The U.S. Court of Appeals for the Sixth Circuit recently held that a delay of over two years before attempting to compel arbitration resulted in waiver of the right to arbitrate. A copy of the opinion is attached.
Plaintiffs filed an action in May of 2007 in federal court against certain mortgage lending defendants for alleged violations of the Servicemembers’ Civil Relief Act. The matter was litigated in federal court for approximately 26 months before the defendants sought to compel arbitration under the terms of the mortgage documents executed by the Plaintiffs. The district court denied the Defendants’ motion and the Defendants appealed.
Agreeing with the lower court the Sixth Circuit found that, the Defendants in this matter waived their agreement to arbitrate by both “(1) taking actions that are completely inconsistent with any reliance on an arbitration agreement; and (2) delaying its assertion to such an extent that the opposing party incurs actual prejudice.”
Defendants acted inconsistently with their arbitration agreement by filing “multiple dispositive and non-dispositive motions,” including a motion to change venue under which, “Defendants proactively selected the forum in which the wished to defend against Plaintiffs’ claims.” In addition to Defendants’ conduct, the Sixth Circuit indicated that the length of time alone likely would have been dispositive. In addition, the Sixth Circuit found that the Defendants’ delay in asserting their right to arbitrate prejudiced the Plaintiffs by causing them to incur costs of over two years active litigation in two federal courts.
Ralph T. Wutscher
Kahrl Wutscher LLP
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