486 F. App'x 786
11th Cir.2012Background
- Southern Farm sued PSC shareholders in a 2006 derivative action alleging securities fraud and common-law fraud; PSC later pursued arbitration for breach of contract under the asset purchase agreement.
- The asset purchase agreement contains a broad arbitration clause: any disputes relating to the agreement must be settled by binding arbitration in Gainesville, Florida under AAA rules.
- A 2009 jury found Southern Farm liable for both fraud counts and PSC appealed; before resolution, PSC initiated arbitration alleging breach of contract under §5.5 of the agreement.
- The district court denied Southern Farm’s motion to stay litigation and compel arbitration, reasoning that the second amended complaint did not revive arbitration rights and that PSC would be prejudiced.
- On appeal, the Eleventh Circuit held: the district court was the proper tribunal for waiver; the right to arbitrate is revived for the breach-of-contract claim but not for the fraud claims; PSC may proceed in arbitration on the contract claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides waiver of arbitration? | PSC contends waiver issues should be decided by the district court. | Southern Farm argues the panel should decide waiver since the clause shows intent to arbitrate. | District court properly decides waiver issues. |
| Does amending the complaint revive arbitration rights for fraud or contract claims? | Amendment did not alter scope to revive waiver; fraud remains arbitration-eligible. | Amendment unexpectedly broadens case, reviving arbitration rights. | Contract claim arbitration rights revived; fraud rights not revived. |
Key Cases Cited
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (presumptions govern court/arbitrator division; waiver questions often for courts)
- Grigsby & Assocs., Inc. v. M Securities Inv., 664 F.3d 1350 (11th Cir. 2011) (presumptions limit arbitrator authority on conduct-based waiver)
- Krinsk v. Suntrust Banks, Inc., 654 F.3d 1194 (11th Cir. 2011) (amended complaints can revive arbitration rights when scope unexpectedly broadens)
- Brown v. E.F. Hutton & Co., Inc., 610 F. Supp. 76 (S.D. Fla. 1985) (amendments broadening claims can revive arbitration)
- Republic of Ecuador v. Chevron Corp., 638 F.3d 384 (2d Cir. 2011) (distinguishes treaty-based arbitration from standard contract waiver scenarios)