SECOND CIRCUIT FINDS ARBITRATION WAIVER DUE TO PROTRACTED LITIGATION
Although federal policy strongly favors arbitration and waiver of a right to arbitrate is not lightly inferred, the Second Circuit recently affirmed the Southern District of New York’s finding of waiver in a case involving “protracted litigation that prejudice[d] the opposing party.” While bright-line rules do not exist for determining when a party has waived its right to arbitration, there are certain factors that courts consider: (1) the time elapsed from commencement of litigation to the request for arbitration, (2) the extent of litigation (including any substantive motions and discovery), and (3) proof of prejudice. The Second Circuit found waiver because the defendant, with knowledge of the arbitration provision, had waited fifteen months after the complaint was filed to raise its contractual rights and had already argued two substantive motions to dismiss, engaged in extensive written discovery requests, and deposed a key plaintiff witness. Additionally, the court defused the defendant’s argument that Second Circuit arbitration jurisprudence conflicted with the Federal Arbitration Act, ultimately holding that its waiver case law “derives from the uncontroversial premise that affirmative defenses like arbitrability ‘are subject to forfeiture if not raised in a timely fashion.’” Technology in Partnership, Inc. v. Rudin, No. 12-3699-cv (2d Cir. Sept. 17, 2013).
This post written by Kyle Whitehead.
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