Senior Law Clerk
There is a question that comes up more than you might expect in commercial disputes: when an arbitration agreement requires the parties to do something before arbitrating, like attempt mediation first, who decides whether that step was actually taken? The court? The arbitrator? Whoever yells the loudest?
A recent decision out of Florida’s Second District Court of Appeal (Harlow v. Tier 1 Pest Solutions) answers that cleanly, and the answer has real consequences for business owners and litigators alike.
The dispute involved partners in a pest control company whose operating agreement included a two-step dispute resolution clause: mediation first, and if that doesn’t resolve things, arbitration. When a falling-out occurred, one partner issued a demand for mediation. The other side went silent, didn’t participate, and instead had the company file a lawsuit alleging breach of fiduciary duty, conversion, and constructive fraud. When the initiating partner then commenced arbitration and moved to compel, the trial court pumped the brakes. It determined that because mediation hadn’t actually happened, it was a condition precedent that hadn’t been satisfied, and therefore arbitration couldn’t proceed yet.
That reasoning seems intuitive. You didn’t follow the steps in order, so wait your turn. But the appellate court reversed, and the reasoning matters.
The Second DCA held that the trial court simply doesn’t have the authority to make that determination. Questions about what constitutes a condition precedent to arbitration, and whether that condition has been met or excused, belong to the arbitrator, not the court. Once you have a valid arbitration agreement, the court’s role is largely limited to deciding whether that agreement exists and applies. The procedural mechanics of how arbitration unfolds, including disputes about whether preliminary steps were properly completed, are for the arbitrator to sort out.
For commercial litigators, this is a significant practice point. When you’re trying to compel arbitration and the other side argues that some pre-arbitration condition wasn’t met, don’t let that argument derail you at the courthouse. The proper response is to get into arbitration and let the arbitrator decide. There’s also a cautionary note on the other side of that coin: if you’re the party who skipped a required step and you want to preserve that argument, make it before the arbitrator. Trying to use it as a sword in court to avoid arbitration altogether is not the move, and this decision confirms that.
The case also surfaced an interesting secondary issue on temporary injunctions. The challenging party in this case didn’t appeal the order granting the temporary injunctions directly. Instead, he later filed a motion to dissolve them. Normally, that’s a harder path, since courts generally expect changed circumstances before they’ll dissolve an injunction. But the appellate court recognized an exception: when the trial court improperly entered the injunction in the first place, a party can move to dissolve and then appeal the denial of that motion, even if the window for a direct appeal of the original order has already closed. It’s not a wide-open door, but it exists, and it’s worth knowing about if you’re staring at an injunction you believe was wrongly entered and you missed the initial appeal deadline.
Taken together, this case is a reminder that the forum where you fight matters as much as the substance of what you’re fighting about. Business owners who have arbitration clauses in their operating agreements, shareholders’ agreements, or commercial contracts need to understand what those clauses actually commit them to. And when a dispute arises, the instinct to run to court can backfire if the contract already has a roadmap that the parties agreed to follow.
If you are working through a business dispute, trying to navigate an arbitration agreement, or just want to make sure your operating agreements say what you intend them to say, our team at Boatman Ricci is glad to help.
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