KRATOS INVESTMENTS LLC v. ABS HEALTHCARE SERVICES, LLC

• Court: District Court of Appeal of Florida
• Decided: March 17, 2021
• Docket: 20-1280
• Status: Published

Opinion

Third District Court of Appeal State of Florida

Opinion filed March 17, 2021. Not final until disposition of timely filed motion for rehearing.

________________

No. 3D20-1280 Lower Tribunal No. 20-8460 ________________

Kratos Investments LLC, et al., Appellants,

vs.

ABS Healthcare Services, LLC, et al., Appellees.

An Appeal from a non-final order from the Circuit Court for Miami-Dade County, William Thomas, Judge.

Cozen O’Connor, and James A. Gale, Samuel A. Lewis, David M. Stahl, Matthew N. Horowitz and Jonathan E. Gale, for appellants.

Boies Schiller Flexner LLP, and James Fox Miller (Hollywood); Boies Schiller Flexner LLP, Carlos M. Sires and Sigrid S. McCawley (Fort Lauderdale), for appellees.

Before FERNANDEZ, LOGUE and GORDO, JJ.

GORDO, J. The appellants, defendants in the suit below, appeal the trial court’s

nonfinal order denying their motion to compel arbitration and denying their

alternative motions to stay litigation or to transfer venue. We have

jurisdiction. See Fla. R. App. R. 9.130(a)(3)(A), (a)(3)(C)(iv). For the

following reasons, we reverse the portion of the order denying the appellants’

motion to compel arbitration. We affirm without further discussion the

portions of the order denying the stay of litigation and the transfer of venue.

FACTS & PROCEDURAL HISTORY

The appellees, ABS Healthcare Services, LLC and Heath Option One,

LLC, doing business as Insurance Care Direct (collectively, “ICD”), sued the

appellants, Kratos Investments LLC, Health Team One, LLC, Complete Vital

Care LLC, Health Essential Care LLC and Richard Ryscik over an alleged

scheme to steal ICD’s business.

ICD is a health and life insurance agency that contracts with licensed

insurance agents to market and sell benefit plans. ICD’s relationship with its

licensed agents is governed by ICD Exclusive Agent Agreements, pursuant

to which ICD authorizes agents to solicit customers and to use ICD’s

confidential and trade secret information in connection with the marketing

and sale of its plans. The Agreements prohibit agents from inducing

2 customers to discontinue business with ICD and prohibits agents from selling

non-ICD plans.

On April 15, 2020, ICD filed a complaint against the appellants alleging

they conspired with ICD agents in a scheme to steal ICD’s business by

setting up sham competing entities, interfering with the ICD Exclusive Agent

Agreements, illicitly soliciting ICD’s customers and prospective customers,

and misappropriating ICD’s confidential information and trade secrets. ICD’s

five-count complaint was for conspiracy to breach the ICD Exclusive Agent

Agreements, tortious interference with Agent Agreements, tortious

interference with business relationships, misappropriation of trade secrets

and conspiracy to misappropriate trade secrets. ICD prayed for the following

relief: “All compensatory damages for all injuries suffered as a result of

Defendants’ wrongdoing, including special damages such as consequential

damages, lost profits, and disgorgement of Defendants’ ill-gotten gains.”

ICD separately commenced actions against eight of its licensed agents

individually in Broward County alleging breach of contract, tortious

interference with contract, claims for permanent injunctive relief,

misappropriation of trade secrets and unjust enrichment. ICD sought both

legal and equitable relief in the form of compensatory damages, permanent

injunctive relief, disgorgement and imposition of a constructive trust.

3 On May 14, 2020, the appellants filed a motion to compel arbitration

and to stay or dismiss the action pending the resolution of arbitration in the

Broward cases, and to dismiss or transfer venue to Broward County. The

appellants, non-signatories, sought to compel ICD, a signatory, to arbitration

pursuant the ICD Exclusive Agent Agreements’ dispute resolution provision.

