The CDRS arbitration procedures bifurcate proceedings into two phases. Phase 1 establishes whether the damage is “[c]overed or [n]ot [c]overed” – effectively a merits determination of the underlying issue. Phase 2 establishes the “[m]ethod of addressing the covered claims,” or, in other words, how damages are to be allotted. After a Phase 1 proceeding is complete, the parties must determine if they can reach a settlement or other damages resolution. If they cannot do so, the parties must return to arbitration to have CRDS determine the appropriate remedy.

Lowell and New Home began arbitration and, after Phase 1, the arbitrator found in favor of Lowell. Lowell then asked the Florida district court to confirm the arbitration award against New Home and to “confirm any subsequent Award(s) by the Arbitrator arising out of or relating to the Contract.”

New Home moved to dismiss, arguing that the district court did not have jurisdiction to enforce the award because it was an interim award and not a final award.

Lowell countered that the award was final because the arbitrator had resolved the only issue put before him – whether the alleged structural defects were covered (or not) by the applicable warranty – and that determining damages would require initiating an entirely new arbitration.

The District Court's Decision

The district court granted the motion to dismiss.

In its decision, the district court explained that federal courts do not have jurisdiction to confirm interim arbitration awards under the FAA. It added that, under Schatt v. Aventura, 603 F. App'x 881, 887 (11th Cir. 2015) (citing 9 U.S.C. § 10), a two-part arbitration was not final for purposes of Article III jurisdiction because “the arbitrator's work was not complete.”

The district court reasoned that the Phase 1 arbitration resolved the preliminary merits issues and determined New Home's liability but that the Phase I award was “not final.” The district court pointed out that the scope of the parties' arbitration agreement encompassed damages, which indicated that the parties meant to resolve both the damages and merits issues in a single arbitration. Moreover, the district court continued, Lowell's complaint indicated that the parties arbitrated under a bifurcated proceeding, which “in and of itself” demonstrated “the lack of finality in this process” because it assumed a second arbitration.

Finally, the district court noted, the arbitrator indicated to the parties that if they could not agree on specific damages, they could return for a second arbitration proceeding solely on the issue of damages. Accordingly, the district court declared, although the text of the arbitration award might “suggest finality,” in practice, the parties did not intend to consider the award final until the damages were rendered. It concluded, therefore, that it did not have jurisdiction over the Phase 1 arbitration award because it was not a final award under the FAA.

The case is Lowell at Camelot, Inc. v. New Home Warranty Ins. Co., No. 18-cv-21155-GAYLES (S.D. Fla. Nov. 28, 2018). Attorneys involved include: For Lowell at Camelot, Inc., Plaintiff: Timothy Drew Corwin, LEAD ATTORNEY, Taylor Espino Vega Touron, P.A., Miami, FL; Vanessa Alison Van Cleaf, LEAD ATTORNEY, Timothy Shane Taylor, Taylor Espino Vega Touron, P.A., Coral Gables, FL. For New Home Warranty Insurance Company, a Risk Retention Group, Defendant: Aaron Michael Cohn, Harold Lang, III, Weinberg, Wheeler, Hudgins, Gunn & Dial, Miami, FL.