FOURTH D I VI SI ON

ELLI NGTON, P. J.

, BRA N CH and M ERCI ER, JJ.

N O T IC E : M otions for r e c ons i de r a tion m us t be

ph y sic a l ly r e ce iv ed i n our c le r k ’s offic e w ithin te n

da y s of the da te of de c is ion to be de e m ed tim e ly file d.

http://w w w .ga a ppe a l s .us /r ule s

Septem ber 28, 2016



# I n th e Co u r t o f

A p p eals o f

G eo r g ia

A1 6 A1 31 8 . SUNTRUST BANK v

. LILLISTON et al

.

B R A N C H , J u d g e.

A p art y t o a co n tract u al arb i trat i o n cl au s e m ay wai v e arb i t rat i o n by act i n g

i n co n s i s t en t l y wi t h t hat ri g h t t o t h e p r e ju d i ce o f t h e o t h er p art y

. In t h i s cas e, t h e

d e f en dan t l i ti g at ed a cas e t hro ug h d i s co v ery an d p l acem en t of th e cas e o n t h e t r i a l

cal en d ar w ithout a sse r

t ing its co n t ract u al ri g h t t o arb i t rat e, b u t t he p lai n ti ffs d i s m i s s ed

t h ei r cas e befo re tri al an d fi l ed a r e n e w a l a ct i o n m o n t h s l at er. In t h i s cas e o f fi rs t

i m p res s i o n

, we g ran t ed Su nTru s t ’ s ap p l i cat i o n fo r i n t erl o cu to ry ap p eal t o d eci d e

wh et h er t h e d efen d an t ’ s act i o n s i n t h e fi rs t l i ti g at i o n wai v ed i t s ri g h t t o arb i t rat e t h e

ren ewal act i o n

. Fo r t he reas o n s t h at fo l lo w, we affi rm t h e t ri al co u rt ’ s d et erm i n at i o n

t h at Su n Tru s t wai v ed i t s ri g h t t o arb i t rat e.Fo r t h e p u rp o se o f t h e l i m i t ed i n q ui ry b efo re u s

, t h e p a rt i es ag ree t o t h e

es s en t i al fact s

. 1 Th e p art ies ag ree t hat t he cas e aro se o u t o f t wo l o an t ran s act i o n s an d

a “ SW AP Ag reem en t ” as so ci at e d w i t h fi n an ci n g fo r on e or m o re au t o m o b i l e

d eal ers h i p s. In 2 0 0 1

, Su n Tru s t Ban k l o an ed ap p ro xi m at el y $5 0 0,0 00 t o L-T

Ad v en t u res

, In c. (LTA) in a t ran s act i o n t hat d i d n o t in cl u d e an arb i t rat i o n p ro v i s i o n.

In 20 0 5, Su n Tru s t l o an ed ap p ro x i m at el y $ 2 m i ll i on t o Jed o n Li l l i st o n (a co -o wn er o f

LTA) an d h er fo rm er h u sb an d i n a t ran s act i o n t h at was g uaran t eed b y L T A. An d

, in

co n nect io n wi t h t h i s s eco n d l oan

, Su n t ru s t, L i l l i s t o n an d h er fo rm er h u s b an d en t ered

i n t o an “ ISDA M as ter A g reem en t ,” al s o k no wn as t h e “ Swap Ag reem en t.” Th e Swap

A g r e em en t co n tai n s an arb i t rat i o n cl au s e th at p ro vi d es fo r m ed i at i o n o f d i s p u t e s

ari s in g t hereu n der an d

, if m ed i at i o n i s un s ucces s fu l

, “ an y p art y m ay d em an d

arb i t rat i on .”

A d i s p u te reg ard i n g ch a r g ed an d co l l ect ed i n t eres t ev en t u al l y aro se b et ween

t h e p art i es reg ard i n g b ot h l o an t ran sact i o n s an d t h e Swap Ag reem en t , an d o n Ap ri l

9

, 2 0 1 3

, J ed on Li l l i s t o n an d LTA f i l e d s u i t ag ai n s t Su n Tru st in th e St at e Co u rt o f

Ch at ham Co u n t y

. Th e cas e was t ra n s f e r r e d t o t h e Su peri o r Co u rt o f Fu l t o n Co u n t y

1 See Co u rt o f Ap p eal s Ru l e 2 5 (b ) (1 ) (“ Ex cep t as co n tro v ert ed [b y t h e

ap p el l ee] , ap p el l an t ’ s s t at em en t o f fact s m ay b e accep t ed b y

t h i s Co u rt as t ru e.”

