DISTRICT COURT OF APPEAL THIRD DISTRICT OF FLORIDA CASE NO. 3D16-2545 RECEIVED, 12/9/2016 7:06 PM, Mary Cay Blanks, Third District Court of Appeal ARNOLD D. HESSEN, an individual. HESSEN, SCHIMMEL & DECASTRO, P.A., and ARNOLD D. HESSEN, P.A., v. Petitioners, ROBERT L. SCHIMMEL, Respondent. / RESPONDENT S RESPONSE TO PETITION FOR WRIT OF CERTIORARI The Respondent, Robert L. Schimmel, by and through undersigned counsel, hereby responds in opposition to Hessen, Schimmel & DeCastro, P.A. s Petition for Writ of Certiorari which asks this Court to order that Mr. Schimmel pay all the arbitration fees if he wants arbitration to go forward and that a stay of the circuit court action against Hessen and Arnold D. Hessen, P.A., remain until arbitration has concluded. In support of denial of the Petition, Respondent relies on the following facts and law. 1
FACTS: 1. Schimmel brought suit against Arnold D. Hessen, Arnold D. Hessen, P.A., and Hessen, Schimmel, & De Castro, P.A., ( HSD ) for breach of an employment contract executed by Hessen as President and by Schimmel as Secretary and Employee, and breach of a shareholder s agreement executed by Plaintiff and Defendant Hessen individually and as shareholders. 2. Both documents contain arbitration clauses regarding any dispute arising from the terms therein. Appendix A. 3. Schimmel asserted Breach of Employment Contract against Hessen individually and HSD; Breach of Shareholders Agreement against Hessen individually and HSD; Breach of Fiduciary Duty, Conversion, Accounting, and Unjust Enrichment against Hessen individually. 4. Schimmel s claims were submitted to arbitration, but arbitration was suspended on July 29, 2011 and later terminated on September 14, 2011, for failure to comply with deposit requirements. Appendix E. 5. Petitioners moved to compel arbitration and stay the proceedings in circuit court. The circuit court held that the parties were required to arbitrate with each side paying their fair share of the arbitrator s fees. Appendix F. 6. On February 14, 2013, the AAA confirmed that Schimmel would reopen arbitration by paying one-half of the requested deposit. Hessen and HSD 2
advised that they were unable to pay their share of arbitration fees, but the AAA stated it would continue to bill the parties equally. Respondents did not file a financial hardship declaration nor did they seek to defer payment nor did they ask that the fees be reallocated. Appendix G. 7. Defendants objected to being bound by arbitration which resulted in the following relevant findings by the arbitrator: a. Neither Hessen nor Arnold D. Hessen, P.A. are signatories to the Agreements; b. Arnold D. Hessen, P.A. did not exist when the Agreements were made and there is no reference to future entities; c. Hessen and Arnold D. Hessen, P.A. did not agree to be bound by the terms of the Agreements; d. Schimmel s conversion claim falls outside the scope of the Agreements; i.e., distinct from a breach of contract to pay money; e. Hessen and Arnold D. Hessen, P.A. are not parties to the arbitration. Appendix H - Order of Arbitration Ruling on Scope of Arbitration of June 9, 2014. 8. As a result of the arbitration not going forward due to Defendants Hessen and Hessen, P.A. not being parties to the agreements, Schimmel filed his Amended Complaint only against Hessen individually and Arnold D. Hessen, P.A. for breach of the Employment Contract, breach of the Shareholders Agreement, breach of fiduciary duty, conversion, accounting, and unjust enrichment. 9. Defendants Hessen and Hessen, P.A. then sought to compel arbitration of the claims against them, contrary to their previous position and the arbitrator s findings that they were not subject to arbitration. 3
10. On October 7, 2014, the arbitrator again ordered that each party deposit its pro rata share of arbitration fees or the proceedings would be terminated. Again, Petitioners did not file a financial hardship declaration nor did they seek to defer payment nor did they ask that the fees be reallocated. Therefore, in accordance with R-47, arbitration was terminated due to deposits not made by Petitioners. Appendix I. 11. The motion to stay the proceedings while some of the claims against HSD were arbitrated was denied and the Defendants petitioned this Court for a writ of certiorari to quash the order denying a stay. Petitioners sought a stay of the circuit court action against them until conclusion of arbitration between Respondent and HSD arising from the same facts. 12. Respondent moved to dismiss the Petition as moot because, once again, arbitration had been terminated. Therefore, there was no pending arbitration so the stay sought by Petitioners was academic. Appendix M. 13. This Court held that Hessen and Hessen, P.A., were "entitled to a stay pending the outcome of the arbitration between Schimmel and HSD." Concurrent with issuing its opinion on April 29, 2015, this Court perfunctorily denied Respondent's Motion to Dismiss without addressing the effect of termination of arbitration. Appendix O; Q. 4
