We haven’t had a good waiver case in a while.  The First Circuit served one up last week with a flourish, teaching me multiple new words in the process (not for the first time, either).  It found that a plaintiff had waived its right to arbitrate, not by bringing its claims to court in the first place, but by waiting nine months to compel arbitration, thereby seeming to “use [] an arbitration clause as a parachute when judicial winds blow unfavorably.”

In Joca-Roca Real Estate, LLC v. Brennan, __ F.3d __, 2014 WL 6737103 (1st Cir. Dec. 1. 2014), the plaintiff alleged fraud and breach of contract stemming from an asset purchase agreement.  The agreement required arbitration.  The parties conducted significant discovery, involved the court in discovery disputes, and were scheduled for trial on February 3, 2014.  On December 6, 2013, shortly before the summary judgment deadline, the plaintiff moved to stay proceedings pending arbitration.  (First big word: the court says the plaintiff did not explain its “cunctation” in invoking the arbitration provision.)  The district court found the plaintiff had waived its right to seek arbitration.

The First Circuit affirmed.  It reiterated the rule in its circuit that mere delay in seeking arbitration is insufficient to find waiver, there must be prejudice to the non-moving party.  To analyze prejudice, the court reviews a “salmagundi” of factors.  But the court admits the prejudice requirement is “tame” and can be inferred from a long delay accompanied by significant activity in the courts. In this case, the court focused on: the fact that the parties engaged in significant discovery, that the plaintiff waited until close to trial to seek arbitration, and that the change in forum would have delayed final disposition of the case and “nullify one of the primary benefits of arbitration.”

So we know at least two things: first, if you’re appearing before the First Circuit, you should use some fifty cent words in your briefs; and second, if you are on the eve of trial, it is probably too late to compel arbitration of the claim.

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By Liz Kramer

Liz Kramer is a shareholder at Leonard, Street and Deinard, one of the largest law firms in Minnesota, where she litigates complex business and construction disputes. Liz graduated from Yale Law School and is deeply knowledgeable on arbitration law. Website: www.arbitrationnation.com