2o n Au g u s t 8

, 2 0 1 4

. On J an u ary 1 5

, 20 1 5

, o v er 2 1 m o n th s aft er fi l i n g th e co m p l ai n t

,

t h e p l ai nt i ffs v ol u n t ari l y d i s m is s ed th ei r act i o n

. Su n T ru s t n ev er d em an d ed arb i t rat i o n

i n th at act i o n

. On J un e 1 9, 2 01 5, Li l l i s t o n an d LTA fi l ed t he p res en t ren ewal act i o n

i n t h e Su p eri o r Co u rt o f Fu l t on Co u nt y

. Su n T ru s t an s wered an d s o o n fi l ed a m o t i o n

t o co m p el arb i t rat i o n b as ed o n t h e arb i t rat i on p ro v is i o n co n t ai n ed i n t he Swap

Ag reem en t

.

Th e t ri al co u rt d en i ed Su n Tru s t ’ s m o t i o n to co m p el arb i t rat i o n

, an d i n so d o i n g,

i t fo u n d th at t he Swap Ag reem en t co n t ai ned a v al i d ag reem en t t o arb i t rat e b et ween

t h e p art i es

, t h at s o m e o f t he cl ai m s at i s s u e i n t h e s u i t w ere s u b ject t o arb i t rat i o n

, b ut

t h at Su nTru s t wai ved i t s ri g h t t o co m p el arb i t rat i on bas ed o n i t s act io n s i n t h e o ri g i n al

l i ti g at i o n

. Th e c o u r t fo u n d t h at Su n Tru s t p art i ci pat ed i n t h e o ri g i nal l i t i g at i o n fo r

m o re t h an a y ear an d a h al f w i t h o u t rai s i n g t h e i ss u e of ar b i t r a t i o n

, t h at Su n Tru s t

p art i ci p at ed i n d i s co v ery an d fi l ed a m o t i o n fo r s u m m ary j u d gm en t i n t h e o ri g i n al

act i on

, an d t h at t he o ri g i n al act i o n h ad b een p l aced o n t h e t ri al cal en d a r b e f o r e t h e

p l a i n t i ff d i s m i s s ed i t

. 2 Th e co u rt co n cl u d ed th erefo re t h at Su n T ru s t h ad “ a c t e d

2 Su nTru s t d o es n o t d i s p u t e t h es e fact u al fi nd i ng s

. An d al t h o u g h t he reco rd o f

t h e o ri g i n al act io n h as n o t b een i n cl u d ed in th e reco rd b efo re u s, i t i s wel l -es t ab l i s h ed

t h at a t ri al c o u r t “ m a y t ak e ju d i ci al n o t i ce o f reco rd s i n t h e sam e co u rt

. ” In t h e

In t er es t o f J. P. V.

, 2 6 1 Ga. Ap p

. 1 9 4

, 1 9 6 (2 ) (5 8 2 SE2 d 1 7 0 ) (2 0 0 3 ) (p u n ct u at i o n

an d fo o t n o t e o m it ted ). Cf. Bel ch er v. Fo l s o m

, 2 5 8 Ga. Ap p

. 1 9 1

, 1 9 2 (5 7 3 SE2 d 4 4 7 )

3i n c o n s i s t en t l y wi t h t h e ri g h t t o arb i trat e” an d th at “ [t ] h e d el ay an d co s t as s o c i a t e d

wi t h co n d u ct i n g d i s co v ery p reju d i ced t h e Pl ai n t i ffs

. ” Su n Tru s t ap p eal s t hi s ru l i n g

.

“ Th e s t an d ard o f rev iew o f a t ri al co u rt ’ s ru l in g o n a m o t i o n t o co m p el

arb i t rat i on i s wh et h er t h e t ri al co u rt was co rrect as a m at t er o f law.” O r d er Ho mes v.

Iver so n

, 3 0 0 Ga. Ap p

. 3 3 2

, 3 3 3 (6 8 5 SE2 d 3 0 4 ) (2 0 0 9 ) (p u n ct u at i o n a n d fo o t n o t e

o m it t ed ).