14. Petitioners moved to determine arbitration fees, arguing that Respondent should be responsible for advancing all the deposits. The trial court ordered the issue resubmitted to the arbitrator for determination. Appendix N; R. 15. The arbitrator again determined that each side was to pay half of the fee deposit, that Petitioners failed to do so and therefore arbitration was terminated. For at least the third time, Petitioners did not request a waiver or appeal the arbitrator s allocation of fees. Appendix S. 16. Respondent moved to lift the stay, arguing the fact that arbitration could not go forward due to Petitioners failure to comply with the arbitrator orders and that lifting the stay was the only way for Respondent to have his case heard. Appendix T. 17. The trial court issued an order to show cause why the stay should not be lifted and allowed 60 days for Petitioners to obtain any orders from the arbitrator. The Petitioners did not seek review from the arbitrator. Appendix U. 18. The trial court granted the motion to lift the stay approximately 75 days later, but still allowed another 45 days for Petitioners to reinstate arbitration. Appendix V. Instead, Petitioners ask this Court to overrule the arbitrator s Rule 47 determinations by compelling Respondent to pay the full amount under the guise of a non-existent ruling that HSD waived its right to arbitrate by not paying its prorata share of the arbitration fees. 5
MEMORANDUM OF LAW The issue before this Court is whether the dispute between Schimmel and HSD has been settled in accordance with the rules of the American Arbitration Association as required by the Arbitration Clause in the Employment Contract. In other words, that arbitration has concluded and the stay can be lifted. I. ARBITRATION PROCEEDINGS BETWEEN SCHIMMEL AND HSD, P.A., HAVE REACHED CONCLUSION Arbitration has been terminated due to non-payment of deposits by Petitioners. Petitioners argue that arbitration is not concluded because Rule 47 allows one party to pay all the fees and Schimmel can pay. This argument ignores the numerous orders of the arbitrator which determine that the fees are to be paid 50-50, in spite of HSD s inability to pay. The argument also ignores the fact that only the arbitrator can determine payment. See Lifescan, Inc. v. Premier Diabetic Services, Inc., 363 F.3d 1010, 1013 (9th Cir. 2004) (where agreement incorporates rules of AAA which cover apportionment of fees, apportionment is left to the arbitrator). See also, Dealer Computer Services, Inc. v. Old Colony Motors, Inc., 588 F.3d 884, 888-89 (5th Cir. 2009) (holding that trial court cannot compel payment of AAA deposits). Therefore, the trial court correctly held that it is the arbitrator who makes the determination as to who pays the fees and who considers the insolvency of HSD. 6
Petitioners request that Respondent be ordered to pay all the deposit can only be granted by the Arbitrator and must be denied by this Court. In Lifescan, the parties participated in arbitration until the defendant declared it was unable to pay its pro-rata share of the fees and costs for the remainder of the proceedings. Although the arbitrators had originally requested equal deposits, it was within their discretion to require one party to advance the remaining fees as a condition for arbitration to proceed. In this case, although Schimmel may advance HSD s deposit, it chooses not to and the arbitrator has not so ordered. Additionally, it is the Petitioners who want arbitration to go forward so that the case against them in circuit court will continue to languish; if no one pays HSD s share and arbitration does not reach the merits, then according to Petitioners, the stay can never be lifted. Petitioners are incorrect. If the arbitration is terminated, the stay can be lifted because arbitration had gone as far as it can go. In Pre-paid Legal Services, Inc. v. Cahill, 786 F.3d 1287 (10th Cir. 2015), the defendant moved for a stay pending arbitration, then failed to pay his share of the arbitration fees. The arbitrators then terminated arbitration proceedings and the plaintiff s motion to lift the stay was granted. The appellate court affirmed, holding that arbitration had gone as far as it could under AAA rules due to the 7
