Hedden v. Z Oldco, LLC

301 So.3d 1034

Terry P. HEDDEN, Jr., Appellant,

v.Z OLDCO, LLC f/k/a Zts.com LLC, successor by conversion to Zeno Technology Solutions, Inc. f/k/a Hedden Enterprises, Inc., Appellee.

Case No. 2D18-4584

District Court of Appeal of Florida, Second District.

Opinion filed October 30, 2019

Charles A. Samarkos, Charles A. Buford, and Rachael L. Wood of Johnson, Pope, Bokor, Ruppel, & Burns, LLP, Clearwater, for Appellant.

Steven C. Pratico and Chance Lyman of Buchanan Ingersoll & Rooney PC, Tampa, for Appellee.

ATKINSON, Judge.

Terry P. Hedden, Jr., appeals the denial of his motion to compel arbitration of a three-count declaratory judgment action filed by Z Oldco, LLC, the successor to the entity to which Hedden sold a business. Because each of Z Oldco's claims arise under the arbitration provision contained in the Compensation Agreement, we reverse.

In connection with the sale of his business, Hedden agreed to remain on as an employee for one year to assist with the transition and maintain goodwill with clients. On October 1, 2012, he and Z Oldco's predecessor entered into a Compensation Agreement to govern the terms of that relationship. Hedden also signed a Non-Compete Agreement, which restricted his ability to operate a similar business for two years following termination of his employment with Z Oldco's predecessor.

The Compensation Agreement provides for the payment of a two-million-dollar bonus (the "Exit Bonus"), to be paid out in intervals based on the success of the business, with the balance paid upon termination of Hedden's employment. Payment of this bonus is conditioned upon Hedden's continued compliance with the Non-Compete Agreement.

The Compensation Agreement contains an arbitration provision, covering "[a]ny dispute, controversy or claim arising out of or relating to this Agreement." The Non-Compete Agreement contains a provision entitled "Governing Law, Jurisdiction and Venue," which provides the following:

This Agreement shall be construed in accordance with and shall be governed by the laws of the State of Florida and venue of any action hereunder shall lie solely with the courts in and for Hillsborough County, Florida, to which jurisdiction each of the parties hereto agrees to submit for the purposes of any litigation involving this Agreement.

Hedden's employment terminated in October 2013. On May 24, 2018, Hedden's attorney sent Z Oldco a letter demanding payment of the Exit Bonus due under the Compensation Agreement (the Demand Letter). One month later, Z Oldco filed a declaratory judgment action, seeking a determination as to whether: (I) Hedden violated the Non-Compete Agreement; (II) the Exit Bonus is due to Hedden under the Compensation Agreement if he is in violation of the Non-Compete Agreement; and (III) whether the terms of the Compensation Agreement have been fulfilled such that payment of the Exit Bonus is due to Hedden. Hedden moved to compel arbitration pursuant to the arbitration clause of the Compensation Agreement.

The trial court denied the motion and concluded that Count I "related more closely to the Non-[C]ompete Agreement than to the Compensation Agreement, and thus is subject to adjudication by the court." The trial court reasoned that because Counts II and III were dependent upon the resolution of Count I, it "need not decide whether those counts must be severed and stayed pending arbitration." Hedden filed the instant appeal, claiming that all three counts are arbitrable.

Our review of this interlocutory order denying the motion to compel arbitration is de novo. See Verizon Wireless Pers. Commc'ns, LP v. Bateman, 264 So. 3d 345, 348 (Fla. 2d DCA 2019) ; Woebse v. Health Care & Ret. Corp. of Am., 977 So. 2d 630, 632 (Fla. 2d DCA 2008). "[A] party who timely objects to arbitration should not be compelled to arbitrate a specific claim unless the party demanding arbitration establishes that the scope of the relevant arbitration clause, under an analysis favoring arbitration, is sufficient to encompass such a dispute." CSE, Inc. v. Barron, 620 So. 2d 808, 809 (Fla. 2d DCA 1993).

