same result under AAA Rules; the provision must be given some genuine meaning or else the contracting parties are deprived of the benefit of their bargain ); Hartford Steam Boiler Insp. and Ins. Co. v. 3 For instance, the parties in this case agreed that the arbitrators had no power to alter the parties contract, including, for example, its change order procedures.

13 Underwriters at Lloyd s, 32 Conn. Super. Lexis 2634, 2002 WL (Sup. Ct. 2002)(remand to arbitrators who did not comply with findings of fact and conclusions requirement in parties contract); Green v. Ameritech Corp., 200 F.3d 967, 976 (6th Cir. 2000) (recognizing that parties specifications as to form of award will be followed and policed by courts). Even cases that hold that findings are not required note that the result would be different where the parties submission agreement or contract calling for arbitration required them. 4 There is thus no precedential support for the Third District s decision. Nor is there support in public policy. The only justification for a reliance on arbitration as a dispute mechanism is that the parties have agreed to do so. In a case such as this one, however, the parties did not only agree to arbitration; they agreed to arbitration under a specific set of procedures and requirements. Arbitration is a matter of contract and the contours of the arbitrator s authority in a given case are determined by reference to the arbitral agreement. Davis v. Chevy Chase Fin. Ltd., 667 F.2d 160, 165 (D.C.Cir. 1981). 5 In this case, Petitioner 4 E.g., Craig v. Barber, 524 So. 2d 974 (Miss. 1988) ( absent contractual agreement, no requirement to give reasons); Gonce v. Veterans Administration, 872 F.2d 995, 999 (Fed. Cir. 1989), cert. denied, 493 U.S. 890 (1989); Reicks v. Farmers Commodities Corp., 474 N.W.2d 809, 811(Io. 1999) (same); Apex Realty Inc. v. Schick Realty Inc., 577 A.2d 534, 536 (N.J. App. 1990), cert. denied, 127 N.J. 321 (1990); Trafalgar House Const. Co. v. MSL Enterprises Inc., 128 N.C. App. 252, 494 S.E.2d 613, 616 (N.C. App. 1998)(parties should take care to specify form of decision they want from arbitrators). 5 In a Florida example of this principle, Baird v. Camp City of Orlando, Inc., 760 So. 2d 285 (Fla. 5th DCA 2000), held that courts review arbitrators decisions on legal questions de novo notwithstanding the Florida arbitration code because the parties had so provided in their arbitration agreement. Other examples are cases holding that where arbitrators are selected other than as required by the parties

14 did not agree to arbitration resulting in an unexplained, conclusory award containing no reasoned explanation, but this is exactly what Petitioner received. Where a party has not received what he bargained for, his contract has been breached, and where there is such a legal wrong, there should be a remedy either vacatur or remand. Enforcing the contractual requirements for arbitrators to follow would not only protect the parties contractual expectations the key goal of commercial law in itself but support two positive developments: encourage parties to carefully consider their desired arbitration procedure and require arbitrators to carefully follow the procedural requirements set by the parties. The result would be to improve the value and utility for the arbitration process, and respect for it: all valid public policy goals undermined by the decision of the Third District. Reasoned arbitration awards can only be applauded as a salutary development. Recently the legal community has begun to acknowledge the value of substantive reasoned awards in commercial arbitration. Hayford, A New Paradigm for Commercial Arbitration: Rethinking the Relationship Between Reasoned Awards and Judicial Standards for Vacatur, 66 Georgetown L.R. 443, 446 (1998). It is highly unlikely that the users of commercial arbitration, over the long term, will tolerate an alternative dispute resolution device that provides no contract, the resulting award should be vacated. E.g., Cargill Rice Inc. v. Empresa Nicaraguense, 25 F.3d 223, 226 (4th Cir. 1994).

15 reliable means for assessing the competency of the arbitrators they select or the rigor of the arbitral decisions they are contractually committed to accept. Id. at 447. The Third District decision, in disregarding precedent and public policy considerations in exchange for the ease of application of the judicial rubber-stamp, wrote a pernicious and ill-justified decision which cries out for review by this Court. CONCLUSION For reasons stated herein, this Court has, and should exercise, discretionary jurisdiction over the instant decision of the Third District. Respectfully submitted, ARAGON, BURLINGTON, WEIL & CROCKETT, P.A. Attorneys for Appellants 2699 South Bayshore Drive, Penthouse Miami, Florida Telephone: (305) Telecopy: (305) By: JEFFREY B. CROCKETT Florida Bar No

16 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing was served by United States Mail on this 21st day of January, 2003 to: Counsel for Ted Fernandez Richard A. Morgan, Esq. Mark Auerbacher, Esq. Katz, Barron, Squitero & Faust, P.A. 7 th Floor 2699 South Bayshore Drive Miami, Florida Tel: Fax: Co-counsel for Ted Fernandez Lauri Waldman Ross, Esq. Two Datran Center, Suite South Dadeland Boulevard Miami, Florida Tel: Fax: Counsel for Hector Dasso and Mashan Contractors, Inc. Michael Schiffrin, Esq. Michael Schiffrin & Associates, P.A. Suite 1109 Two Datran Center 9130 South Dadeland Boulevard Miami, Florida Tel: Fax: JEFFREY B. CROCKETT

17 CERTIFICATE OF COMPLIANCE I certify that Petitioners Brief on Jurisdiction complies with the font requirements of Rule 9.210(a)(2), Florida Rules of Appellate Procedure. JEFFREY B. CROCKETT