By: Harsh Arora, Esq. 

Harsh is a Partner and Business Unit Leader at Kelley Kronenberg, where he heads the firm’s Business Law Practice Group. He concentrates in the areas of business litigation and complex domestic and international corporate transactions with a focus on healthcare, hospitality, leisure, real estate, retail, technology, transportation, and finance sectors. Harsh routinely assists clients with resolving their business disputes through mediations and arbitrations. He is licensed to practice law in Florida and New York.

Arbitration: A Clause for Concern

A carefully crafted arbitration agreement can often be an effective way of resolving many different types of disputes. Arbitration is a form of alternative dispute resolution in which parties agree to resolve disputes by going before a neutral arbitrator who will make a binding decision to resolve the matter.

More and more businesses and individuals are choosing to include arbitration clauses in their contracts for several reasons. Mainly, arbitration allows parties to settle disputes in a more timely and cost-effective manner than entering into stressful, expensive, and time-consuming litigation. Further, due to backlog of cases resulting from COVID-19 closures, arbitration provides a faster path to dispute resolution when compared to the litigation process in the court system.

While an arbitration agreement may eliminate the guesswork out of determining how a dispute will be handled, it is essential to note that it takes the final decision out of the hands of an impartial jury and into the hands of a single or multiple arbitrators. There is rarely a right to appeal, even if a mistake is made. Florida law and public policy favor arbitration when parties have agreed to arbitrate, and courts are encouraged to resolve all doubts in favor of arbitration.

Gheradi v. Citigroup Global Markets Inc. (11th Cir. 2020)

The Eleventh Circuit Court of Appeals has reinforced the gravity and irrevocability of a decision to include an arbitration clause in a contract. In Gheradi v. Citigroup Global Markets Inc., the Plaintiff, Mr. Gheradi, initiated an arbitration for wrongful termination against his employer, Citigroup, where he won an award of approximately $4 million. Citigroup then moved to vacate the arbitration award, arguing that the arbitration panel could not legally award damages for wrongful termination because the Plaintiff was considered an “at-will” employee, and therefore, Citigroup was permitted to terminate him at any time. The district court agreed with the employer and vacated the award, holding that the arbitrators exceeded their powers in violation of the Federal Arbitration Act (“FAA”) by finding that the employee had been wrongfully terminated.

The Eleventh Circuit Court of Appeals reversed the district court’s ruling, holding that the parties agreed to mandatory arbitration for “all employment-related disputes” and “if an agreement assigns a dispute to arbitration, the arbitrators do not exceed their authority when they resolve that dispute—regardless of the outcome.”[1] The majority characterized the losing party’s inability to appeal an arbitrator's decision in court as “a tough pill to swallow”, explaining that judicial review of arbitration decisions is “among the narrowest known to the law” and under the FAA, enormous deference is owed to arbitrators, even when they make a “serious error” or have an arguable interpretation of a contract which seemingly contradicts its express terms.[2]

The decision was not unanimous. The dissent challenged the scope of the parties' agreement to arbitrate, noting that the employment agreement explicitly stated that the Plaintiff was an at-will employee, and as such, Citigroup was permitted to terminate him at any time.[3]

The case is a reminder of the power and finality of arbitration. Unlike judges, arbitrators are not bound by legal precedent. Citigroup was stuck with the outcome of the arbitration and had no other effective procedure to challenge the result.

Takeaway

Whether to include an arbitration clause in an agreement is highly fact-intensive and should be decided after careful consideration and thorough review of the relevant circumstances. Arbitration may save you time and money in the future, but the informal process also lacks the procedural safeguards of traditional litigation. Consultation with legal counsel is critical before entering into any contract, which requires mandatory arbitration. An experienced attorney can help you navigate the complexities of the legal system and determine if arbitration is right for you.

Kelley Kronenberg Can Help

The Business Law attorneys at Kelley Kronenberg have decades of experience providing comprehensive legal services to individuals and businesses of all types and sizes across various industries. Our attorneys are skilled negotiators, problem-solvers, and litigators with both financial and practical business experience. We are committed to providing timely, cost-effective, business-oriented representation focused on personal attention and results.

To learn more about arbitration agreements or how we can help you, contact Harsh Arora, Esq. at (800) 436-1424 or [email protected].  Harsh is a Partner at Kelley Kronenberg, where he leads the firm’s Business Law Practice Group. He concentrates on business litigation and complex domestic and international corporate transaction matters.

DISCLAIMER: This article is provided as a courtesy and is intended for the general information of the matters discussed above and should not be relied upon as legal advice. Neither Kelley Kronenberg, nor its individual attorneys or staff, are responsible for errors, omissions and/or typographical errors – always seek competent legal counsel.]

[1].          Gheradi v. Citigroup Global Markets Inc., 975 F.3d 1232, 1238 (11th Cir. 2020).
[2].          Id. at 1236-37, 39.
[3].          Id. at 1244 (Martin, B., dissenting).

 

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