### In the



# United States Court of Appeals

For the Seventh Circuit

____________________

No. 19

‐ 2187

B RICKSTRUCTURES

, I NC

., Plaintiff

‐ Appellee

,

v.

C OASTER D YNAMIX

, I NC

., Defendant

‐ Appellant

.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 1:16

‐ cv

‐ 10969

— Joan B. Gottschall

, Judge

.

____________________

A RGUED D ECEMBER 9, 2019

— D ECIDED M ARCH 11, 2020

____________________

Before E ASTERBROOK

, R OVNER

, and S CUDDER

, Circuit

Judges

.

S CUDDER

, Circuit Judge

. Brickstructures, Inc. and Coaster

Dynamix, Inc. joined forces to create a LEGO

‐ compatible

roller coaster set. The venture later soured, and Brickstruc

‐

tures fi led a lawsuit in federal court against its former partner.

The two companies had signed an agreement that contained

an arbitration provision. Coaster Dynamix invoked that pro

‐

vision in a second motion to dismiss. Brickstructures viewed2 No. 19

‐ 2187

the motion as untimely (indeed frivolous) and stated so in a

le tt er that threatened sanctions if Coaster Dynamix did not

withdraw its motion. The tactic worked, and Coaster Dy

‐

namix withdrew its arbitration demand. When Coaster Dy

‐

namix renewed the argument in a motion to compel arbitra

‐

tion, the district court denied the resurrected request on the

ground that the earlier withdrawal amounted to a waiver of

the right to arbitrate. We agree.

I

Brickstructures, Inc. is a product design fi rm that creates

LEGO sets, those colorful plastic bricks used to form minia

‐

ture castles, spaceships, and whatever else a youthful imagi

‐

nation can conjure up. Coaster Dynamix, Inc. creates and sells

model roller coasters. The two companies agreed to partner

to design a roller coaster kit that would be compatible with

LEGOs or other plastic bricks, and in doing so, they executed

a joint venture agreement. The document was no master class

in contract drafting—it was a stock, fi ll

‐ in

‐ the

‐ blank agree

‐

ment with spaces for the terms and details to be inserted.

Many of those blanks went un fi lled.

The agreement contained this arbitration clause:

SECTION TEN: ARBITRATION

The assignment of speci fi c duties and authority to

_______ [C.D.] was made to avoid major di ff erences be

‐

tween the parties as to conduct of the venture. The par

‐

ties declare that the terms of this agreement are con

‐ trolling as to each of them. Any ma tt er in dispute, and

which is not provided for in this agreement, shall be

submi tt ed to arbitration

__________ [under the provi

‐

sions of

________ (cite statute) or as the case may be]

.No. 19

‐ 2187 3

With the venture agreement in place, the collaboration

successfully released an initial product called the Roller

‐

Coaster Factory. But the relationship fi zzled once the compa

‐

nies turned their sights toward a successor product that never

reached the market. For its part, Coaster Dynamix went on to

independently launch the Cyclone, a LEGO

‐ compatible roller

coaster kit, without a tt ributing any credit to its former part

‐

ner.

Brickstructures sued, claiming that Coaster Dynamix

breached the joint venture agreement and its fi duciary duties

and falsely advertised in violation of the Lanham Act. Coaster

Dynamix moved to dismiss the complaint under Federal Rule

of Civil Procedure 12(b)(6), principally arguing that the ven

‐

ture arrangement was not an enforceable contract. The district

court dismissed the original complaint on the basis of a juris

‐

dictional defect.

An amendment cured the jurisdictional issue and added

an unjust enrichment claim. Coaster Dynamix moved anew to

dismiss, this time under Rules 12(b)(2), 12(b)(3), and 12(b)(6).

Once again, the main contractual argument was that the

amended complaint did not allege a binding joint venture.

But this time Coaster Dynamix urged the court, if it did fi nd

there was a contract, to dismiss the lawsuit under Rule

12(b)(3) for improper venue because the agreement contained

a provision that made arbitration the exclusive forum for the

claims. The company also raised a personal jurisdiction argu

‐

ment.

