LENNAR HOMES, INC. v. DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, etc.
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IN THE DISTRICT COURT OF APPEAL
FIRST DISTRICT, STATE OF FLORIDA
LENNAR HOMES, INC.,
NOT FINAL UNTIL TIME EXPIRES TO
FILE MOTION FOR REHEARING AND
DISPOSITION THEREOF IF FILED.
CASE NO.: 1D03-3020
DEPARTMENT OF BUSINESS
REGULATION, DIVISION OF
FLORIDA LAND SALES,
CONDOMINIUMS AND MOBILE
Opinion filed September 27, 2004.
An appeal from an order of the Department of Business and Professional Regulation.
William P. McCaughan and Jeffrey P. Margolis of Duane Morris LLP, Miami, for
Karl M. Scheuerman, Staff Counsel, Department of Business and Professional
Regulation, Tallahassee, for Appellee.
VAN NORTWICK, J.
Lennar Homes, Inc. (Lennar), appeals a declaratory statement issued by the
Department of Business and Professional Regulation, Division of Land Sales,
Condominiums and Mobile Homes (Division), ruling that a mandatory arbitration
provision in a condominium purchase and sale agreement is prohibited by sections
718.111(3), 718.303 and 718.506, Florida Statutes (2002), and that the arbitration
language in Lennar’s agreement is void as against public policy. For the reasons that
follow, we hold that the Division was without authority to interpret and declare void
Lennar’s contractual arbitration provision in a declaratory statement proceeding under
section 120.565 and to announce a general policy of far-reaching applicability against
arbitration provisions in a declaratory statement proceeding. Accordingly, we reverse.
Section 120.565(1) provides:
Any substantially affected person may seek a declaratory
statement regarding an agency’s opinion as to the
applicability of a statutory provision, or of any rule or order
of the agency, as it applies to the petitioner’s particular set
Lennar is a builder and developer of residential condominiums. The purchase and sale
agreement utilized by Lennar in selling condominiums includes a provision requiring
that disputes between Lennar and a condominium purchaser be resolved by binding
arbitration.1 Pursuant to section 120.565(1), Lennar filed a petition for declaratory
Section 43.3 of Lennar’s proposed purchase and sale agreement provides in
If the Dispute is not fully resolved by mediation, the Dispute shall be
submitted to binding arbitration and administered by the AAA
statement seeking the opinion of the Division
as to whether §§ 718.111(3), 718.303, and 718.506, Florida Statutes, or
any other provision of Chapter 718, Florida Statutes, prohibit a
mandatory and binding arbitration provision requiring mandatory and
binding mediation and arbitration of disputes between a purchaser and
condominium developer in a purchase agreement for a condominium unit
The Division found that such an arbitration provision is prohibited. After reviewing
the disputed binding arbitration language in Lennar’s purchase contract, the Division
ruled that it exceeded and contradicted the prescribed statutory remedies and was void
as against public policy.
Generally, sections 718.111(3), 718.303 and 718.506 grant a condominium
purchaser causes of action for rescission or damages against a developer for the
publication of false and misleading disclosures in any sales materials, authorize the
condominium association or unit owner to file actions for damages or for injunctive
relief or both, and grant the associations the power to bring an action on behalf of unit
owners concerning matters of common interest. Further, sections 718.303(1) and
718.506(2) provide that the prevailing party in such actions is entitled to recover
reasonable attorney’s fees. Although none of these statutes mention arbitration or
[American Arbitration Association] in accordance with the AAA’s
Supplemental Rules for Residential Construction Arbitration Rules in
effect on the date of the request.
provide for exclusive jurisdiction in courts of law, the Division reasoned that by
expressly granting specific remedies and procedures, the legislature intended that
condominium contract disputes be brought solely in a court of law. See Aztec
Medical Services, Inc. v. Burger, 792 So. 2d 617, 621 (Fla. 4th DCA
2001)(recognizing that to rule the legislature intended to preclude the submission of
a dispute to arbitration, "the legislature would have to state such a requirement in
unambiguous text," quoting Sharpe v. Lytal & Reiter, Clark, Sharpe, Roca, Fountain,
Williams, 702 So. 2d 622, 624 (Fla. 4th DCA 1997)).
