Duane Morris Class Action Review - 2023 - Report - Page 17
“arbitration, instead of going to court” to resolve any employment dispute. Id. at 1711.
Sundance defended the lawsuit by moving to dismiss the suit as duplicative of another
collective action previously brought by other employees, by subsequently answering the
complaint, and by asserting 14 affirmative defenses, none of which included arbitration.
Nearly eight months after the plaintiff filed the lawsuit, Sundance moved to stay the
litigation and to compel arbitration under the FAA. The plaintiff opposed the motion and
argued that, by litigating for eight months, Sundance waived enforcement of the
arbitration agreement.
Applying Eighth Circuit precedent, the district court held that a party waives its right to
arbitration only if it knows of the right, acts inconsistently with the right, and prejudices
the other party by its inconsistent actions. Id. at 1711-12. The U.S. Court of Appeals for
the Eighth Circuit agreed. It reasoned that, although the prejudice requirement is not a
feature of federal waiver law generally, the requirement should apply because of the
“federal policy favoring arbitration.” Id. at 1712. The U.S. Supreme Court subsequently
granted review.
Although the parties disagreed about the role of state law in resolving questions as to
when a party’s litigation conduct results in the loss of a contractual right to arbitrate, the
Supreme Court observed that appellate courts, including the Eighth Circuit, generally
have resolved such issues as a matter of federal law. Assuming the correctness of such
decision, the Supreme Court considered only whether it was correct to “create
arbitration-specific variants of federal procedural rules, like those concerning waiver,
based on the FAA’s ‘policy favoring arbitration.’” Id. The Supreme Court decided the
issue in the negative. It observed that, outside the arbitration context, federal courts
assessing waiver do not generally ask about prejudice and, instead, focus on the
actions of the person who held the right. Id. at 1713.
The Supreme Court noted that the Eighth Circuit’s rule in this case derives from a
decades-old Second Circuit decision that grounded the rule in the FAA’s policy. Id. The
Supreme Court, however, held that the FAA’s “policy favoring arbitration” does not
authorize federal courts to “invent special, arbitration-preferring procedural rules.” Id. at
1713. Rather, the policy “is merely an acknowledgment of the FAA’s commitment to
overrule the judiciary’s longstanding refusal to enforce agreements to arbitrate and to
place such agreements upon the same footing as other contracts.” Id. In other words,
the Supreme Court clarified that “[t]he policy is to make ‘arbitration agreements as
enforceable as other contracts, but not more so.’” Id. Accordingly, it concluded that a
court must hold a party to its arbitration contract just like any other contract but may not
devise novel rules to favor arbitration over litigation.
C.
Viking River Cruises Inc. v. Moriana, et al., 142 S.Ct. 1906 (2022)
In the largest door-closer to the courthouse to representative proceedings, the U.S.
Supreme Court reacted to a state’s attempt to render alleged violations of its laws
immune from arbitration.
16
© Duane Morris LLP 2023
Duane Morris Class Action Review – 2023