Florida Appellate Court Holds Right to Arbitrate Did Not Apply Within Lien Transfer Bond

A trial court’s order granting a motion to compel arbitration was recently overturned after the Fourth District Court of Appeals determined that no enforceable arbitration agreement existed between the parties.

The plaintiff, Andersen Service Company, entered into a subcontract with Marco Contractors, Inc. for construction work, which included a dispute resolution clause enabling only Marco to select arbitration or litigation. If Marco elected arbitration, that proceeding would have to take place in Allegheny County, Pennsylvania.

Subsequently, Andersen filed a construction lien for unpaid work. That lien was transferred to a lien transfer bond, issued by the defendant, Old Republic Surety Company. Notably, the transfer did not incorporate the subcontract and its arbitration clause, but rather indicated it was issued pursuant to Fla. Stat. § 713.24. Thereafter, Andersen filed suit in Broward County where the bond was recorded, and Old Republic Surety sought to compel arbitration. The trial court granted Old Republic’s Motion, and proceedings were subsequently stayed.

On appeal, Florida’s Fourth District Court of Appeal noted that the trial court granted the motion in error, as there was no binding contract compelling the arbitration between Andersen and Old Republic. Only Marco Contractors and Andersen were parties to the contract, not Old Republic. The court held that sureties cannot exercise the contractual election right when that right is saved for the principal to the contract. Marco Construction exclusively retained the right to elect arbitration, and the bond transfer did not enable Old Republic to do so. As a result, the Fourth DCA remanded to the trial court for further proceedings pursuant to its ruling.