On appeal, Lennar asserts that these transactions involve interstate commerce.2
Lennar argues that, as a result, these statutes cannot be construed as precluding
arbitration of disputes arising out of the sale of its condominiums because the Federal
Arbitration Act (FAA), 9 U.S.C. §§ 1-16, applies and preempts any state statute that
prohibits arbitration. See Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265
(1995). Thus, under the FAA, their arbitration provision must be enforceable.
The FAA also provides that
[a] written provision in . . . a contract evidencing a
Without citation to the record, Lennar states that the construction of its
condominiums involves interstate commerce because materials and equipment are
used which are manufactured and/or produced in states outside of Florida; Lennar
engages in marketing and advertising activities throughout the United States; and
Lennar sells to purchasers located outside of Florida.
transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract or
transaction . . . shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the
revocation of any contract.
9 U.S.C. § 2 (emphasis added). Therefore, an arbitration provision may be challenged
"based upon any state-law contract defense." Gainesville Health Care Center v.
Weston, 857 So. 2d 278, 283 (Fla. 1st DCA 2003); see also Allied-Bruce Terminix,
513 U.S. at 281. Seizing upon this principle, the Division argues that, under Florida
law, Lennar’s contract is both procedurally and substantively unconscionable. See
generally Powertel, Inc. v. Bexley, 743 So. 2d 570 (Fla. 1st DCA 1999).
“A declaratory statement by a state administrative agency is subject to judicial
review by appeal . . . under Section 120.68(1) . . . .” Chiles v. Department of State,
Division of Elections, 711 So. 2d 151, 155 (Fla. 1st DCA 1998). However, unlike our
ability to review the agency’s interpretation of the statute in Chiles, this court cannot
engage in meaningful review of the declaratory statement appealed because the issues
raised on appeal were not expressly raised in the declaratory statement proceedings.
Intertwined with the issue of statutory preclusion of arbitration is the
constitutional issue of FAA preemption. Southland Corp. v. Keating, 465 U.S. 1, 1516 (1984). However, this issue was not addressed below; nor could it have been since
an agency does not possess the authority to determine the constitutionality of statutes.
See Palm Harbor Special Fire Control District v. Kelly, 516 So. 2d 249, 250 (Fla.
1987).3 Similarly, although the Division found Lennar’s arbitration provision void as
against public policy, the issue of the unconscionability of Lennar’s arbitration
provision was not expressly raised below.
Further, the determination of
unconscionability of a contract is fact-driven and generally requires an evidentiary
hearing, see Stewart Agency, Inc. v. Robinson, 855 So. 2d 726, 727 (Fla. 4th DCA
2003), which is not accorded in a declaratory statement proceeding.
Optometric Association v. Department of Professional Regulation, Board of
Opticianry, 567 So. 2d 928, 936 (Fla. 1st DCA 1990).
The authority of the Division to issue declaratory statements is limited by
section 120.565 to a determination "as to the applicability of a statutory provision . .
. to the petitioner’s particular set of circumstances." See generally Grippe v. Florida
Department of Business and Professional Regulation, Division of Florida Land Sales,
Condominiums, and Mobile Homes, 729 So. 2d 459 (Fla. 4th DCA 1999). In our
This court is precluded from addressing the preemption issue on appeal
because the determination that the FAA applies only comes into play if the contract
is one affecting interstate commerce. See 9 U.S.C. § 2; Perry v. Thomas, 482 U.S.
483, 490 (1987)(the FAA "embodies Congress’ intent to provide for the
enforcement of arbitration agreements within the full reach of the Commerce
Clause."). Because the parties did not and could not litigate the interstate
commerce issue below, we are unable to decide this factual issue on appeal. See,
e.g., Lytle v. CitiFinancial Services, Inc., 810 A.2d 643, 655-56 (Pa. Super. Ct.
Chiles decision, which the Supreme Court expressly approved in Florida Department
of Business and Professional Regulation, Division of Pari-Mutuel Wagering v.
Investment Corp. of Palm Beach, 747 So. 2d 374, 375 (Fla. 1999), this court
A declaratory statement may not be employed in place of a rule to
require compliance with general agency policy. See Regal Kitchens Inc.
v. Florida Department of Revenue, 641 So. 2d 158 (Fla. 1st DCA 1994);
Tampa Electric Company v. Florida Department of Community Affairs,
654 So. 2d 998 (Fla. 1st DCA 1995). If an agency is presented with a
petition for a declaratory statement requiring a response that amounts to
a rule, the agency should decline to issue the statement and initiate
rulemaking. See Florida Optometric Association; Agency for Health
Care Administration v. Wingo, 697 So. 2d 1231 (Fla. 1st DCA 1997).