Days later Coaster Dynamix received a le tt er from Brick

‐

structures’s a tt orneys. The le tt er demanded that the company

withdraw the personal jurisdiction and arbitration arguments

from its second motion to dismiss because Coaster Dynamix4 No. 19

‐ 2187

waived them by not advancing them in its fi rst motion. The

le tt er called the arguments “clearly frivolous” and threatened

to seek sanctions.

Brickstructures’s le tt er proved e ff ective. That very day

Coaster Dynamix informed the district court that it was with

‐ drawing its personal jurisdiction and arbitration

‐ based venue

arguments. The notice Coaster Dynamix fi led with the court

was clear and precise: “Since Coaster Dynamix did not explic

‐ itly move on the personal jurisdiction and venue issues in its

motion to dismiss the original complaint, Coaster Dynamix

withdraws the sections of its pending motion to dismiss based

on lack of personal jurisdiction and improper venue.” That

left only Coaster Dynamix’s Rule 12(b)(6) argument—that the

joint venture agreement was not an enforceable contract—re

‐ maining on the table. The district court denied the motion, de

‐ termining that the amended complaint adequately alleged a

binding agreement.

Coaster Dynamix put the arbitration issue back on the ta

‐

ble roughly one month later when it moved to compel arbi

‐

tration. The company noted that it raised the argument in its

second motion to dismiss only then to receive no ruling from

the district court. Nowhere, however, did Coaster Dynamix

mention that it had withdrawn its motion. Brickstructures

caught the omission and argued that Coaster Dynamix was

playing games and had plainly waived its right to arbitrate,

both by withdrawing the Rule 12(b)(3) argument from the sec

‐

ond motion to dismiss and by its conduct in the litigation (like

proceeding with some discovery). Coaster Dynamix replied

and insisted that it withdrew its arbitration argument only in

response to Brickstructures threatening sanctions.No. 19

‐ 2187 5

The district court declined to compel arbitration, fi nding

that Coaster Dynamix waived its right to arbitrate by ex

‐ pressly withdrawing the arbitration demand in its second mo

‐

tion to dismiss. “By fi rst arguing that the 2012 agreement re

‐ quires arbitration and then withdrawing that argument,” the

court reasoned, “Coaster chose a course inconsistent with

submi tt ing the case to an arbitral forum.” Nor did the court

allow Coaster Dynamix to rescind its waiver. The court found

unconvincing the company’s contention that it was reasona

‐

ble to abandon an arbitration demand in acquiescence to an

adversary’s threat to seek sanctions.

This appeal followed.

II

We start by assuring ourselves of our own jurisdiction.

Coaster Dynamix challenges an order denying its motion to

compel arbitration and invokes the Federal Arbitration Act as

the jurisdictional hook for the interlocutory appeal. The FAA

allows appeals from “an order

... denying a petition under

section 4 of this title to order arbitration to proceed.” 9 U.S.C.

§ 16(a)(1)(B). Brickstructures argues that Coaster Dynamix’s

motion to compel arbitration was not a petition under § 4 of

the FAA but rather a motion challenging venue under Rule

12(b)(3). Brickstructures is right that Coaster Dynamix titled

its motion as being brought under Rule 12(b)(3). And so too is

Brickstructures correct that circuit courts lack jurisdiction

over an interlocutory decision to deny a challenge to venue.

See Lauro Lines s.r.l. v. Chasser

, 490 U.S. 495, 496–98 (1989).

But it is the substance of a motion that counts, not its label.

See Obriecht v. Raemisch

, 517 F.3d 489, 493 (7th Cir. 2008)

(“[W]hether a motion fi led within 10 days of the entry of judg

‐

ment should be analyzed under Rule 59(e) or Rule 60(b)6 No. 19

‐ 2187

depends on the substance of the motion, not on the timing or

label a ffi xed to it.”); Travel All Over the World, Inc. v. Kingdom

of Saudi Arabia

, 73 F.3d 1423, 1429 (7th Cir. 1996) (“The district

court may look beyond the technical nomenclature of motions

to dismiss to reach the substance of the movant’s conten

‐

tions.”). Though Coaster Dynamix’s motion bore a Rule

12(b)(3) sticker, the venue argument was rooted in enforce

‐

ment of the arbitration agreement. Even more, Coaster Dy

‐

namix expressly clari fi ed—before the district court ruled on

the motion—that it was brought under Rule 12(b)(1), Rule

12(b)(3), and § 4 of the FAA. Brickstructures dedicated most of

its district court response brief to analysis under the FAA,

suggesting it too understood the motion to invoke that stat

‐

ute.

