Shareholder Disputes In Florida: Are Mandatory Arbitration Provisions Enforceable?
A shareholder agreement is a contract between the stakeholders of a corporation. When properly drafted, it should define a shareholders’ rights, privileges, and responsibilities. Should a shareholder dispute arise, the first place to look is the shareholder agreement. In it, you may find a mandatory arbitration provision.
This raises an important question: Are forced arbitration clauses in a shareholder agreement enforceable in Florida? The short answer is ‘yes’—but only in certain circumstances. Here, our West Palm Beach shareholder dispute attorneys explain the key things you should know about forced arbitration provisions and shareholder agreements in Florida.
What is Arbitration?
As described by the American Arbitration Association (AAA), arbitration is a form of alternative dispute resolution (ADR) through which a legal dispute is decided by a neutral third party. In some ways, arbitration is similar to a ‘mini-trial’. There are some significant advantages to arbitration. It is generally faster and more cost-efficient than litigation.
At the same time, a mandatory arbitration clause does restrict the rights of the parties. When invoked, this type of clause requires parties to a case to resolve their dispute in arbitration. They lose their legal right to go to court. As a shareholder, you may sometimes prefer litigation over arbitration.
A Mandatory Arbitration Clause in a Shareholder Agreement May Be Enforceable
A mandatory arbitration provision in a shareholder agreement is sometimes enforceable. Whether it will be upheld by a Florida court depends on the specific terms of the contract and the nature of the underlying shareholder dispute. The 1996 Florida Fifth District Court of Appeal case of Miller v. Roberts provides a useful example of how the law works. In that case, Dr. Roberts sued his business partners for breach of a shareholders’ agreement and fraud. Notably, the shareholder agreement in question contained a mandatory arbitration clause. With reference to the agreed-upon terms of the contract, the defendants moved to compel arbitration. The appeals courts split the two cases:
- The Florida court ruled that the arbitration provision was enforceable in regards to the breach of shareholder agreement claim.
- However, the Florida court ruled that the mandatory arbitration provision was not enforceable in regards to the fraud claim.
The Bottom Line: There is no rule in Florida law that bars the use of mandatory arbitration provisions in a shareholder agreement. Whether such a contract clause is enforceable in a particular shareholder dispute depends on the specific facts of the case. A shareholder rights lawyer with experience in arbitration law can help you understand your rights and options.
Contact Our West Palm Beach Shareholder Dispute Lawyers Today
At Pike & Lustig, LLP, our Florida shareholder law attorneys possess the legal skills and expertise you can count on. If you have any questions about mandatory arbitration and shareholder agreements, we are available to help. Contact our firm today for a strictly confidential initial legal consultation. We handle shareholder disputes throughout Southeastern Florida, including in West Palm Beach, Boca Raton, Boynton Beach, Fort Lauderdale, Miami, and Miami Beach.