When ruling on a motion to compel arbitration, the trial court must consider the following: "(1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived." Seifert v. U.S. Home Corp., 750 So. 2d 633, 636 (Fla. 1999). Whether an arbitrable issue exists—the question at issue in this case—depends on whether there is a "significant relationship" or "nexus" between the dispute and the contract containing the arbitration provision. Id. at 638 ("[E]ven in contracts containing broad arbitration provisions, the determination of whether a particular claim must be submitted to arbitration necessarily depends on the existence of some nexus between the dispute and the contract containing the arbitration clause.").

Z Oldco filed a complaint for declaratory relief, a cause of action which requires a plaintiff to "allege a present controversy based on articulated facts which demonstrate a real threat of immediate injury." Apthorp v. Detzner, 162 So. 3d 236, 240 (Fla. 1st DCA 2015) (citing Reinish v. Clark, 765 So. 2d 197, 202 (Fla. 1st DCA 2000) ).

Specifically, [the plaintiff is] required to establish that[ ] there is a bona fide, actual, present practical need for the declaration; that the declaration should deal with a present, ascertained or ascertainable state of facts or present controversy as to a state of facts; that some immunity, power, privilege or right of the complaining party is dependent upon the facts or the law applicable to the facts; that there is some person or persons who have, or reasonably may have an actual, present, adverse and antagonistic interest in the subject matter, either in fact or law; that the antagonistic and adverse interest are all before the court by proper process or class representation and that the relief sought is not merely the giving of legal advice by the courts or the answer to questions propounded from curiosity.

Id. (quoting Martinez v. Scanlan, 582 So. 2d 1167, 1170 (Fla. 1991) ).

For all counts of its declaratory judgment complaint, Z Oldco chose to rely on the following allegation to support its entitlement to declaratory relief: "There is a bona fide, actual, and present dispute between the parties, as stated in the May 24, 2018[,] correspondence of Hedden's counsel, which is attached as Exhibit C [the Demand Letter]." The Demand Letter leaves no question about what that dispute is: Under the "Compensation Agreement," Hedden is entitled to receive an "Exit Bonus," but, "[n]otwithstanding the terms of the [Compensation] Agreement, none of the Exit Bonus has been paid ...."

Z Oldco presumably chose to rely on Hedden's Demand Letter for a good reason: It is what this case is about. It is a dispute about an employment agreement in which one party thinks he ought to get paid something the other party thinks he ought not. The employment agreement includes, unsurprisingly, an arrangement regarding the rate, method, and timing of financial compensation for the employee's labor, memorialized in the Compensation Agreement. And the employment agreement includes an arrangement not uncommon to formalized employment agreements: a commitment not to compete with the employer, memorialized in the Non-Compete Agreement. Payment in the Compensation Agreement is made explicitly contingent on, among other things, adherence to the Non-Compete Agreement.

The Compensation Agreement specifically references the concurrently executed Non-Compete Agreement and provides that the Compensation Agreement shall "constitute adequate consideration for execution" of the Non-Compete Agreement. Yet, this court need not make a determination as to whether the Compensation Agreement and Non-Compete Agreement actually comprise one employment agreement. Nor does this court need to address the possibility that the Compensation Agreement's express reference to the Non-Compete Agreement gives rise to arbitrability of disputes concerning the latter. See, e.g., Phoenix Motor Co. v. Desert Diamond Players Club, Inc., 144 So. 3d 694, 698 (Fla. 4th DCA 2014) ; Lowe v. Nissan of Brandon, Inc., 235 So. 3d 1021, 1026 (Fla. 2d DCA 2018), review dismissed, SC18-207, 2019 WL 446572 (Fla. Feb. 5, 2019). Z Oldco did not seek to enjoin Hedden from further violation of the Non-Compete Agreement or to obtain...