Yesterday, the Florida Supreme Court approved of an “eternal” arbitration clause that may perpetually bind successive owners of property. Sorry, I am a Marvel fan and think the recent Eternals movie is the most underrated in the MCU! The case is Hayslip v. U.S. Home Corp., No. SC19-1371 (Fla. Jan. 27, 2022) (click here for a copy of the decision).
According to the court, an arbitration clause found in a deed conveying a home from the original builder to the original purchaser can bind subsequent purchasers of the home. In this case, a subsequent purchaser filed a construction defect lawsuit against the original builder. The Florida Supreme Court held that the arbitration clause in the original deed was a covenant running with the land and binding on subsequent purchasers such as the plaintiffs in this case.
I am accustomed to seeing arbitration clauses in contracts, and one would apply traditional contract law to assess the validity of such clauses. If you enter into a relationship with a credit card company, the contract between you and the credit card company will typically have an arbitration clause. Or if you shop on Walmart.com, the contractual terms and conditions governing your use of the website contain an arbitration clause. But I am noticing arbitration clauses increasingly appearing outside of the context of traditional, bilateral contracts, such as in trust documents, by-laws, and deeds, where the arbitration clause purports to bind a broad scope of parties in different relationships. In these other contexts, arguably, there can be different grounds for creating binding obligations, and these grounds may differ from the grounds accepted in contract law. In other words, some of these settings may not involve traditional contract law principles, but arbitration law is built on or incorporates the framework of contract law. (E.g., how will courts assess the FAA section 2 savings clause regarding traditional contract defenses in these other settings?).
Although this Hayslip case involved a construction defect, the deed at issue contained expansive arbitration language covering personal injury or other damage to any occupants or even to the broader community where the property is located. I am not sure what limits will now exist with such arbitration clauses. Can a builder of homes in a community now insert into deeds and CC&R’s arbitration clauses that are expansive in scope and purport to cover all disputes between neighbors or any guests on the property or community, or cover disputes between any two successive purchasers of property? Would the landmark Supreme Court case of Shelley v. Kraemer, which involved racially restrictive housing covenants, now be decided in private arbitration?