Whatever it was called, Coaster Dynamix’s motion to com

‐ pel arbitration was in substance a motion under § 4 of the

FAA, so we have jurisdiction and can proceed to the merits.

III

Federal law favors arbitration. See Epic Sys. Corp. v. Lewis

,

138 S. Ct. 1612, 1621 (2018). Like other contractual rights,

though, the right to arbitrate is waivable. See Kawasaki Heavy

Indus., Ltd. v. Bombardier Recreational Prod., Inc.

, 660 F.3d 988,

994 (7th Cir. 2011). A waiver can be express or implied

through action. See id

. Either way, the question is whether

“based on all the circumstances, the party against whom the

waiver is to be enforced has acted inconsistently with the right

to arbitrate.” Welborn Clinic v. MedQuist, Inc.

, 301 F.3d 634, 637

(7th Cir. 2002). The analysis can be short when the basis of the

waiver is an express abandonment of the right. In most situa

‐

tions, “I waive arbitration” answers the question. The district

court found that Coaster Dynamix’s withdrawal of theNo. 19

‐ 2187 7

arbitration argument amounted to an explicit waiver of any

right to arbitrate.

A

Our fi rst stop is the standard of review, which the parties

dispute. Brickstructures urges us to apply a clear error stand

‐

ard. It relies on St. Mary’s Medical Center of Evansville, Inc. v.

Disco Aluminum Products Co.

, 969 F.2d 585, 588 (7th Cir. 1992),

where we held that the clear error standard applies to both the

district court’s factual determinations and its application of

the legal standards to those facts. Coaster Dynamix, on the

other hand, points to cases in which we have said that factual

fi ndings are reviewed for clear error but “the legal question

of whether the conduct amounts to waiver is reviewed de

novo .” Ernst & Young LLP v. Baker O’Neal Holdings, Inc.

, 304

F.3d 753, 756 (7th Cir. 2002); see also Kawasaki

, 660 F.3d at 994;

Halim v. Great Gatsby’s Auction Gallery, Inc.

, 516 F.3d 557, 561–

62 (7th Cir. 2008).

We see no inconsistency. “[T]here is both a factual and a

legal dimension to the waiver inquiry.” Iowa Grain Co. v.

Brown

, 171 F.3d 504, 509 (7th Cir. 1999). The facts drive the

waiver analysis, but the inquiry takes direction from the back

‐ ground legal rules. See id

. We review de novo the district

court’s determinations regarding the legal principles, like the

applicable common law rules and presumptions, but defer to

the district court’s fi ndings with respect to the facts and the

legal consequences of those facts. See id

. Where, as here, no

‐ body contends that the district court “misunderstood the ap

‐ plicable law, the result turns on whether the district court

clearly erred in its assessment of the situation.” Id. ; see also

Smith v. GC Servs. Ltd. P’ship

, 907 F.3d 495, 499 (7th Cir. 2018)

(articulating the same standard of review). Adhering to the8 No. 19

‐ 2187

position articulated in Iowa Grain

, we apply the clear error

standard.

All for good reason too: waiver is an intensely fact

‐ bound

question and here the district judge is in a be tt er position to

assess the parties’ conduct. See St. Mary’s

, 969 F.2d at 588. As

the Supreme Court explained not long ago, in the case of

mixed questions of fact and law that “immerse courts in case

‐ speci fi c factual issues”—which require them to do things like

“marshal and weigh evidence” and “make credibility judg

‐ ments”—“appellate courts should usually review [the] deci

‐

sion with deference.” U.S. Bank Nat’l Ass’n ex rel. CWCapital

Asset Mgmt. LLC v. Vill. at Lakeridge, LLC

, 138 S. Ct. 960, 967

(2018). Whether a party has waived its right to arbitrate by

acting inconsistently with the right is such a mixed question,

so we appropriately review the district court’s determination

with deference.

