Litigating for 31 months waived right to arbitration

Waiving the right to arbitrate requires conduct or activity inconsistent with the right to arbitrate, as well as prejudice to the party claiming waiver.  Factors relevant to assessing prejudice include the length of delay in requesting arbitration, and the extent of the moving party’s trial oriented activity.

In Heartland Cooperative Co. v. Murphy, No. 15-0446 (Sept. 28, 2016), Murphy moved to dismiss the lawsuit thirty-one months after the suit was filed, attempting to compel arbitration.  That length of time combined with Murphy’s other actions, and led the appellate court to conclude that Murphy had engaged in conduct inconsistent with the right to arbitrate, to Heartland’s prejudice.

Murphy had filed two answers (neither asserting a right to arbitrate), a motion to change venue, and numerous filings on evidentiary matters and in preparation for trial.  Murphy twice filed motions to continue trial, and Murphy resisted Heartland’s motion to amend and for sanctions.  In the discovery process, Murphy deposed Heartland employees, and served interrogatories and requests for documents.  Based on the manner in which Murphy took full advantage of the litigation process, the appellate court agreed that Murphy had waived his right to arbitration.

Murphy argued that his initial answer did not assert a right to arbitrate, because he did not at the time have a copy of the contracts.  However, in moving to dismiss and compel arbitration, Murphy apparently did not argue that a late production of the contracts was the cause of his inability to earlier invoke his right to arbitrate.  Had he so argued, the court may have reached a different decision.  However, in the absence of such an argument, the court had no choice but to conclude that since “early in the litigation,” Murphy had been in possession of the contracts containing the arbitration provision, but had not sought arbitration, he had waived arbitration.

Heartland Cooperative Co. v. Murphy reminds litigants to review contracts closely at the beginning of a dispute, to ensure that early on, parties enforce their rights, such as arbitration.  Given the traditional approach to enforcing arbitration clauses, had Murphy made his argument earlier, the court likely would have enforced the arbitration provision.  For further information regarding Heartland Cooperative Co. v. Murphy, commercial litigation or arbitration, please contact Mollie Pawlosky.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- Mollie Pawlosky