However, a declaratory statement is not transformed into a rule merely
because it addresses a matter of interest to more than one person.
Chiles, 711 So. 2d at 154. Given the express directive of the language in the
declaratory statement issued here, we are confronted with the issue of whether the
response of the agency here “amounts to a rule” or “merely . . . addresses a matter of
interest to more than one person.” Id.4
In Chiles this court found that Commissioner Brogan was entitled to a
Section 120.52(15), Florida Statutes (2002), defines “Rule,” in pertinent
part, as follows:
[E]ach agency statement of general applicability that implements,
interprets, or prescribes law or policy or describes the procedure or
practice requirements of an agency. . . .
declaratory statement whether section 215.3206(2), Florida Statutes, precludes
certification of candidates for public campaign financing, even though other state
candidates could raise the same issue. Id. at 155. In Investment Corp., 747 So. 2d at
385, the Florida Supreme Court determined that an agency can issue a declaratory
statement dealing with a petitioner’s “particular set of circumstances,” while at the
same time announcing its intention to initiate rulemaking on the same subject. The
It must be observed that under circumstances such as those presented in
this case, involving such a unique industry having very limited
participants engaged in almost identical operations, declaratory
statements as to one would almost invariably be of interest to others in
the very limited group. We are not aware of any rule of law that
precludes an agency from simultaneously pursuing both courses of
action. Further, such an approach to these issues does not appear to
harm the rights of “[a]ny substantially affected person[(s)].
We find the instant case to be factually distinguishable from both Chiles and
Investment Corp. The declaratory statement in this case not only determined the
applicability of several Chapter 718 statutes to Lennar’s particular purchase contract,
it announced a broad agency policy that prohibited the use of arbitration provisions
in condominium purchase and sale agreements. We do not believe that a statement
of policy regulating all purchases and sales of condominiums in Florida can be likened
to the “very limited participants engaged in almost identical operations” which the
court addressed in Investment Corp. Further, here, unlike Investment Corp., the
agency has not announced its intention to institute rulemaking on this subject.5 The
Division cannot use the declaratory statement proceeding as a vehicle to announce a
broad policy against arbitration. See Tampa Electric Company v. Florida Department
of Community Affairs, 654 So. 2d 998, 999 (Fla. 1st DCA 1995) (a declaratory
statement which sets forth “broad agency policy . . . that appl[ies] to an entire class of
persons” is impermissibly broad.)
In the case before us, the Division went beyond applying the condominium
statutes to Lennar’s contract and ruled that the contract language requiring arbitration
was void as against public policy. We know of no statute which confers authority on
the Division to declare a party’s contract void. The Division may not interpret a
party’s contract and then enforce its interpretation on the parties. Peck Plaza
Condominium v. Division of Florida Land Sales and Condominiums, Department of
The parties do not argue, and therefore we do not address, whether under
the 1996 and 1999 amendments to Florida’s Administrative Procedure Act
regarding the scope of agency rulemaking authority, see sections 120.52(8) and
120.536(1), sections 718.111(3), 718.303 and 718.566 provide the Division with
the rule-making authority to prohibit arbitration. See, e.g., State, Board of Trustees
of the Internal Improvement Trust Fund v. Day Cruise Association, Inc., 798 So.
2d 847 (Fla. 1st DCA 2001); Southwest Florida Water Management District v.
Save the Manatee Club, Inc., 773 So. 2d 594 (Fla. 1st DCA 2000).
Business Regulation, 371 So. 2d 152, 153-54 (Fla. 1st DCA 1979). "Jurisdiction to
interpret such contracts is, under our system, vested solely in the judiciary." Id. at
154; see also Weston, 857 So. 2d at 283 (recognizing that a court determines the
validity of an arbitration provision and whether it is unconscionable or not).
In summary, we conclude that this case involves issues which cannot be
determined in a section 120.565 proceeding and that the Division lacked the authority
to declare void the appellant’s condominium purchase and sale agreement.
Accordingly, the Division should have declined to issue a declaratory statement. See,
e.g., Grippe, 729 So. 2d at 459.
WOLF, C.J., CONCURS and ERVIN, J., DISSENTS WITH WRITTEN OPINION.
ERVIN, J., dissenting.
