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Sachse Construction And Development Corp. v. Affirmed Drywall, Corp.

Florida Court of Appeals, Second District

July 18, 2018

AFFIRMED DRYWALL, CORP., a Florida corporation, and TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, a foreign insurance company, Appellees.


          Appeal pursuant to Fla. R. App. P. 9.130 from the Circuit Court for Collier County; Lauren L. Brodie, Judge.

          Richard B. Akin, II, and J. Matthew Belcastro of Henderson, Franklin, Starnes & Holt, P.A., Fort Myers, for Appellant.

          Steven M. Siegfried and Nicholas D. Siegfried of Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, P.A., Coral Gables, for Appellee Affirmed Drywall Corp.

          No appearance for remaining Appellee.


         Based on a subcontract to perform drywall work (the Subcontract), Affirmed Drywall Corp. filed a two-count complaint for (1) breach of contract against Sachse Construction and Development Corporation and (2) an action against bond naming Sachse and Travelers Casualty and Surety Company. Sachse appeals a nonfinal order determining that the arbitration clause in the Subcontract is void and unenforceable because it requires arbitration in Michigan of a contract dispute relating to the improvement of real property in Florida, in violation of section 47.025, Florida Statutes (2016). We reverse that order because if the Federal Arbitration Act (FAA) applies, it preempts section 47.025. However, because the trial court did not first determine whether the contract involves interstate commerce so as to make the FAA applicable, on remand the trial court must address the question of interstate commerce.

         In October 2016, Sachse, as contractor, and Affirmed Drywall, as subcontractor, entered into the Subcontract. The Subcontract reflects that Sachse is a Michigan Limited Liability Company (LLC) with an address in Detroit and reflects an address in Coral Gables, Florida, for Affirmed Drywall. Affirmed Drywall was to provide all labor, materials, and equipment associated with drywall work for the improvement of real property in Naples, Florida. Paragraph 23 of the Subcontract states that any dispute between Sachse and Affirmed Drywall "in any way relating to the Work or this Subcontract may be submitted to mediation and/or arbitration pursuant to the Construction Industry Rules of the American Arbitration Association then in effect." Paragraph 23 also provides that arbitration "shall take place at the American Arbitration Association's Southfield, Michigan, office or within 20 miles thereof." Paragraph 21 provides that the "Subcontract shall be governed by and construed in accordance with the laws of the State of Michigan."

         On March 20, 2017, Affirmed Drywall filed its two-count complaint for breach of contract and an action against bond. Sachse filed a motion to dismiss or to compel arbitration in which it argued that the Subcontract is governed by and enforceable in accordance with the FAA. It contended that the FAA supersedes any inconsistent state law, that Florida courts must enforce valid arbitration agreements within the scope of the FAA, and that the trial court should compel the parties to proceed to arbitration in Michigan pursuant to the Subcontract's terms.

         Affirmed Drywall opposed the motion and contended that Sachse failed to adequately allege facts that evidence interstate commerce. Affirmed Drywall also argued that under Florida law the venue provision requiring arbitration in Michigan was void as against public policy and cited, among other things, section 47.025.

         At the hearing on the motion, Sachse argued that the Subcontract provides that the laws of Michigan control the contract, so section 47.025 does not even apply. But counsel stated that "far more importantly," as argued in Sachse's motion to compel arbitration, the contract involves interstate commerce because the contract shows that Sachse's principal place of business is in Detroit, Michigan, and Affirmed Drywall's principal place of business is Coral Gables, Florida; thus, Sachse's counsel argued that the FAA applies. In its motion to compel and on appeal, Sachse cites federal and Florida law, and neither party mentions what Michigan law provides. Sachse argued to the trial court that the FAA preempts section 47.025.

         Affirmed Drywall argued that an evidentiary hearing would be necessary to determine if the contract involved interstate commerce. Affirmed Drywall further argued that section 47.025 prohibited the enforcement of a provision that requires venue outside the State of Florida in a contract concerning improvements to real property. Thus, Affirmed Drywall argued that the arbitration agreement violated public policy, a generally applicable contract defense that could be used to invalidate the agreement, relying upon Shotts v. OP Winter Haven, Inc., 86 So.3d 456 (Fla. 2011).

         The trial court stated that if it decided the agreement violated public policy, then arbitration would not be compelled. If it did not, then the trial court recognized that the issue of whether interstate commerce was involved would need to be determined. The trial court took the matter under advisement.

         Later, the trial court denied the motion to compel arbitration. In its order, the trial court determined that "the arbitration clause that required arbitration of disputes arising out of the improvement to real property within the state of Florida to take place in the state of Michigan" was void and unenforceable, citing to Shotts and section 47.025. The trial court implicitly rejected Sachse's preemption argument because the order did not mention the FAA or preemption. Apparently, the court did not consider whether ...

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