IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

STEVEN A. ZIMMER : CIVIL ACTION

:

v. :

:

COOPER NEFF ADVISORS, INC., : NO. 04-3816

et al.

MEMORANDUM

ROBERT F. KELLY, Sr. J. SEPTEMBER 26, 2008

Presently before the Court is Defendant Cooper Neff Advisors, Inc.’s (“Cooper Neff”)

Renewed Motion to Compel Arbitration And Staying Proceedings. The procedural history of this

case is set forth in Zimmer v. Cooper Neff Advisors, Inc., 523 F.3d 224 (3d Cir. 2008),

remanding the case to this Court to consider whether Plaintiff Steven A. Zimmer (“Zimmer”) has

proven the prejudice necessary for a finding that Cooper Neff waived its right to arbitration. 

I. FACTS

Cooper Neff is a financial trading and investment firm, which uses several different

models in the management of hedge funds. Zimmer is an individual who has been employed in

the financial industry for many years. Zimmer is the maker and developer of a computer program

designed to analyze and rank stocks in the public market (“the Model”). In 2002, Zimmer began

negotiations with several different financial institutions, including Cooper Neff, regarding

possible opportunities of employment. Cooper Neff presented Zimmer with a formal offer of

employment by letter dated February 6, 2003. Zimmer accepted Cooper Neff’s offer, and began

working at Cooper Neff on March 26, 2003. 

On this date, Cooper Neff presented Zimmer with a copy of Cooper Neff’s standard form

Case 2:04-cv-03816-RK Document 53 Filed 09/26/08 Page 1 of 9
of employee agreement (“Employment Agreement”). The Agreement contained two provisions

that are of particular relevance to this dispute. First, Paragraph 6 of the Employment Agreement

reads:

All software, programs, inventions, trade secrets, patentable or

copyrightable items, Confidential Information and any other item of

intellectual property that (I) may arise (in whole or in part) as a

result of your joint or sole efforts during employment with the

Company that in any way related to the business of the Company or

any affiliate or that might (if developed, pursued, or the like) give

the Company or such affiliate a financial benefit, or (ii) that you

invented, discovered, produced or the like using (in whole or in

part) any of the Company’s resources or on Company time,

regardless of whether it relates to the Company’s business

(collectively referred to as “Converted Intellectual Property”) will

be the sole and exclusive property of the Company. 

(Zimmer Br., Ex. D, ¶ 6.) 

Secondly, Paragraph 8 of the Agreement contained an arbitration clause that reads as follows:

The types of claims and disputes that will be resolved under these

procedures include all claims and disputes arising under this

agreement or in connection with your employment by the

Company; all claims arising from the terms and conditions of your

employment; all claims arising from the termination of your

employment . . . . However, the Company retains the right to bring

any claims to enforce any of its rights in paragraph 6 of this

agreement directly in a court of competent jurisdiction and the

Company need not arbitrate any such claims.

(Zimmer Br., Ex. D, ¶ 8.)

Zimmer initially refused to sign the Employment Agreement; however, he did eventually

sign it sometime in May 2003. In June 2004, Zimmer informed Cooper Neff that he would be

leaving the company as of July 2, 2004 to work for a competitor of Cooper Neff. Zimmer alleges

that upon learning of his intention to leave the company, Cooper Neff requested that he stay on

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for an additional two weeks, so that they could obtain important information pertaining to the

Model. After obtaining the needed information, Zimmer alleges that Cooper Neff abruptly

terminated him on June 30, 2004, and filed suit against him the next day in Pennsylvania state

court. In its state court Complaint, Cooper Neff contends that Zimmer continued to develop the

Model while being employed by them, and therefore, under the terms of paragraph 6 of the

Employment Agreement, the Model belongs to them. As such, the Complaint sought a temporary

restraining order (“TRO”) barring Zimmer’s use of the Model at his new place of employment.1

Both parties agree that during the course of these proceedings, a total of three depositions were

taken, with Cooper Neff taking one deposition and Zimmer taking two. On July 1, 2004, the

Montgomery County Court of Common Pleas entered the TRO against Zimmer, enjoining his use

of the Model. 

In July 2004, Zimmer removed the state court action to this Court and filed his own

Complaint, seeking a TRO and preliminary injunction against Cooper Neff’s use of the Model. 

On August 5, 2004, Cooper Neff moved to remand the matter to state court, and on August 6,

2004, this Court granted Cooper Neff’s Motion to Remand. On August 11, 2004, Zimmer filed a

new action in this Court, again seeking a TRO and preliminary injunction against Cooper Neff’s

use of the Model. This Court held a hearing on Zimmer’s request for a TRO on August 18, 2004. 

By Order of August 19, 2004, after nearly a full day of hearings on the matter, this Court granted

Zimmer’s request for a TRO. We then scheduled a Preliminary Injunction Hearing for September

21, 2004. On September 20, 2004, the day before the Preliminary Injunction Hearing was

scheduled, Cooper Neff moved to stay the proceedings in this Court and to compel arbitration

Additionally, the Complaint asserted claims for inadequacy of legal relief, breach of contract,

1

misappropriation of trade secrets, breach of fiduciary duty, conversion, and unfair competition.

