TERRY P. HEDDEN, JR. v. Z OLDCO, LLC, f/k/a ZTS.COM, LLC, ZENO TECHNOLOGY SOLUTIONS, INC., F/K/A HEDDEN ENTERPRISES, INC. ( 2019 )

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT
TERRY P. HEDDEN, JR., )
)
Appellant, )
)
v. ) Case No. 2D18-4584
)
Z OLDCO, LLC f/k/a ZTS.COM )
LLC, successor by conversion to )
ZENO TECHNOLOGY SOLUTIONS, )
INC. f/k/a HEDDEN ENTERPRISES, )
INC., )
)
Appellee. )
)
Opinion filed October 30, 2019.
Appeal from the Circuit Court for
Hillsborough County; Steven Scott
Stephens, Judge.
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.
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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).
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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)).
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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
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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 damages for prior
violations—relief that, if sought, might have necessitated such considerations.
Instead, Z Oldco sought a declaration of past violations of the Non-
Compete Agreement to resolve a dispute regarding payment under the Compensation
Agreement. Thus, even assuming the Non-Compete Agreement is a wholly separate
contract, the "controversy" that Z Oldco claims not to be covered by the broad
arbitration provision in the Compensation Agreement is still about the Compensation
Agreement. All counts of the complaint are expressly intended to resolve a dispute
regarding compensation under the Compensation Agreement pursuant to the general
allegation—incorporated by reference into each count—invoking the Demand Letter as
a bona fide dispute of the parties. Cf. Seifert, 750 So. 2d at 642 ("None of the
allegations assert that [the defendant's] duties or obligations arose from or were
governed by the contract.").
It does not matter that a specific allegation of Count I also states that
"there is currently a bona fide dispute between the parties as to whether Hedden's
conduct . . . constitutes a violation of the Non[-C]ompete Agreement." The general
allegations include a simple explanation of why the Compensation Agreement has a
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nexus to every count: "Pursuant to the terms of the Compensation Agreement, Hedden
is only entitled to compensation after terminating his employment if he complies with the
Non[-C]ompete Agreement." Z Oldco's entire declaratory judgment action, premised as
it is on a dispute articulated in the Demand letter, is a "dispute" "arising out of or relating
to" the Compensation Agreement, and each count of that action is a "claim" "arising out
of or relating to" the Compensation Agreement.
It is true that "the mere fact that the dispute would not have arisen but for
the existence of the contract and consequent relationship between the parties is
insufficient by itself to transform a dispute into one 'arising out of or relating to' the
agreement." Id. at 638 (finding that a wrongful death action against a construction
company with which the homeowner had entered into a purchase and sale agreement
did not arise out of or relate to that agreement). Yet, there is much more than but-for
causation between the Compensation Agreement and the cause of action brought by Z
Oldco; there is a nexus that is not attenuated at all by the fact that the complaint also
seeks declaratory relief relating to the Non-Compete Agreement. The Compensation
Agreement bears a "significant relationship" to the action as a whole and to each of its
counts. Cf. id. at 642 ("[T]he dispute does not create a 'significant relationship' to the
contract because none of the allegations in the complaint refer to or mention the sales
agreement . . . ."). Indeed, it is the stated raison d'etre of the entire complaint: Because
Hedden sent a letter demanding payment of compensation, entitlement to which is
disputed by the parties, we are in need of a declaration not only as to whether Hedden
fulfilled the terms of the Compensation Agreement but also whether he violated the
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Non-Compete Agreement, compliance with which is an articulated requirement for
payment under the Compensation Agreement.
Z Oldco also claims that disputes related to the Non-Compete Agreement
cannot be resolved through arbitration because the Non-Compete Agreement contains
a venue clause that is irreconcilable with the arbitration clause in the Compensation
Agreement. But the arbitration and venue clauses do not conflict. The former
designates the procedure for resolving disputes—arbitration—and the latter designates
the venue of litigation should any become necessary—circuit court in Hillsborough
County.
The venue clause in the Non-Compete Agreement dictates the forum in
the event that a party chooses to litigate a dispute involving the Non-Compete
Agreement. The clause only governs the "venue of any action hereunder" and the
"jurisdiction . . . for the purposes of any litigation involving this [Compensation]
Agreement." It does not mandate that all disputes must be heard by "the courts in and
for Hillsborough County, Florida." The provision applies if the parties litigate; it does not
provide that the parties must litigate all disputes involving the Non-Compete Agreement.
Cf. Fischer v. Rodriguez-Capriles, 472 So. 2d 1315, 1316 (Fla. 3d DCA 1985) ("[T]he
bare provision in a contract—'Arbitration to be held in Miami, Florida'—without more, did
not obligate the parties to arbitrate any dispute arising out of the agreement, but was a
choice of the place for arbitration in the event of an agreement to arbitrate.").1
1Moreover, the use of the terms "litigation" and "action," as opposed to
"dispute," "controversy," or "claim," suggests that this provision applies if the parties
litigate, not that litigation is required. The use of the former words do not suggest that
the parties intended to carve out an exception to the broad arbitration provision in the
Compensation Agreement. See Alternative Dispute Resolution, Black's Law Dictionary
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The arbitration provision, in contrast, is broad, requiring arbitration of
"[a]ny dispute, controversy or claim arising out of or relating to" the Compensation
Agreement. See O'Keefe Architects, Inc. v. CED Const. Partners, Ltd., 944 So. 2d 181,
188 (Fla. 2006) ("In this case, the parties agreed to a broad provision that requires
arbitration of '[c]laims, disputes, and other matters . . . arising out of or relating to' the
contract."); see also Citigroup, Inc. v. Boles, 914 So. 2d 23, 25 (Fla. 4th DCA 2005)
("[N]arrow clauses often use the language 'arising under,' and broader clauses use
wording such as 'arising out of or relating to' in specifying covered disputes."). Even
parties who wish to arbitrate any disputes arising from or relating to a contract might still
find it prudent to designate in what court to bring any litigation that might become
necessary—for example, litigation regarding arbitrability.
Both provisions can be given effect without offending the other. While the
language of the venue clause indicates that venue would lie exclusively in Hillsborough
County in the event that a party filed suit under the Non-Compete Agreement, nothing
suggests that litigation in Hillsborough County courts was to be the exclusive means for
the resolution of all disputes concerning that Agreement. The venue clause can and
should be read together with the arbitration clause, the latter of which applies to Z
Oldco's cause of action by virtue of the language of the parties' agreements and the
allegations of Z Oldco's complaint.
Accordingly, we reverse the order denying the motion to arbitrate and
remand with directions to refer each of the declaratory judgment claims to arbitration.
(10th ed. 2014) ("Any procedure for settling a dispute by means other than litigation, as
by arbitration or mediation." (emphasis added)); Action, Black's Law Dictionary (10th
ed. 2014) ("A civil or criminal judicial proceeding." (emphasis added)).
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See Austin Commercial, L.P. v. L.M.C.C. Specialty Contractors, Inc., 268 So. 3d 215,
221 (Fla. 2d DCA 2019).
Reversed and remanded with instructions.
SALARIO, J., and CASE, JAMES, ASSOCIATE JUDGE, Concur.
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