Waiving Arbitration Goodbye: No Showing of Prejudice Required

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Arbitration is a hot topic. In a key decision in Morgan v. Sundance, Inc., the United States Supreme Court recently made it easier for a party to argue that an opponent has waived its right to arbitrate a matter. Until the decision in Morgan, parties would routinely initiate legal action in courts against an adversary despite having a written agreement to arbitrate disputes arising from that agreement (the reason for this varied, but included the desire to burden an opponent with the need to file a motion to compel arbitration). In fact, such was the case in Morgan.

Until recently, parties could routinely do this as federal courts held that a party did not waive its right to arbitrate a matter unless its adversary could prove that it was prejudiced by the other party’s delay in arbitrating a matter. And oftentimes, courts would be reluctant to find such prejudice.

But in Morgan, the Supreme Court bucked this trend and held that a prejudice requirement was inconsistent with the federal statute governing arbitration agreements—the Federal Arbitration Act. Despite recognizing “the strong federal policy favoring arbitration,” the Supreme Court said that the prejudice requirement could not be justified by a liberal policy favoring arbitration.

In practical terms, the Supreme Court’s decision means that if you have an arbitration agreement with another party, you should not delay the initiation of arbitration if a dispute arises or the party invokes litigation. A delay now, more than ever, would likely subject you to a claim that you’ve waived your right to arbitrate a matter. Unless you’re willing to kiss arbitration goodbye, do not delay the initiation of arbitration.

Contact us for more information on arbitration by e-mailing us at info@mnklawyers.com.

This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between MNK Law and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.