Th e p art i es d o n o t d is p u t e th at t h e Fed eral Arb i t rat i o n Act g o v e r n s t h e

en fo rceab i li t y of t hei r arb i t rat i o n ag reem en t

. See 9 U.S.C. § 2

. Th e rel ev an t p ro v i s i o n

o f t h e Act p ro v i d es as fo l l o w s :

A wri t t en pro vi s io n i n an y m ari t i m e t ran s act i o n o r a c o n tract

ev i d e n c i n g a t ran sact i o n i n v o lv i n g co m m erce to s et t l e b y arb i t rat io n a

co n t ro vers y t h ereaft er ari s i n g o u t o f s uch co n tract o r t ran s act io n

, o r th e

refu s al t o p er f

orm t h e wh o l e o r an y p art t h ereo f, or an ag reem en t i n

wri t i n g t o su b m i t t o arb it rat i o n an ex i s t i n g co n t r o v e rs y ari s i n g ou t o f

s u ch a co nt r a c t

, t ran s act i o n

, o r refu s al

, sh al l be v al i d

, irrev o cab l e, an d

en fo rceab l e, sav e u p o n s u ch g ro u n d s as ex i s t at l aw o r in eq u i t y fo r th e

rev o cat i o n o f an y co n t ract

.

(2 0 0 2) (wh ere “ t h e ren ewed act i o n was fi l ed i n t h e s am e co u rt as t h e o ri g i n al act i o n,

t h e t ri al co u rt co ul d t ak e ju d i ci al n o t i ce o f t h e ph y s i cal reco rd fro m th e o ri g i n al act i o n

i n d et erm i n i n g i f t h e ren ewed act i o n m et t h e t es t s fo r ren ewal .”).

49 U.S.C. § 2

. Th e l an gu ag e o f t h i s co d e s ect i o n m ak es cl ear t h at arb i t rat i on i s fav o red

u n d er th e Act

. See AT& T Mo b i l i t y v. Co n cep ci o n

, 5 6 3 U. S. 3 3 3

, 3 3 9 (II) (1 3 1 SCt

1 7 4 0

, 1 7 9 L E2 d 7 4 2 ) (2 0 1 1 ) (“ W e h av e d es cri b ed th i s pro v i si on as refl ect i n g b o t h

a ‘l i b eral fed eral p o li cy fav o ri n g arb i t rat i o n,’ an d t h e ‘ fu n d am en tal p ri n ci p l e t h a t

arb i t rat i on i s a m at t er o f co n tract [.] ’ ” ) ( c i t a t i o n s o m i t t ed ). Bu t as ex p l ai n ed b y t h e

El ev en th Ci rcu i t, “ d es p i t e t he st ro n g p o l i cy i n fav o r of arb i t rat io n

, a part y m ay

, b y i t s

co n du ct

, wai v e i t s ri g h t to arb i trat i o n .” S & H Co n t r a ct o r s v. A. J. Ta

f t Co a l Co

. , 9 0 6

F2 d 1 5 0 7 , 1 51 4 (III) (1 1 t h Ci r. 1 9 9 0 ) (ci t at io n s o m i t ted ). M o re s p eci fi cal ly

,

[A] part y t h at s u b st an t i a l l y i n v o k es t h e l i ti g at i o n m ach i n ery p ri o r t o

d em an d i n g arb i t rat i o n m ay wai v e i t s ri gh t t o arb i t rat e. A p art y h as

wai v ed it s ri g h t t o a r b i t r at e i f, u n d er t h e t o t al i t y o f t h e ci rcu m st an ces

,

t h e p art y h as act ed i n co n s i s t en t l y wi t h t h e arb i t rat i on ri g h t, an d

, i n s o

act i n g , h as i n s o m e way p reju d i ced t h e o t h er p art y [.]

Id

. (ci t at i o n s an d p u n ct u at i o n o m i t t ed ). T h u s

, t h e t ri al co u rt co rrect l y fo l l owed wel l

e s t ab l i s h ed l aw in h o l d i n g t h at a p art y t o an arb i t rat i on cl au s e m ay wai v e i t s

co n tract ual ri g h t t o arb i trat e b y act in g i n co n s i s t en t l y wi t h t hat ri g h t t o t h e d et ri m en t

o f t h e o t h er p art y

t o t h e co n t ract

.

