The Treatment of Arbitration Waivers under Federal Law
Forsythe, Matthew, Dispute Resolution Journal
The following article analyzes the more recent and influential federal court cases concerning waiver of contractual arbitration rights. Matthew Forsythe focuses on the factual considerations that circuit courts have found significant in their decisions regarding arbitration waiver issues, and offers a review of the standards the courts have applied in these cases.
When contracting parties include an arbitration provision in their contract, it is obviously not their intention that disputes arising out of, or relating to, that agreement will ultimately wind up before a judge or jury in civil court. Even though parties to such arbitration agreements do not intend to litigate, their subsequent actions, or the steps taken by their legal counsel, may lead them directly into the public forum that contractually they have attempted to avoid.
The following article offers a summary of recent and influential federal court cases when a party has waived its contractual right to arbitrate. It looks at what factual considerations circuit courts deemed significant in their decisions regarding waiver, and the standards that each court applied in its review. Although the attempt has been to provide some insight into how courts address waiver of arbitration rights, this article is not intended to be an exhaustive treatise on the subject, a practitioner's guide, or hornbook entry. Rather, it outlines the prevailing general trends in federal law and compares the varying tests and analyses used by federal appellate courts over the last 10 years or so.
Presumption Favoring Arbitration
In several of the federal circuits' landmark cases addressing the issue of waiver of a party's right to arbitrate disputes, the courts' initial point of departure has been to recognize and reaffirm the strong federal policy in favor of arbitration when contracting parties have selected it for the resolution of their disputes. The lineage of "the old judicial hostility to arbitration" has ended, and this modern trend represents a sea change in the way federal courts now view arbitration.1 Gone are the days when the English judges opposed any innovation that would deprive them of their jurisdiction.2 Today, federal policy strongly favors arbitration as an alternative dispute resolution forum.3
In this regard, many of the cases discussed below have pointed to the fact that "[i]n enacting the Federal Arbitration Act, Congress declared a national policy in favor of arbitration."4 This "national policy" and subsequent Supreme Court rulings mandate that federal courts widely recognize "Congress's clear intent, in the Arbitration Act, to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible."5 Justice Brennan summarized the Supreme Court's opinion concerning this policy by stating:
[t]he Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.6 As a general rule, therefore, the federal courts have interpreted this federal policy favoring arbitration as a presumption that must be overcome initially in any argument in which waiver of the right to arbitrate is asserted. Decisions rendered in numerous federal cases illustrate clearly this inference in favor of arbitration. For example:
1. Accordingly, we indulge a presumption against finding waiver.7
2. Given this presumption in favor of arbitrability, waiver of arbitration is not to be lightly inferred.8
3. Further, when the contract's arbitration clause is a broad one, the strong presumption in favor of arbitrability applies with even greater force.9
With this presumption as a backdrop, the following cases demonstrate how federal courts have scrutinized the facts involved, and the procedural steps taken by the parties invoking arbitration to determine if, by their own actions, this initial presumption has been rebutted, and whether such parties have waived their contractual right to arbitrate. …