The majority’s opinion reverses the declaratory statement of the Division of
Land Sales, Condominiums and Mobile Homes (Division) on two separate bases: (1)
that the Division was without authority to declare the arbitration language in the
declaration of condominium proposed by the developer, Lennar Homes Inc., void as
against public policy, and (2) that the effect of the statement was the issuance of a
non-adopted rule, contrary to the provisions of section 120.52(15), Florida Statutes
(2002). I cannot agree with either of these conclusions, and therefore dissent.
As to the first of the two reasons given for reversal, the majority, in my
judgment, mischaracterizes the Division’s dispositive ruling, which addressed only
the developer’s petition asking for an interpretation of whether sections 718.111(3),
718.303, and 718.506, Florida Statutes (2002), prohibit certain provisions in its
proposed contract requiring mandatory mediation and binding arbitration of disputes
between a purchaser of a condominium unit and the developer. The Division
answered, interpreting the statutes as precluding binding arbitration. Its action was
altogether in keeping with the reason for declaratory statements by agencies: to
inform parties about the scope of statutes and rules and whether a party’s intended
actions fall within or exceed such scope.
The Division found that the arbitration provisions of paragraph 43 of the
contract exceeded the authority of the pertinent statutes and that the provisions were
contrary to public policy, as embodied in the pertinent statutes. In the decretal portion
of the Declaratory Statement, the Division ordered, in full:
WHEREFORE, based upon the statement of facts
and conclusions of law, it is DECLARED that Lennar’s
proposed declaration of condominium or purchaser contract
may not contain the proposed mandatory mediation and
binding arbitration provisions because these provisions are
inconsistent with sections 718.111(3), 718.303 and
718.506, Florida Statutes, and therefore, prohibited by
section 718.104(4)(m), Florida Statutes.
Section 718.104 details 15 requirements of a declaration of condominium, and
provides in subsection (m) that it may contain “[o]ther desired provisions not
inconsistent with this chapter.” Lennar’s contract is 12 pages long, consisting of 51
paragraphs with numerous subparagraphs, and paragraph 43, dealing with “arbitration
of disputes,” is simply a component of such contract. All the Division did in issuing
its statement was inform Lennar that the arbitration provisions, which are clearly
separable from the rest of the declaration, could not be included, because they would
run afoul of the specified provisions in chapter 718. It did not make any comment
whatsoever about any other provision in the contract, much less declare the entire
We review an agency’s declaratory statement under the clear and erroneous
standard. In examining an agency’s interpretation of a statute that it is charged with
enforcing, an appellate court is required to accord to it great deference. See Fla.
Wildlife Fed’n v. Collier County, 819 So.2d 200, 203 (Fla. 1st DCA 2002). As this
court observed in State Department of Health & Rehabilitative Services v. Framat
Realty, Inc., 407 So. 2d 238, 242 (Fla. 1st DCA 1981): "[T]he judiciary must not, and
we shall not, overly restrict the range of an agency's interpretative powers. Permissible
interpretations of a statute must and will be sustained, though other interpretations are
possible and may even seem preferable according to some views."
Under this extremely deferential review standard, it is our task to decide simply
whether the agency’s interpretation of the statutes falls within the range of permissible
interpretations, and I see nothing in the pertinent provisions reasonably suggesting
that they do not. As pointed out by it in its declaratory statement, the Division is the
agency that is statutorily empowered to interpret and enforce chapter 718, the
Condominium Act, and, among its duties, it is required to review proposed documents
relating to the sale or lease of residential condominium units for more than five years.
It complied with its regulatory duties by concluding only that the proposed documents
were not in compliance with pertinent provisions of the Florida Condominium Act.
