Arbitration of Unlawful Group Boycott Claim Under California Cartwright Act Was The Juicy Florida Choice Of Law Law Issue.
HCF Insurance Agency v. Patriot Underwriters, Inc., Case No. B257715 (2/5 May 27, 2015) (unpublished) involved a dispute between plaintiff insurance broker, and defendant program administrator/underwriter, partially governed by an arbitration clause. The Court of Appeal affirmed the trial judge’s order that causes of action for contract breach and breach of the covenant of good faith and coverage were within the scope of the arbitration agreement, but that causes of action for fraud and intentional interference with economic advantage were not within the scope.
However, the cause of action for unlawful group boycott, in violation of California’s Cartwright Act, raised an interesting issue of public policy and choice of law. The dispute, which was within the scope of the arbitration clause, was governed by a Florida choice-of-law provision. Florida law did not provide a remedy for losses resulting from antitrust violations outside Florida, and plaintiff’s alleged damages were sustained in California. Florida law also provides an arbitration agreement is unenforceable if it violates public policy, and such a violation occurs when an arbitration agreement diminishes available remedies. Thus, the Court of Appeal reasoned that the arbitration clause must be invalid under Florida law, because arbitration under Florida law would diminish the remedies of plaintiff for injury in California under the Cartwright Act, violating Florida public policy.
COMMENT: Under the Federal Arbitration Act, claims that an arbitration provision violates state public policy don’t get much traction these days. However, even under the FAA, the parties can agree to choice of law, and here, the parties agreed to apply Florida law to their dispute.
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