U.S. Supreme Court Rejects Prejudice Element for a Claim of Waiver

Is the precise to compel arbitration waived solely when the plaintiff can present prejudice from the defendant’s inconsistent actions and delay?  In Morgan v. Sundance, Inc., No. 21-328 (2022), the Supreme Court discovered that the Federal Arbitration Act (“FAA”) doesn’t allow courts to create assessments to favor arbitration over litigation, and that a displaying of prejudice just isn’t required for a declare of waiver. 

In Morgan, the defendant, a Taco Bell franchisee, moved to compel arbitration eight months after the plaintiff, an worker alleging a nationwide collective motion for violations of wage and hour legal guidelines, introduced go well with.  The defendant sought to compel arbitration, however not earlier than submitting a movement to dismiss the lawsuit, submitting a solution and asserting affirmative defenses that didn’t point out the arbitration settlement, and mediating the case.  Eight months into the litigation, the defendant modified course and moved to compel arbitration of the plaintiff’s particular person claims.

In opposition, the plaintiff argued that, even when there was a legitimate settlement to arbitrate, the defendant had waited too lengthy, and thus waived its proper to take action.  The Eighth Circuit rejected the plaintiff’s argument as a result of she failed to point out that she suffered any hurt by the defendant’s delay in bringing the movement to compel arbitration.  

Overturning the Court of Attraction’s determination, a unanimous Supreme Court famous that “[t]he prejudice requirement… is not a feature of federal waiver law generally,” and whereas the FAA prevents courts from undermining arbitration agreements, it additionally doesn’t allow courts to “invent special, arbitration-preferring procedural rules” to favor arbitration.  On remand, the Court directed the Court of Attraction to evaluate whether or not the defendant knowingly relinquished its proper to arbitrate by “acting inconsistently with that right,” with out the necessity to present hurt.

Morgan highlights the significance of contemplating early on whether or not to maneuver to compel arbitration in litigation, and the downsides of taking motion that could be inconsistent with the precise to compel.

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