Authored by: Marcia M. Ernst

The Eleventh Circuit Court of Appeals recently affirmed the district court’s denial of a defendant’s motion to compel arbitration because the parties had mutually rescinded the settlement agreement containing the arbitration clause.

In Reiterman v. Abid,[1] a law school admissions test prep teacher sued a former student in 2018, claiming she had defamed him by creating anonymous blogposts that accused him of sexually assaulting multiple women.[2] The former student denied involvement in the internet smear campaign, and the teacher and student entered into a settlement agreement in the summer of 2018. The settlement agreement included mutual releases, called for the teacher to make certain payments to the student, and provided that “[a]ny controversy or claim arising out of or relating to this contract, or breach thereof, shall be settled by arbitration.”

According to the recitation of facts in the opinion,[3] after the parties entered into the 2018 settlement agreement, the teacher learned of evidence that indicated that the student was responsible for all or most of the past blogposts. Further, three new blogposts were posted after the settlement agreement was signed, which the teacher suspected were by the student.

In the spring of 2019, the teacher sent correspondence to the former student stating that the student’s conduct had rendered the 2018 settlement agreement “null and void,” relieving the teacher of his obligations under the agreement, and demanding that the student return payments made under the agreement.[4] The student responded seven days later by email stating that “[s]ince [the teacher] is accusing me of having breached the settlement agreement and believes he no longer has an obligation to abide by the clauses set therein, I will mirror that belief and no longer honor the clauses set forth in the agreement either.”[5] Her email then described certain actions she would take, including the publication of a book about the teacher’s alleged sexual assault.

In the fall of 2019, the teacher brought the action at hand against the former student in federal district court in Florida alleging, among other things, defamation. The defendant student filed a motion to compel arbitration arguing that the parties were required to arbitrate their dispute under the terms of the 2018 settlement agreement. The plaintiff teacher opposed the motion and argued that the parties had mutually rescinded the 2018 settlement agreement under Florida law.

The Florida district court conducted an evidentiary hearing and denied the motion to compel arbitration finding that the parties had rescinded the 2018 settlement agreement. The student appealed the district court’s interlocutory order. The Eleventh Circuit found that the district court correctly denied the motion to compel arbitration after finding that the parties had mutually rescinded the 2018 settlement agreement under Florida law.

In so holding, the appellate court noted that “a subsequent mutual rescission is an agreement between the parties to not be bound by their former contract any longer,” and that because “arbitration is ‘simply a matter of contract between the parties,’ the parties may of course voluntarily decide to release each other from their obligations after forming the contract, including their obligation to arbitrate certain disputes.”[6]

The appellate court also found “instructive” its opinion in Dasher v. RBC Bank (USA) [7], which held that arbitration could not be compelled based on an earlier agreement containing an arbitration clause when a subsequent agreement without an arbitration clause entirely superseded the earlier agreement under state law.[8] The court noted that “[w]hile the parties in Dasher chose to replace their earlier agreement with a new one, the parties here chose to rescind their agreement entirely. We see no reason the two situations should be treated differently….”[9]

This case highlights that parties to an agreement with an arbitration provision should be aware that their arbitration rights are defeated if (1) they form a new agreement, without an arbitration provision, that entirely supersedes and replaces the prior agreement, or (2) they agree to rescind the agreement with its arbitration provision, thereby rendering it abrogated and of no force and effect from the beginning. In both situations, no agreement to arbitrate exists for a court to enforce on a motion to compel arbitration.

 

 

[1] Reiterman v. Abid, No. 20-11025, 2022 WL 613682 (11th Cir. March 2, 2022).

[2] The teacher and student had briefly dated, and after the relationship ended, the student accused the teacher of sexual assault. Local police and prosecutive authorities investigated the student’s accusations but closed their files with no action. Thereafter, a cyber-smear campaign began. 2022 WL at *1.

[3] In a footnote, the Eleventh Circuit said:  “We make no comment on the truth or falsity of any of the background facts of this case, as the merits of [the teacher’s] claims are not before us on appeal. For context purposes only, we summarize the facts of the merits dispute as they have been presented by the parties to this Court on appeal.” 2022 WL at *1, n. 1. Likewise, this case summary makes no comment concerning the truth or falsity of the matters at issue in this case.

[4] 2022 WL at *1.

[5] 2022 WL at *2.

[6] 2022 WL at *3.

[7] Dasher v. RBC Bank (USA), 745 F.3d 1111 (11th Cir. 2014),

[8]  2022 WL at *3.

[9] Id.