Both parties shall use best efforts to resolve disputes in an amicable manner for a period of ten (10) days. The Parties agree that any dispute arising out of or related in any way to the solicitation, negotiation, inception or performance of this Agreement (whether the dispute is couched in terms of contractual, statutory, or common law grounds) shall be exclusively resolved and construed in accordance with Commercial Arbitration Rules of the American Arbitration Association pursuant to the laws of the State of Florida governing arbitration. For any disputes not resolved amicably, venue shall be Broward County, Florida and any judgment upon the award rendered by the arbitrator(s) may be entered in any court having competent jurisdiction thereof.

The appellants argued they were entitled to enforce the arbitration provision

against the signatory under the doctrine of equitable estoppel. ICD opposed

the motion claiming there was no basis to compel it to arbitrate its claims

against non-signatories under the doctrine of equitable estoppel because

4 ICD’s claims against its own agents fell within the carve-out provision of the

arbitration clause. 1

Following a hearing, the trial court denied the motion finding that the

appellants could not invoke arbitration because they were not signatories to

the Agent Agreements and there was no direct relationship to the

Agreements that would make it inequitable to allow the appellants’ claims to

proceed outside of arbitration. This appeal followed.

STANDARD OF REVIEW

“This Court reviews an order granting or denying a motion to compel

arbitration de novo.” Duty Free World, Inc. v. Miami Perfume Junction, Inc.,

253 So. 3d 689, 693 (Fla. 3d DCA 2018).

LEGAL ANALYSIS

“[N]ot every dispute that arises between contracting parties will be

subject to arbitration . . . .” Kolsky v. Jackson Square, LLC, 28 So. 3d 965,

968 (Fla. 3d DCA 2010) (quoting Roth v. Cohen, 941 So. 2d 496, 499 (Fla.

3d DCA 2006)). “An obligation to arbitrate is based on consent . . . .” Marcus

v. Fla. Bagels, LLC, 112 So. 3d 631, 633 (Fla. 4th DCA 2013). “[F]or this

reason ‘a non-signatory to a contract containing an arbitration agreement

1 The ICD Exclusive Agent Agreement provided the following exception: “ICD may pursue its equitable remedies, including specific performance, injunctions and restraining orders in any court of competent jurisdiction.”

5 ordinarily cannot compel a signatory to submit to arbitration.’” Id. (quoting

Roman v. Atl. Coast Constr. & Dev., Inc., 44 So. 3d 222, 224 (Fla. 4th DCA

2010)). “However, courts ‘have been willing to estop a signatory from

avoiding arbitration with a nonsignatory when the issues the nonsignatory is

seeking to resolve in arbitration are intertwined with the agreement that the

estopped party has signed.’” Id. (citation omitted). “The doctrine of equitable

estoppel on the basis of intertwined claims . . . applies when a signatory to a

contract containing the arbitration clause raises allegations of substantially

interdependent and concerted misconduct by both a non-signatory and one

or more of the signatories to the agreement.” Greene v. Johnson, 276 So.

3d 527, 531 (Fla. 3d DCA 2019) (citing Marcus, 112 So. 3d at 633–34); see

Kolsky, 28 So. 3d at 969; Beck Auto Sales, Inc. v. Asbury Jax Ford, LLC,

249 So. 3d 765, 767 (Fla. 1st DCA 2018) (“Florida and federal courts have

recognized that principles of equitable estoppel sometimes allow a non-

signatory to compel arbitration against someone who had signed an

arbitration agreement.”).

The appellants argue that, although they are non-signatories to the

Agent Agreements, they have the right to compel arbitration because ICD’s

allegations against them are intertwined with the Agent Agreements. ICD

specifically alleges the appellants conspired with its agents in a scheme to

6 steal ICD’s business by interfering with and causing the agents to breach the

Agent Agreements. The claims against the appellants and the agents are

based on the same set of operative facts and unquestionably premised upon

substantially interdependent and concerted misconduct between the non-

signatories and signatories to the Agent Agreements. Thus, we conclude

ICD is estopped from avoiding arbitration. See Kolsky, 28 So. 3d at 970

(holding equitable estoppel warranted where the signatory plaintiff’s “claims

against the non-signatory appellants arise out of the same allegations of

concerted conduct among the non-signatory appellants and [signatory], are

based on the same facts, and are inherently inseparable”); Greene, 276 So.

