Posted by Nydia Streets of Streets Law in Florida Divorce
Can arbitration be ordered or forced in a Florida divorce case? Some issues in a Florida family law case cannot be decided in binding arbitration, but others can be if agreed-to by the parties. Disputed ownership of a corporate entity during divorce was an issue in the case Malek v. Malek, 3D21-2451 (Fla. 3d DCA July 20, 2022).
In this contested divorce case, the wife named the parties’ adult son and a corporation that owned five Florida properties as third-party defendants. The husband claimed to be the sole owner of the corporation. The wife filed a motion for sanctions against the husband, alleging that after the divorce case was filed, he backdated records to indicate he was the sole owner. After a hearing, the trial court granted the wife’s motion for sanctions. Later, the husband attempted to compel the issue of ownership over the corporation to arbitration, arguing the corporate documents provide for arbitration in the event of a dispute between the corporation and a shareholder. The wife argued this was a ploy by the husband to get around the sanctions ordered against him. The court granted the husband’s motion for arbitration and the wife appealed.
The appellate court reversed, holding “The ownership of Kymed for purposes of the dissolution action is not an arbitrable issue. Three elements are necessary to compel arbitration: (1) whether a valid written agreement to arbitrate exists, (2) whether an arbitrable issue exists, and (3) whether the right to arbitration was waived. See Xerox Corp. v. Smartech Document Mgmt., Inc., 979 So. 2d 957, 959 (Fla. 3d DCA 2007). When those elements are met, arbitration must be compelled. See Comvest IMC Holdings, LLC v. IMC Grp., LLC, 276 So. 3d 874, 877 (Fla. 3d DCA 2019) [internal citation omitted]. None of these elements exist in the current facts.” The court went on “Kymed’s corporate documents provide for arbitration in the event there is a dispute between Kymed and a shareholder. Kymed, however, does not have an interest in who owns it, and it has no dispute over shares or governance with the parties. Indeed, the soon-to-be ex-spouses do not have any dispute with Kymed, or Kymed with them as shareholders or putative shareholders. In its pleadings and argument Kymed does not even recognize [the wife] as a shareholder such that the arbitration clause would apply. The dispute over ownership is, actually, solely a matter between [the spouses] in the dissolution action. Kymed is properly before the court and within the court’s jurisdiction to determine whether Kymed is marital or non-marital property. Identification of Kymed as a party is merely incidental to the court’s jurisdiction to determine who owns the corporation.” The order compelling arbitration was therefore reversed.
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