The U.S. Supreme Court to Hear Case Regarding Waiver of Arbitration Rights | ZFZ Postcard Cases
In Morgan v. Sundance, plaintiff sued Sundance for violating the Fair Labor Standards Act in the US District Court for the Southern District of Iowa.
Sundance participated in the litigation of the district court case by filing a motion to dismiss, and then filing an answer upon the denial of its motion. Eight months into litigation, Sundance then moved to dismiss Morgan’s complaint pursuant to the arbitration clause in Morgan’s employment contract with Sundance. The district court denied the motion holding that Sundance waived its right to arbitration by participating in litigation. Sundance appealed. The Eighth Circuit reversed the district court’s denial of Sundance’s motion.
A party waives its right to arbitration if: (1) it knew of its right to arbitrate; (2) it acted inconsistent with that right to arbitrate; and (3) the other party is prejudiced by the inconsistent acts. The Eighth Circuit reversed the lower court’s decision on the third element. In its reversal, the Eighth Circuit found that Morgan was not prejudiced because four of the eight months of litigation were spent addressing the first motion to dismiss focused on a quasi-jurisdictional issue, no discovery was conducted, and the record lacked evidence that Morgan would have to duplicate any efforts in arbitration.
Morgan’s petition for certiorari was granted and the U.S. Supreme Court will have the opportunity to set the standard of evidence required to prove if arbitration rights have been waived. Stay tuned.
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Read more on this decision here.