On ap p eal

, Su n Tru s t arg u es t h at t h e t ri al co u rt erred as a m at t er of l aw b ecau s e

a ren ewal act i o n u n d er OCGA § 9 -2 -6 1 i s a d e n ov o act i o n an d t hat

, as t h i s Co u rt h as

5h el d

, “ [a] d efen d an t i s n o t es t op p ed fro m rai s i n g a p ro p er d efen s e i n a ren ewal act i o n

s i m p l y b ecau s e t h at d efen s e was n ot rai s ed i n th e ori g i n al act i o n

. ” Ad a ms v.

Gl u ckma n

, 1 8 3 Ga. Ap p

. 6 6 6 (1 ) (3 5 9 SE2 d 7 10 ) (1 9 8 7 ) ; Fi ne v. Hi g g in s Fo u nd

r y

& S u p p l y Co

. , 20 1 G a. Ap p

. 2 7 5

, 2 7 6 -2 7 7 (1 ) (b ) (4 10 SE2 d 8 2 1 ) (1 9 9 1) (s am e). On

t h i s p o in t

, Su n Tru s t rel i es heav i l y o n Ho r n s by v. Ha n co ck

, 1 6 5 Ga. A p p

. 5 4 3 (3 0 1

SE2 d 9 0 0) (1 9 8 3), in wh ich a d efen dan t d id n ot o b ject t o v en u e i n t h e p l ai n t i ff’ s fi rs t

m al p ract i ce act i o n

, wh i ch t h e pl ai n ti ff d i s m i s s ed wh en t h e cas e was cal l ed fo r t ri al

.

Id

. at 5 4 3

. In r e s p o n s e t o t h e p l ai n t i ff’ s l at er ren ewed act i o n i n th e s am e co u rt

, t h e

d efen d an t m ov ed t o d i s m i s s fo r l ack o f v en u e. Id

. Th e tri al co u rt g ran ted t he m o t i o n,

an d o n ap p eal

, t h i s Co u rt affi rm ed an d h el d t hat b ecau s e t h e s eco n d act i o n w a s a

ren e wal o f t h e fi rs t

, i t was i n effect a d e n o v o act i o n d u ri n g wh i ch th e d efen d an t

co u ld as s ert d efen s es n o t rai s ed i n t h e o ri gi n al act io n. Id

. at 54 4

. Su n t ru s t co n cl u d es

t h at b ecau s e th e ex is t en ce o f an ag reem en t t o arb i t rat e i s a d efen s e s i m i l ar t o l ack o f

v en ue, i t s h o u ld b e al l o we d to d em an d arb i t rat i o n i n t h e ren ewal act i o n d es p i t e n ot

rai s in g i t i n t h e o ri g i n al act i o n b el o w

.

Des p i t e Su n Tru s t ’ s arg u m en t t o t h e co n t rary

, H o r n s b y i s i n fact co n s is t en t wi th

t h e t ri al co u rt ’ s ru l i n g

. In t h e p res en t act i on

, t h e t ri al co u rt di d n o t h o ld t h at Su n Tru s t

was b arred fro m d em an d i ng arb i t rat i o n i n th e ren ewal act i o n s i m p l y b ecau s e i t fai l ed

6t o rai se t h e i s su e in t h e o ri g in al act i o n

. Rat her, i n t h e ren ewal act i on t h e co u rt

co n si d ered Su n Tru s t ’ s d em an d fo r arb i t rat i o n b u t fo u nd t h at Su n Tru s t h ad wai v ed i t s

ri gh t t o arb i t rat e b y a ct i n g i n co n s i s t en t l y wi th t h at ri

gh t d u ri n g th e o r i g i n al act i o n.