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pursuant to the terms of paragraph 8 of the Employment Agreement. We heard oral argument on

the Motion to Compel the following day, and denied the Motion. Following argument on the

Motion to Compel, this Court heard two days’ of hearings on Zimmer’s Motion for Preliminary

Injunction. Cooper Neff filed a Renewed Motion to Compel on September 22, 2004. By Order

dated September 23, 2004, we denied Zimmer’s Motion for Preliminary Injunction. 

 This Court heard argument on Cooper Neff’s Renewed Motion to Compel on October 28,

2004. On December 20, 2004, we determined that Cooper Neff had waived its right to compel

arbitration by initiating suit against Zimmer in Pennsylvania state court and by continuing to

litigate its case in the court system. Cooper Neff appealed this Court’s findings to the Third

Circuit Court of Appeals. On April 14, 2008, the Third Circuit vacated the December 20, 2004

Order, and remanded the case to this Court for a determination as to whether Zimmer had proven

the requisite prejudice needed for waiver. We address that issue now. 

II. DISCUSSION

“[T]he prevailing mood is to favor arbitration as an effective method of dispute

resolution.” Zimmer v. CooperNeff Advisors, Inc., 523 F.3d 224, 231 (3d Cir. 2008). Waiver of

arbitration rights is not to be “lightly inferred” by federal courts. Paine-Weber Inc. v. Faragalli,

61 F.3d 1063, 1068 (3d Cir. 1995) (citing Gavlick Constr. Co. v. H.F. Campbell Co., 526 F.2d

777, 783 (3d Cir. 1975)). Usually, waiver will only be found “where the demand for arbitration

came long after suit was commenced and the parties have engaged in extensive discovery.” Id. at

1968-69; Zimmer, 523 F.3d at 231-32. Nonetheless, a party may waive its right to compel

arbitration where the party’s conduct acts to prejudice the non-moving party. Hoxworth v.

Blinder, Robinson & Co., Inc., 980 F.2d 912, 926 (3d Cir. 1992). Prejudice is the touchstone for

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determining whether a party has waived its right to arbitration. Ehleiter v. Grapetree Shores, Inc.,

482 F.3d 207, 222 (3d Cir. 2007) (citing Hoxworth, 980 F.2d at 925). To establish waiver, the

party opposing arbitration has the burden of proving by clear and convincing evidence that the

moving party acted in a manner inconsistent with arbitration and that these inconsistent acts have

prejudiced the non-moving party. Davis-Clemens Const. Co., Inc. v. S.I.W. Intern., Inc., No. 90-

7195, 1992 WL 102877, at * 3 (E.D. Pa. May 6, 1992). The Third Circuit has identified several

non-exclusive factors relevant to a finding of prejudice, including: 

[1] the timeliness or lack thereof of a motion to arbitrate... ; [2] the

degree to which the party seeking to compel arbitration [or to stay

court proceedings pending arbitration] has contested the merits of

the opponent’s claims; [3] whether that party has informed its

adversary of the intention to seek arbitration even if it has not yet

filed a motion to stay the district court proceedings; [4] the extent of

its non-merits motion practice; [5] its assent to the [trial] court’s

pretrial orders; and [6] the extent to which both parties have

engaged in discovery. 

Ehleiter, 482 F.3d at 222. Thus, in deciding whether Cooper Neff has waived its right to

arbitration, we must determine whether Zimmer has demonstrated prejudice.

Zimmer argues that he was prejudiced because Cooper Neff chose to invoke the judicial

process in obtaining a TRO against him, and only later moved to compel arbitration after

receiving an unfavorable ruling from this Court. He further asserts that Cooper Neff’s state court

Complaint was not limited to preliminary relief, but instead, sought several additional claims. As

a result of Cooper Neff’s choice to litigate this case in the court system, Zimmer argues that he

was forced to incur significant legal fees in defending the state court case and in responding to

Cooper Neff’s allegations before this Court. Furthermore, Zimmer argues that Cooper Neff took

advantage of expedited discovery before this Court, took part in motions practice on the merits of

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the parties’ claims, and assented to this Court’s pretrial Orders. As a result, Zimmer asserts that

Cooper Neff has chosen to litigate this case in the courts and has waived its right to arbitration.

In contrast, Cooper Neff argues that it had limited involvement with the court system

before making its Motion to Compel Arbitration, and that the Motion was timely made. First, it

argues that its Motion to Compel was made only six weeks after the filing of Zimmer’s Complaint

in this Court and three months after the filing of the state court Complaint. Also, while it

acknowledges that its state court Complaint was not limited to a request for preliminary relief, it

argues that it has made no attempt to pursue its remaining claims. Finally, it asserts that any

discovery or motion practice has been directed solely toward its requests for preliminary relief. 

As a result, Cooper Neff asserts that it has not waived its right to arbitration. 