Although nothing in chapter 718 expressly prohibits arbitration, nothing in the
three statutes, which the Division examined for a determination of consistency with
Lennar’s documents, expressly states that arbitration is authorized. For example,
section 718.111(3), relating to the powers of condominium associations, provides in
part that an association “may . . . sue or be sued with respect to the exercise or
nonexercise of its powers.” Section 718.303, pertaining to obligations of owners,
authorizes a unit owner who prevails in any action with an association to recover
reasonable attorney fees “as determined by the court.” Section 718.506, precluding
the developer from publishing false and misleading information, provides an
aggrieved person “a cause of action to rescind the contract or collect damages from
In support of its conclusion that the Division’s statement exceeded the scope
of its delegated powers in declaring the arbitration provisions void as against public
policy, the majority cites Peck Plaza Condominium v. Division of Florida Land Sales
and Condominiums, 371 So. 2d 152 (Fla. 1st DCA 1979). The facts in Peck Plaza are
altogether dissimilar from those at bar. There the court concluded that nothing in the
Condominium Act granted the Division the authority to interpret and thereafter
enforce its interpretation of an admittedly ambiguous contract. It appears from the
opinion that the controversy was not raised in a declaratory statement proceeding, but,
more likely, in a section 120.57 disputed-fact hearing. The court’s language therein
should be, in my judgment, limited to the facts before it, involving the question of
whether the Division’s delegated enforcement powers gave it the authority to construe
an ambiguous contract for the purpose of resolving a dispute between certain unit
owners and members of the entire association regarding who should bear the cost of
electricity for servicing an elevator in the condominium which was used only for the
benefit of the owners.
In contrast, the Division, in the case now on appeal, did not interpret and
enforce a provision that was disputed by parties to a contract, and Lennar did not
contest the Division’s authority to interpret the statutes regarding whether the
arbitration provisions were consistent with chapter 718, Florida Statutes. Instead,
Lennar challenged the Division’s construction of chapter 718 as prohibiting binding
mediation and arbitration of disputes between it and purchasers. Clearly, the Division
is empowered to construe pertinent provisions of chapter 718 for such purpose.
Section 718.501(1), Florida Statutes (2002), provides that the Division “has the power
to enforce and ensure compliance with the provisions of this chapter and rules
promulgated pursuant hereto relating to the development, construction, sale, lease,
ownership, operation, and management of residential condominium units.”
Additionally, Florida Administrative Code Rule 61B-17.005 requires the Division to
determine whether a declaration of condominium is consistent with chapter 718. Rule
61B-17.005(3)(a) provides: “The Division will examine the content of the filing to
determine its sufficiency under the Condominium Act and these rules.” In my
judgment, the Division’s determination that a provision in a proposed condominium
document is contrary to pertinent statutes falls squarely within its powers.
It is possible the Division’s legal conclusion that the pertinent statutes bar
arbitration collides with the Florida Arbitration Code, sections 682.01-682.22, or with
the Federal Arbitration Act. Yet, the Division was not asked to decide, nor is it
authorized to decide, such questions. Any lurking issues the Division did not
specifically address, which were beyond the scope of the Division’s power to
consider, are not precluded by the order entered from being later addressed in a
judicial forum. See Grippe v. Fla. Dep’t of Bus. & Prof’l Regulation, 729 So. 2d 459
(Fla. 4th DCA 1999).
I dissent as well from what appears to be the majority’s conclusion that the
Division’s statement must be invalidated because its effect was the issuance of a nonadopted rule. The agency’s statement can, by no stretch of the imagination, be said
to be, as required by section 120.52(15), “one of general applicability that . . .
prescribes law or policy.”
§ 120.52(15), Fla. Stat. (2002).
interpretation applied only to the developer before it, and to the documents submitted
by it for review. As such, it could not be one which had “‘the direct and consistent
effect of law.’” State, Dep’t of Admin. v. Harvey, 356 So. 2d 323, 325 (Fla. 1st DCA
1977) (quoting McDonald v. Dep’t of Banking & Fin., 346 So. 2d 569, 581 (Fla. 1st
The analysis this court used in State, Dep’t of Commerce v. Matthews Corp.,
358 So. 2d 256 (Fla. 1st DCA 1978), is highly instructive with regard to the facts at
bar. There a competitive bidder on a public-works project brought a rule challenge,
seeking to have certain wage-rate determinations declared invalid as non-adopted
rules. The hearing officer agreed and declared the determinations invalid because,
among other things, they uniformly applied to all contractors in each geographic area
where the project was located. In reversing the ruling, this court observed that the
determinations could not be considered general statements of applicability, as defined
by statute, because they pertained only to the particular work specified, and, more to
the point, they had “no prospective application to any other contract–only the specific
project involved in the particular location.” Id. at 258. Because the Division in the
present case did only that which it was required to do by section 120.565, Florida
Statutes (2002), i.e., issue a declaratory statement “as it applies to the petitioner’s
particular set of circumstances,” its action can hardly be described as “an agency
statement of general applicability,” as defined in section 120.52(15).
For all of the above reasons, I would affirm the Division’s statement in its