Warrington v. Patel et al
Filing
57
OPINION AND ORDER denying 45 Motion to Compel Arbitration. Signed by Judge John E. Steele on 8/1/2022. (AFC)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
BRAD WARRINGTON,
Plaintiff,
v.
Case No:
2:22-cv-77-JES-KCD
ROCKY PATEL PREMIUM CIGARS,
INC., and RAKESH PATEL,
Defendants.
OPINION AND ORDER
This case comes before the Court on defendants’ Motion to
Compel Arbitration (Doc. #45) filed on June 15, 2022.
and reply were filed.
(Docs. ## 49, 56.)
A response
For the reasons set
forth, the motion is DENIED.
I.
In
1996,
Plaintiff
Brad
Warrington
(Warrington)
and
his
former neighbor, defendant Rakesh “Rocky” Patel (Patel) formed the
cigar company Indian Tabac-Company, now known as defendant Patel
Premium Cigars (Patel Cigars). 1
(Doc. #1, ¶ 13.)
In 1998,
Warrington entered into a Buy-Sell Agreement (the 1998 Agreement),
which included provisions related to selling company shares. (Id.
The Court previously described the allegations of the
Complaint (Doc. #1) and procedural history when denying
defendants’ motion to dismiss, abate, stay, or remand. (Doc. #42,
pp. 1-5.)
1
¶ 14.) Relevant to the pending motion, the 1998 Agreement includes
the following arbitration provision:
In the event that any controversy or claim
arising out of this Agreement cannot be
settled by the parties, such controversy or
claim shall be settled by arbitration in
accordance with the then current rules of the
American
Arbitration
Association,
and
judgment upon the award may be entered in any
court having jurisdiction thereof.
(Doc. #1-4, § 6.05.)
In
2015,
Warrington
began
discussions
selling or transferring his shares.
with
Patel
(Doc. #1, ¶ 20.)
offered Warrington less than $1 million.
(Id. ¶ 22.)
about
Patel
Warrington
declined the offer, based on an independent evaluation which valued
his shares and interest at $13 million.
(Id.)
In 2021, Warrington
sent Patel a letter stating his desire to sell his shares for $7.5
million.
(Id. ¶ 23.)
Patel did not respond to the offer, leaving
Warrington to sell a portion of his shares at a discounted price.
(Id. ¶¶ 24-25.)
On July 7, 2021, defendants initiated an action in Florida
state court (the State Action).
On November 4, 2021, defendants
filed an amended complaint in the State Action, asserting claims
for breach of contract and the covenant of good faith and fair
dealing, relating to Warrington’s sale of his shares.
1.)
(Doc. #13-
In the State Action, defendants sought specific performance
2
by requiring Warrington to sell his shares pursuant to the 1998
Agreement.
(Id.)
On February 4, 2022, Warrington initiated this action.
#1.)
(Doc.
Defendants moved to dismiss, remand, abate, or stay this
action based on the State Action.
(Doc. #13.)
The Court denied
the motion. (Doc. #42.) Defendants now move to compel arbitration
pursuant to the 1998 Agreement.
(Doc. #45.)
II.
The provisions of the Federal Arbitration Act (“FAA”), 9
U.S.C. § 1 et seq, establishes a federal policy in favor of
arbitration.
Shearson/American Express, Inc. v. McMahon, 482 U.S.
220, 226 (1987); Walthour v. Chipio Windshield Repair, LLC, 745
F.3d 1326, 1330 (11th Cir. 2014) (FAA was enacted in order to
ensure the “enforcement of arbitration agreements according to
their terms so as to facilitate streamlined proceeding.”).
The FAA provides that any dispute arising out of a contract
that has a written agreement to arbitrate “[s]hall be valid,
irrevocable and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.”
9 U.S.C. §
2; see Pendergast v. Sprint Nextel Corp., 691 F.3d 1224, 1231 (11th
Cir. 2012).
The FAA creates “a presumption of arbitrability such
that any doubts concerning the scope of arbitrable issues should
be resolved in favor of arbitration.”
Bazemore v. Jefferson
Capital Sys., LLC, 827 F.3d 1325, 1329 (11th Cir. 2016).
3
Warrington asserts that defendants waived their right to
compel arbitration.
(Doc. #49, p.3.)
“A party has waived its
right to arbitrate if, under the totality of the circumstances,
the party has acted inconsistently with the arbitration right.”
S
& H Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507, 1514
(11th Cir. 1990), abrogated by Morgan v. Sundance, Inc., 142 S.
Ct. 1708, 212 L. Ed. 2d 753 (2022). 2
“A party that substantially
invokes the litigation machinery prior to demanding arbitration
may waive its right to arbitrate.” Krinsk v. SunTrust Banks, Inc.,
654 F.3d 1194, 1201 (11th Cir. 2011) (quotation omitted).
“[T]he
burden of proving waiver rests with the party seeking to prove
waiver.”
Nelson v. Synchrony Bank, No. 216CV703FTM99MRM, 2017 WL
4763541, at *2 (M.D. Fla. Oct. 20, 2017) (quotation omitted).
Defendants
waived
their
right
to
arbitrate.
Defendants
initiated the State Action, seeking to avail themselves of the
litigation machinery instead of arbitration.
Defendants then
wanted all the claims between the parties in this case litigated
in state court, as evidenced by their motion to dismiss, abate,
stay, or remand filed in this court.
The Court denied that motion
The Eleventh Circuit previously required a showing of: (1)
the party seeking to compel arbitration acting inconsistently with
that right; and (2) prejudice to the nonmoving party.
S&H
Contractors, 906 F.2d at 1514. In Morgan, the Supreme Court held
that there is no prejudice requirement when considering whether a
party waived their right to arbitrate. Morgan, 142 S. Ct. at 1714.
2
4
but recognized that the federal and state litigation boiled down
to substantially the same issue: whether Warrington, Patel, and
Patel Cigars fulfilled their respective duties and obligations
under
the
1998
Agreement
and
applicable
Florida
law.
Had
defendants wanted to pursue their right to arbitrate, they would
never have filed the State Action.
Defendants have waived their
right to arbitrate.
Accordingly, it is now
ORDERED:
Defendants’
Motion
to
Compel
Arbitration
(Doc.
#45)
is
DENIED.
DONE and ORDERED at Fort Myers, Florida, this
August, 2022.
Copies:
Counsel of Record
5
1st
day of
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