First, while the fact that Cooper Neff initiated the litigation process is relevant to the

prejudice inquiry, that fact alone is not dispositive. See Zimmer, 523 F.3d at 232; Zwitserse

Maatschappij Van Levensverzekering En Lijfrente v. ABN Int’l Capital Mkts. Corp., 996 F.2d

1478, 1479-80 (2d Cir. 1993). Parties often seek preliminary relief from the courts and later seek

arbitration. This is true because parties often need a forum that can act promptly to protect their

interests. See Ortho Pharm. Corp. v. Amgen, Inc., 882 F.2d 806, 812 (3d Cir. 1989). While

Cooper Neff’s state court Complaint was not limited to its request for a TRO, it is not unusual

that a party would assert all of its claims at the outset, and furthermore, it has not advanced any of

its remaining claims at this time. Additionally, many courts have found that a party does not

waive its right to arbitrate by first seeking preliminary relief from the court system. See, e.g., id. 

Thus, while we may consider the fact that Cooper Neff initiated the litigation in our prejudice

inquiry, that fact alone will not establish waiver. 

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Next, it is highly relevant that Cooper Neff moved to compel arbitration only six weeks

after Zimmer filed his Complaint with this Court and only three months after the filing of the

action in the Montgomery County Court of Common Pleas. Numerous courts have found no

waiver in situations where a great deal more time had passed before the moving party sought to

compel arbitration. See, e.g., Peltz ex rel. Estate of Peltz v. Sears, Roebuck & Co., 367 F. Supp.

2d 711, 722 (E.D. Pa. 2005) (finding no waiver after delay of seven months); Bellevue Drug Co.

v. Advance PCS, 333 F. Supp. 2d 318, 326 (E.D. Pa. 2004) (finding no waiver after ten-month

delay); Palcko v. Airborne Express, Inc., 372 F.3d 588, 598 (3d Cir. 1995) (no waiver after

approximately five weeks). While the length of the delay alone is not determinative of the issue

of waiver, Palcko, 372 F.3d at 598, the fact that Zimmer was not forced to endure the time and

expense of lengthy litigation weighs against a finding of prejudice. Id. 

Zimmer next asserts that Cooper Neff used the judicial process to obtain expedited

discovery, that it engaged in significant motions practice, and that it assented to this Court’s

pretrial Orders. While the parties have engaged in some discovery and motions practice, a review

of the case reveals that the discovery and motions practice was limited to the issue of preliminary

relief. As noted above, the parties engaged in a total of three depositions in the state court case. 

In the case before this Court, discovery was limited to interrogatories and requests for documents. 

(Zimmer Br. 7) (outlining course of discovery). Over the course of the litigation, Cooper Neff

moved for a special injunction, an Order of Contempt and Sanction, and a preliminary injunction. 

Zimmer filed oppositions to Cooper Neff’s motions, and also moved for sanctions and for a

preliminary injunction. Thus, the extent of the parties’ motion practice was directed toward

obtaining preliminary relief. None of the filings reached the final disposition of the claim, but

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instead were directed at either obtaining or opposing the grant of a preliminary injunction. 

Consequently, this Court’s pretrial Orders were all directed at the parties’ motions for preliminary

relief. None of this Court’s pretrial Orders addressed the merits of the parties’ claims. In fact,

this Court has yet to issue a Rule 16 Order in this matter. Even coupled with the TRO hearing

and the hearing on the preliminary injunction, limited discovery and motion practice of this nature

is not enough for a finding that Cooper Neff waived its right to arbitration. See, e.g., Bellevue

Drug, 333 F. Supp 2d at 326 (finding no waiver after ten-month delay where parties engaged in

motions practice, but no Rule 16 or case management Orders had issued). As such, these factors

weigh against a finding of prejudice.

Lastly, we note that Cooper Neff had no incentive to move to compel arbitration as a

matter of forum shopping. This Court denied Zimmer’s request for a preliminary injunction on

September 23, 2004. As such, Cooper Neff had not received an unfavorable ruling that would

have induced it to seek arbitration as an alternative to litigating before this Court. 

Keeping in mind that arbitration is generally favored by courts for the resolution of

disputes, coupled with the fact that the burden falls on Zimmer to prove prejudice by clear and

convincing evidence, we do not find that Zimmer has met his burden of establishing prejudice. 

While Zimmer was likely inconvenienced by litigating the initial aspects of this case in court

before being forced into arbitration, the facts and circumstances of this case do not meet the

standards for prejudice set forth by the Third Circuit. As such, we find that Cooper Neff has not

waived its right to arbitrate this dispute.

An appropriate Order follows. 

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Case 2:04-cv-03816-RK Document 53 Filed 09/26/08 Page 8 of 9
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

STEVEN A. ZIMMER : CIVIL ACTION

:

v. :

:

COOPER NEFF ADVISORS, INC., : NO. 04-3816

et al.

O R D E R

AND NOW, this day of September, 2008, upon consideration of the Renewed

Motion to Compel Arbitration And Staying Proceedings filed by Defendant Cooper Neff

Advisors, Inc., (Doc. No. 34), and the responses thereto, it is hereby ORDERED that the Motion

to Compel is GRANTED.

BY THE COURT:

 

Robert F. Kelly

ROBERT F. KELLY

SENIOR JUDGE 

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