defendant s failure to his fees. In fact, failure to pay his share of arbitration fees was a breach of the arbitration agreement. Id. at 1294. Alternatively, the Cahill court held that lifting the stay was permissible because failure to pay the fees constitutes a default. The court also distinguished Dealers and Lifescan as cases where the arbitration suspended the proceedings were terminated with no indication the AAA has left open the possibility for proceedings to continue. Therefore, arbitration has concluded and the trial court correctly lifted the stay. II. THERE HAS BEEN NO DETERMINATION THAT HSD S INABILITY TO PAY ARBITRATION FEES WAS A WAIVER OF ITS RIGHT TO ARBITRATE Petitioners mischaracterized the trial court s reason for lifting the stay. Although Petitioners argued that failure to pay was not a waiver, the trial court lifted the stay because the failure to pay terminated arbitration, not due to waiver. In fact, both the trial court and the arbitrator at one time or another determined that Petitioners had not waived arbitration. See Appendix F, Q Respondent s Motion to Dismiss the previous petition as moot did not argue that Petitioners had waived arbitration, only that a stay pending arbitration should be lifted when there was no arbitration pending. Assuming arquendo that waiver were a valid issue in this case, the trial court could have held that Petitioners waived their right to arbitrate by acting 8
inconsistently with the right to arbitrate. Raymond James Financial Servs., Inc. v. Salduckas, 896 So. 2d 707, 711 (Fla. 2005). In Sullivan v. PJ United, Inc., 2016 U.S. Dist. LEXIS 117841 (N.D. Ala. August 10, 2016), the defendants moved to stay trial of the action pending arbitration, then refused to pay any arbitration fees. The arbitrator advised that arbitration would be terminated for non-payment of fees in accordance with AAA rules. Sullivan argued that a stay was no longer required because the defendants refused to pay put them in default of the arbitration agreement resulting in waiver of their right to arbitrate. The court held that by refusing to accept the arbitrator s decision and not paying the fees, the defendants have acted inconsistently with their right to arbitrate. The court also held that failure to pay arbitration fees puts a party in default and a stay is properly lifted when failure to pay fees results in termination of arbitration. So, too, in this case; the Petitioners failure to pay the fees results in waiver or default. Specifically, Petitioners failed to seek reconsideration or reallocation of fees from the arbitrator, even though the trial court allowed 60 days to do so before lifting the stay and then another 45 days after the hearing before the stay was lifted. In all this time, Petitioners failure to do anything to advance arbitration was inconsistent with asserting their right to arbitrate. 9
As in Sink v. Aden Enterprises, 352 F.3d 1197, 1199-1201 (9th Cir. 2003) ordering the parties back ordering the parties back to arbitration would result in a cycle of default where one party would continually fail to pay its fees, forcing the arbitrator to end the arbitration. Id. at 1201. This cycle would only result in the "frustration of the aggrieved party's attempts to resolve its claims." Id. Further, it noted that the defendant "had a fair chance to proceed with arbitration, but [he] scuttled that prospect by its non-payment of costs, impeding the arbitration to the point where the arbitrator cancelled the arbitration and declared [the defendant] in default.." Id. Thus, there are numerous reasons why the stay should be lifted. CONCLUSION The Petition should be denied because the trial court correctly lifted the stay where arbitration proceedings have concluded. Respectfully submitted, By: WASSON & ASSOCIATES, CHARTERED Co-counsel for Respondent Courthouse Plaza Suite 600 28 West Flagler Street Miami, Florida 33130 (305) 372-5220 Telephone (305) 372-8067 Facsimile annabel@wassonandassociates.com e-service@wassonandassociates.com s/ Annabel C. Majewski ANNABEL C. MAJEWSKI Florida Bar No. 181684 10
CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing has been served by e-mail upon Stephen M. Zukoff, Co-counsel for Respondent, Law Office of Stephen M. Zukoff, Biscayne Building, 19 W. Flagler Street - Suite 211, Miami, FL 33130-4406, smz@zukofflaw.com; e-service@zukofflaw.com; Robert L. Schimmel, 1221 Brickell Avenue, Suite 770, Miami, Florida, rls@schimmelpa.com; Arnold D. Hessen, 3191 Coral Way, Suite 630, Miami, Florida 33145, arnold@compusource.net; jaj@hsdpa.com; and Martin E. Leach, Counsel for Petitioner, Feiler & Leach, P.L., 901 Ponce de Leon Boulevard, Penthouse, Coral Gables, Florida 33134, mel@flmlegal.com; erodriguez@flmlegal.com; on December 9, 2016. By: s/ Annabel C. Majewski ANNABEL C. MAJEWSKI Florida Bar No. 181684 11