What To Know About Shareholder Agreements And Mandatory Arbitration
Are you involved in a shareholder dispute in Florida? If so, it is crucial that you know your rights under the shareholder agreement and state law. Many modern shareholder agreements contain contract language calling for arbitration for any disputes. You may hear this referred to as a mandatory arbitration provision or a forced arbitration claim.
Will a forced arbitration clause in a shareholder agreement be upheld in Florida? The answer varies based on your cause of action—from breach of shareholder agreement claims “likely yes”, for fraud claims, “likely no.” Here, our Miami shareholder dispute attorney highlights the key things to understand about shareholder agreements and mandatory arbitration provisions.
Background: Arbitration is a Private Process to Resolve Disputes
To start, it is important to understand what arbitration is and how it works. It is a form of ADR (alternative dispute resolution) that involves parties going before a neutral arbitrator who is empowered to make a decision. Each side will be given a chance to present their case before the arbitrator. The arbitrator’s decision is generally binding.
Florida Law: A Forced Arbitration Clause Can Be Enforced (But Not for Fraud Claims)
A large share of modern shareholder agreements contain an arbitration clause. In recent years, a lot of questions have been raised about whether or not these clauses are enforceable. If you sign a shareholder agreement with a forced arbitration provision do you actually lose your right to litigate a dispute? The answer depends on many factors. Florida courts have weighed in on this matter before. While every case involves its own set of facts and circumstances, the general standard for shareholder disputes and mandatory arbitration provisions in Florida is as follows:
- Breach of Shareholder Agreement Claims: If a shareholder is bringing a claim for an alleged breach of the shareholder agreement, then any mandatory arbitration provision is likely to be upheld and enforced. Arbitration will be required.
- Fraud Claims: If a shareholder is suing for fraud, then any forced arbitration clause is likely not valid. Fraud is outside the bounds of the agreement and therefore, on that specific cause of action, arbitration typically cannot be compelled.
The Terms of the Shareholder Agreement is Critically Important
Shareholder disputes are complicated. While Florida law provides certain legal protections to shareholders, a shareholder’s rights and responsibilities derive primarily from the agreement. The specific terms of a shareholder agreement is critically important. Whether a shareholder has a valid claim or whether a mandatory arbitration provision will actually be enforced depend on many factors, including the specific language of the shareholder agreement.
Speak to Our Miami, FL Shareholder Lawyer Today
At Pike & Lustig, LLP, we are committed to helping our clients find the most effective solution for their case. If you are involved in a dispute over the alleged breach of a shareholder agreement and you have any questions about a mandatory arbitration clause, we are here to help. From our law offices in Miami, West Palm Beach, and Wellington, we handle shareholder disputes, commercial litigation, and business arbitration claims throughout Southeastern Florida.