3d at 531 (holding plaintiff was estopped from avoiding arbitration where

plaintiff’s claims against non-signatory defendants “are based on the same

set of operative facts” that plaintiff alleged against the signatory defendant,

and “the defenses of the non-signatory defendants will be dependent upon,

if not the same as, [the signatory’s] defenses”).

In the same manner, we conclude the allegations against the

appellants fell within the scope of the arbitration clause in the Agent

Agreements as they arose out of and were related to the agents’

performance of the Agreement. The signatories to the Agent Agreements

expressly agreed that “any dispute arising out of or related in any way to the

7 solicitation, negotiation, inception or performance of this Agreement . . . shall

be exclusively resolved . . . [by] arbitration.” This Court has recognized such

language as permitting non-signatories to enforce arbitration agreements.

“[A]rbitration provisions containing the language, ‘arising out of or related to,’

in certain instances can be construed to include non-signatories.” Armas v.

Prudential Sec., Inc., 842 So. 2d 210, 211 (Fla. 3d DCA 2003). Based on

our review, we find there is a “sufficient nexus” between ICD’s claims against

the appellants and the Agent Agreement “such that the arbitration clause

applies and is enforceable between the parties.” Kolsky, 28 So. 3d at 969.

ICD, however, argues that its claims fall within the arbitration

provision’s exception providing that the parties may seek equitable remedies

in court. The Agent Agreements contain a carve-out provision providing:

“ICD may pursue its equitable remedies . . . in any court of competent

jurisdiction.” ICD contends it mainly sought equitable relief against the

agents, thus the claims against the agents themselves are not arbitrable and

by extension neither are the claims against the appellants. We reject ICD’s

argument as on the record before us, ICD’s complaints against the individual

agents seek both legal and equitable relief and the Broward court has

compelled arbitration in several pending actions.

8 With regard to ICD’s claims against the appellants, ICD seeks

compensatory damages, including special damages such as consequential

damages, lost profits and disgorgement of ill-gotten gains. The fact that

ICD’s prayer for relief seeks disgorgement 2 does not bring ICD’s claims

under the carve-out exception. See Duty Free World, 253 So. 3d at 698

(concluding unjust enrichment claim seeking disgorgement did not fall within

the arbitration clause’s exception permitting the parties to seek “equitable . . .

relief” in the circuit court as claim sought legal, rather than equitable, relief).

Each count of ICD’s complaint asserts a legal cause of action seeking

compensatory damages. Thus, we conclude that ICD’s claims seek legal,

rather than equitable relief and the exception permitting parties to seek

equitable relief in the circuit court does not apply. See Duty Free World, 253

So. 3d at 699.

2 “Disgorgement is an equitable remedy . . . .” Duty Free World, 253 So. 3d at 698 (quoting S.E.C. v. Monterosso, 756 F.3d 1326, 1337 (11th Cir. 2014)); see Cushman & Wakefield, Inc. v. Office Depot, Inc., No. 08-80321-CIV- MIDDLEBROOKS/JOHNSON, 2008 WL 11409887, at *3 (S.D. Fla. Nov. 3, 2008) (“Disgorgement is a remedy . . . and not an independent cause of action.”); Waldrop v. S. Co. Servs. Inc., 24 F.3d 152, 157 (11th Cir. 1994) (“[D]amages are equitable when ‘they are restitutionary, such as in “action[s] for disgorgement of improper profits.”’” (citation omitted)).

9 CONCLUSION

For the foregoing reasons, we determine the trial court erred in denying

the motion to compel arbitration. We reverse, in part, the order and remand

the cause to the trial court with instructions to grant the motion to compel

arbitration of all claims against the appellants. We affirm the order in all other

respects.

Affirmed in part, reversed in part and remanded with instructions.