WA Court of Appeals: Division III fights the tide on prejudice under arbitration clauses.
Very interesting case out of Division III this morning. The actual case itself is not really worth discussing. Suffice it to say there was a lawsuit where the underlying contract contained an arbitration clause.
In the present case, Plaintiffs were in discussion about the case, and no arbitration clause was discussed or invoked by the Defense. After filing suit, the case went on for over a year without any invocation of the arbitration clause, including discovery and responding to motions to compel.
Unsurprisingly, the Court found waiver and estoppel of the clause.
The interesting part of this case, however, revolved around the issues of prejudice and a seeming rebuking of 9th Circuit precedent by Division III. Why is this important? In this case, the arbitration clause was governed by Federal arbitration law. While the prejudice analysis likely would have played out the same regardless of the discussion of the 9th Circuit, Division III noted the 9th Circuit's seeming view that there could be no real prejudice to a Plaintiff in having an arbitration clause invoked against it because the Plaintiff chose to file the lawsuit knowing the arbitration clause existed. The discussion is worth the read:
The Ninth Circuit Court of Appeals' decision in Fisher v. A.G. Becker Paribas, Inc., conflicts with the tenor of other circuits' decisions. No other circuit has imposed blame on the plaintiff for filing suit, despite the applicability of an arbitration agreement. No other circuit has characterized the cost of litigation to be self-inflicted by the plaintiff who files suit despite being party to an arbitration clause. Blame is more often imposed on a defendant for untimely seeking arbitration.
It is not often that you have a state Court of Appeals calling out a federal circuit court in such a manner. Even more surprising is, given the Ninth Circuit's usual liberal tone, that they reached this ruling in the first place.
Regardless, the decision is the arbitration clause was waived, and the lawsuit continues. If you have an arbitration clause and wish to enforce it, keep in mind the courts will be looking to pre-litigation conduct on top of the conduct during litigation. As the Court stated at the beginning of the opinion, it is very much a use it or lose it situation. Our Issaquah attorneys are well-versed in the state and federal arbitration law. Allow our Issaquah lawyers to assist you with your claim-handling.