Th e t ri al co u rt ’ s reas on i n g reco g n i zes t h e p o s si bi l i t y t hat i f t h e o ri gi n al act i o n h ad

p ro ceed ed d ifferen t l y

, Su nTru s t m i g h t n o t h av e wai v ed i t s ri g h t t o arb i t rat e i n a

ren ewal act i o n

. Fo r ex am p l e, i f t h e p l ai nt i ff h ad di sm i s s ed t h e o ri g i nal act i o n b efo re

Su n Tru s t act ed in co n si s ten t l y wi t h i t s ri g h t t o arb it rat e

, S u n Tru st wo ul d n o t h av e

wa i v ed th at ri g h t i n t h e ren ewal act i o n

. Or i f Su n T ru s t ’ s act i o n s i n t h e fi rs t act i o n,

al t h o u g h i n co n s i s t en t wi t h i t s ri g h t t o arb i t rat e, di d n o t cau s e a n y p reju d i ce t o t h e

p l ai n t i ffs , t h en Su nTru s t wo u l d n o t h av e wai v ed i t s ri g h t t o arb it rat e i n t h e ren ewal

act i on

. Th u s

, Ho r ns b

y s u p p o rt s t h e t ri al co u rt ’ s d eci s i o n b ecau s e Ho r n s b y d i d n o t b ar

Su n Tru s t fro m rai s i ng arb i t rat io n i n th e ren ewal act io n

. Rat h er, i t s m o t i o n t o co m p el

arb i t rat i on was d en ied fo r an i n d ep en d en t reas o n , n am el y wai v er.

“ Th e qu es t i o n o f wh at co n s t i t ut es a wai v er o f t he ri g h t o f arb i trat i o n d ep en d s

o n t h e fact s of each cas e.” US A Pa yd a y Ca s h A d

va n ce Cen t er # 1 v. Eva n s

, 2 8 1 Ga.

Ap p

. 8 4 7

, 8 5 0 (6 3 7 SE2 d 4 1 8) (2 0 0 6 ) (p u n ct u at i o n an d fo o tn ot e o m i t t ed ). Here, t h e

t ri al co u rt co n cl ud ed th at Su n Tru s t h ad wai v ed i ts ri g h t t o arb i t rat i on b y p art i ci p at i n g

i n d i s co v ery

an d by fi l in g a m o t i o n fo r s u m m ary ju dg m en t i n t h e o ri g i n al l i t i g at i o n

7wi t h o u t rai s i n g t h e i s s u e o f arb i t rat i o n fo r m o re t han a y ear an d a h al f cau s i n g t h e

cas e t o en d u p o n t h e t ri al cal en d ar. Su n Tru st do es n o t d i s p u t e t h es e fi n d i n g s o f fact

.

Th e t ri al co u rt al s o fo u nd th at “ t h e d el ay an d co st a s s o c i a t ed wi t h co n d u ct i n g

d i s co v ery p reju d i ced t h e [ap p el l ees ] .” See Mo r ewi t z v. W es t o f En g l a nd S

hi p Own er s

Mu t

. Pr o t ect i o n & In d

em. A s s o c.

, 6 2 F3 d 1 3 5 6

, 1 3 6 6 (II) (C) (4 ) (1 1 t h Ci r. 1 9 9 5 )

(“ Preju d ice h as been fo un d i n si t u at i o n s wh ere t h e p art y s eek in g arb i trat i o n al l o ws

t h e o p p o si n g p art y t o un d erg o t h e t y p es o f l i t i g at i o n ex p en ses t h at arb it rat i o n was

d es i g n ed t o al l ev iat e.”) (ci t at i o n s o m it t e d ). A s h el d i n US A P ayd a y

, “ we can n ot

o v ert u rn t h e fact u al fi n di n g s un d erl y i ng t h e t ri al co u rt ’ s co n cl u s i o n becau s e b as ed o n

t h e reco rd

, we can n ot s ay t h at t h ey are cl earl y erro n eo u s .” US A Pa yd a y

, 2 8 1 Ga. Ap p.

at 8 5 1 (fo o t n o t e o m i t t e d )

. Gi v en t hat Su n Tru s t d o es n o t ch al l en g e t h e tri al co u rt ’ s

u n d erl y i n g fact u al fi n d i n g s an d b ecau s e th e t ri al co u rt co rrect l y h el d t hat a p art y m ay

wai v e i t s ri g h t t o arb i t ra t e a ren ewal act i o n b y t ak i ng act i o n s i n t h e co rres p o n d i n g

o ri g i nal act i o n t h at p reju d i ce th at o p p o si ng p art y

, we fi n d n o erro r i n th e t ri al co urt ’ s

d en ial o f Su n Tru s t ’ s m o t i o n t o co m p el arb it rat i o n

.

Ju d g men t a f f i r m ed . El l i n g t o n , P. J., a n d Mer ci er , J., co n cu r

.

8