B

We fi nd no clear error in the district court’s fi nding that

Coaster Dynamix waived its right to arbitrate. The company

expressly invoked the venture agreement’s arbitration provi

‐

sion and urged dismissal of Brickstructures’s suit because ar

‐

bitration was the “exclusive venue.” But then Coaster Dy

‐

namix withdrew the argument—a litigation choice incon

‐

sistent with the right to arbitrate. The withdrawal signaled to

Brickstructures and the district court that Coaster Dynamix

was content to leave the litigation where it was in federal

court. Having put the arbitration card on the table and then

taken it back, Coaster Dynamix was not permi tt ed to play that

card again later.

As the district court observed, Coaster Dynamix em

‐ ployed a wait

‐ and

‐ see approach—it decided to retract theNo. 19

‐ 2187 9

arbitration issue and roll the dice on its other dismissal argu

‐

ments before seeking a ruling on the proper venue. Parties

seeking to enforce their arbitration rights ought to get to it as

soon as possible. Traveling too far down the judicial road be

‐

fore reversing course to restart in an arbitral forum wastes

time and resources. See Cabinetree of Wisconsin, Inc. v. Kraft

‐

maid Cabinetry, Inc.

, 50 F.3d 388, 391 (7th Cir. 1995) (“Selection

of a forum in which to resolve a legal dispute should be made

at the earliest possible opportunity in order to economize on

the resources, both public and private, consumed in dispute

resolution.”). Taking the time to weigh one’s options “is the

worst possible reason for delay.” Id

.

That does not mean parties waive their right if a motion to

compel arbitration is not the fi rst thing they fi le on the docket.

As Coaster Dynamix points out, we have acknowledged be

‐

fore that taking certain actions, like fi ling a motion to dismiss

or requesting a transfer of venue, does not automatically

waive the right to arbitrate. See Halim

, 516 F.3d at 562; Sharif

v. Wellness Int’l Network, Ltd.

, 376 F.3d 720, 725–26 (7th Cir.

2004). But Coaster Dynamix did not just fi le a motion to dis

‐

miss. By identifying the arbitration argument in its motion to

dismiss, the company showed that it knew of its right to arbi

‐

trate, and by then expressly withdrawing the argument, it

surrendered the right.

Coaster Dynamix insists that waiver must be based on vol

‐

untary conduct and that its withdrawal of the arbitration ar

‐

gument was not voluntary because it was spurred by Brick

‐

structures’s sanctions le tt er. The waiver analysis does not re

‐ quire us to delve into the deeper motivations behind counsel’s

litigation choices. Even if it did, there can be no doubt that

Coaster Dynamix’s choice to withdraw its arbitration10 No. 19

‐ 2187

argument was intentional and voluntary. Indeed, Coaster Dy

‐

namix itself calls the withdrawal a “strategic decision.” It had

options after receiving Brickstructures’s le tt er. It could have

conducted its own research and concluded that the arbitration

argument was neither frivolous nor sanctionable and moved

forward with the second motion to dismiss. Or it could have

taken the course it ultimately took—withdraw the arbitration

demand and see if the other dismissal arguments win the day.

Coaster Dynamix voluntarily chose the option inconsistent

with the right to arbitrate.

Coaster Dynamix tries to reframe the issue by focusing on

the di ff erent ways it raised arbitration. It says the arbitration

argument in the second motion to dismiss was made under

Rule 12(b)(3) and the later fi led motion to compel arbitration

was brought under the FAA. This distinction ma tt ers, the ar

‐

gument goes, because even if withdrawal of the arbitration

demand from the former motion constituted waiver, the

waiver would be limited to Rule 12(b)(3) and would not fore

‐

close the later argument under the FAA. This misunderstands

the proper inquiry. We do not ask whether Coaster Dynamix

waived a particular argument under a certain rule or statute

but rather whether it waived its contractual right to arbitrate.

The procedural mechanism it sought to use does not control.

Nor was Coaster Dynamix entitled to rescind its waiver. A

district court has the discretion to allow a party to rescind a

waiver of the right to arbitrate. See Iowa Grain

, 171 F.3d at 509–

10. But rescission is reserved for “abnormal” circumstances,

Cabinetree

, 50 F.3d at 391, which this case does not present.

The district court commi tt ed no error in so holding.

All of this leads us to AFFIRM.