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A South Florida Business Avoids Sanctions Because It Wasn’t Under a Court-Ordered Obligation to Arbitrate

Many business people involved in negotiating and executing commercial contracts may understand the importance of awareness of even small details with that agreement. However, that same level of attention to detail is just as important when it comes to litigating a commercial contract dispute. The difference between owing hundreds of thousands of dollars in sanctions or not may derive from exactly what is, and what is not, in a court’s order. In other words, whether you’re negotiating a deal or litigating in relation to an existing contract, it pays to have skilled South Florida commercial litigation counsel to “sweat the small stuff” on your behalf.

A pretty good example of this concept on display was a recent case from Miami. The owner of a property in Miami-Dade County hired a South Florida-based architectural firm to provide architectural services for a development project at the property. Problems arose and, eventually, the architectural firm filed for a lien, arguing that the client failed to pay its bill.

First, a mediation was begun between the two sides. Eventually, the architectural firm voluntarily initiated an arbitration proceeding, which again pertained to the client’s alleged failure to pay for services rendered. The owner filed a request asking the trial court judge to enter an injunction that would force the parties to litigate the issues in court instead of going through arbitration. The trial judge summarily denied that request, with no explanation or additional details.

Later, the architectural firm asked the trial court to impose sanctions against the owner for bad-faith failure to arbitrate the dispute. The trial judge agreed that the owner had acted in bad faith and imposed sanctions of more than $302,000.

The owner appealed and won. The key to the owner’s success a strong reminder of how important it is to understand precisely what the trial court has – and has not – ordered you to do. If the judge ordered you to do something and you fail to do it, there are several harmful consequences that can ensure, including sanctions totaling very large dollar amounts. However, if the judge did not actually demand that you do a particular thing, then you cannot be sanctioned.

The importance of precision and details was paramount here. The trial judge sanctioned the owner on the basis that she had ordered it to arbitrate when she denied the request for an injunction. The problem with that reasoning was that she had never actually issued any such order. She had denied the owner’s request that she compel both sides to resolve the case through litigation in court, but refusing to compel two sides to resolve a dispute through litigation in court is not automatically the same as ordering those same parties to resolve their dispute in arbitration, even if there is an open arbitration proceeding pending.

It only stands to reason that, before you can be sanctioned for failing to arbitrate in good faith, you first have to be under a court order to arbitrate at all. Because the owner was not under court order to arbitrate, the court couldn’t sanction it for failing to proceed in good faith.

As noted above, cases have small details (as well as big ones), any one of which can be the difference between success and failure. Protect your interests with representation upon which you can rely implicitly. The diligent South Florida commercial litigation attorneys at Stok Kon + Braverman are here to help, having handled a wide range of commercial contract cases here in Florida for many years.

Contact us online or by calling (954) 237-1777 to schedule your consultation and find out how this firm can help you.