2007 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

4-6-2007

Ehleiter v. Grapetree Shores Inc

Precedential or Non-Precedential: Precedential

Docket No. 06-2542

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PRECEDENTIAL

IN THE UNITED STATES COURT 

OF APPEALS

FOR THE THIRD CIRCUIT

 

NO. 06-2542

 

 JACK EHLEITER

v.

GRAPETREE SHORES, INC.

Appellant

 

On Appeal From the District Court

of the Virgin Islands,

Division of St. Croix

(D.C. Civil Action No. 05-cv-00056)

District Judge: Hon. Raymond L. Finch

District Judge: Hon. Stanley S. Brotman

Superior Court Judge: Hon. Audrey L. Thomas

 

Argued December 4, 2006

BEFORE: McKEE, BARRY and STAPLETON,

Circuit Judges
2

(Opinion Filed April 6, 2007)

 

Joel H. Holt (Argued)

2132 Company Street, Suite 2

Christiansted, St. Croix

USVI 00820

 Attorney for Appellee

Charles E. Engeman (Argued)

Simone R.D. Francis

Ogletree, Deakins, Nash, Smoak & Stewart

1336 Beltjen Road, Suite 202

Charlotte Amalie, St. Thomas

USVI 00802

 Attorneys for Appellant

 

OPINION OF THE COURT

 

STAPLETON, Circuit Judge:

After litigating this case before the Superior Court of the

Virgin Islands (“Superior Court”) for nearly four years,

Appellant Grapetree Shores, Inc. (“GSI”) moved to stay the
3

court proceedings pending arbitration pursuant to Section 3 of

the Federal Arbitration Act (“FAA”). The Superior Court

denied the motion, finding that GSI had waived any right it may

have had by actively litigating the plaintiff’s claims. The

Appellate Division of the District Court of the Virgin Islands

(“Appellate Division”) affirmed the decision of the Superior

Court on appeal. 

This interlocutory appeal presents three principal issues.

First, we must examine the contours of appellate jurisdiction

under the FAA to determine whether the Appellate Division had

jurisdiction over GSI’s appeal from the Superior Court’s denial

of its Section 3 motion, and whether we, in turn, have

jurisdiction to review the Appellate Division’s order affirming

the Superior Court’s ruling. We conclude that Section

16(a)(1)(A) of the FAA conferred appellate jurisdiction on the

Appellate Division to review the Superior Court’s decision, and

also provides the basis for our jurisdiction over GSI’s appeal

from the Appellate Division’s decision. Second, we must

determine if the issue of whether a party seeking arbitration has

waived its right thereto by litigating the case in court remains a

question for the trial court, rather than an arbitrator, to decide in

the wake of Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79

(2002), and Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444

(2003) (plurality opinion). We conclude that it does. Third, we

must consider whether the Superior Court correctly found on the

merits that GSI waived any right it had to arbitrate by actively

litigating this case before that court. We agree with both the

Superior Court and the Appellate Division that a finding of

waiver is compelled under the facts and circumstances of this

case. Accordingly, we will affirm the judgment of the Appellate
 1

It appears from the record that a total of nineteen depositions

were taken by the parties. Although it is unclear how many were

taken by each party respectively, there is no dispute that both

parties took depositions in this case.

4

Division.

I.

Appellant GSI is the owner of real property in the Virgin

Islands which it leased to Treasure Bay VI Corp. (“TBVI”). At

all times here relevant, TBVI operated a casino known as the

Divi Carina Bay Casino (“the Casino”) on the GSI-owned

property. Appellee Jack Ehleiter was employed with TBVI as

a card dealer and at the commencement of his employment,

entered an Hourly Employment Agreement (“the Agreement”)

with TBVI, setting forth the terms and conditions of his

employment.

Ehleiter allegedly slipped and fell while walking down an

employee stairway of the casino. In April 2001, he filed a

complaint against GSI in the Superior Court (then known as the

Territorial Court of the Virgin Islands), seeking damages for

personal injuries he allegedly sustained as a result of the fall.

GSI filed an answer to the complaint with affirmative defenses

and, over approximately the next four years, the parties engaged

in extensive discovery. Both parties submitted and responded

to several sets of interrogatories and requests for production of

documents, took numerous depositions,1

 and submitted several

expert reports. On May 13, 2003, while discovery was still

ongoing and in response to a court order, the parties submitted
5

a joint stipulation certifying their readiness for trial by

December 1, 2004. The parties participated in a mediation

session on November 16, 2004, but were unable to resolve the

dispute. On December 2, 2004, in response to a motion filed by

Ehleiter requesting a trial date, the Superior Court entered an

order scheduling trial for February 14, 2005 and requiring all

discovery be completed by January 5, 2005. Five days later, on

December 7, 2004, GSI moved to continue the trial date, noting

that the date that had been set by the Superior Court conflicted

with a previously scheduled trial involving GSI’s counsel. In

the motion, GSI requested a new trial date in March or April

2005. On December 10, 2004, the Superior Court granted GSI’s

request, and rescheduled the trial for March 31, 2005. 

Over the course of the next six weeks, GSI filed a motion

for summary judgment and a motion to implead a third party

defendant, and Ehleiter filed a motion to amend his complaint to

include a claim for punitive damages against GSI. All three

motions had been fully briefed and were pending decision by the

Superior Court when, on February 17, 2005, the final day for

filing motions and only one day before the parties’ joint final

pretrial statement and proposed jury instructions were due, GSI

filed a motion to stay the case pending arbitration pursuant to

Section 3 of the Federal Arbitration Act, 9 U.S.C. § 3. In its

motion, GSI asserted, for the first time, that, as an affiliated

company of TBVI, it was entitled to have the dispute arbitrated

pursuant to the arbitration provisions in the Agreement entered

into by Ehleiter and TBVI. Under the terms of that Agreement,

Ehleiter agreed to arbitrate, inter alia, all claims against

“affiliated companies” of TBVI arising from his employment. 

In response, Ehleiter contended that GSI was not entitled
6

to invoke the arbitration provisions of the Agreement because it

was not an “affiliated company” of TBVI and that, in any event,

GSI had waived whatever arbitration rights it had under the

Agreement by actively litigating the matter for nearly four years.

Over GSI’s objections, the Superior Court concluded that the

question whether GSI had waived any arbitration rights it had

under the Agreement was for the court, rather than an arbitrator,

to decide. Without resolving whether GSI was an “affiliate” of

TBVI under the Agreement, the Superior Court denied GSI’s

motion, agreeing with Ehleiter that GSI had waived any right it

had to arbitration by actively litigating the case. 

GSI appealed the Superior Court’s decision to the

Appellate Division, and the Appellate Division affirmed. GSI

timely filed this appeal, and we thereafter granted GSI’s

emergency motion to stay the proceedings in the Superior Court

pending our resolution of the appeal.

II.

Although the parties have not raised the issue, a court of

appeals has both the inherent authority and a continuing

obligation to assess whether it has jurisdiction over a case or

controversy before rendering a decision on the merits. Lazy Oil

Co. v. Witco Corp., 166 F.3d 581, 585 (3d Cir. 1999); Shendock

v. Director, Office of Workers’ Compensation Programs, 893

F.2d 1458, 1461 (3d Cir. 1990) (en banc). We must therefore

determine as a threshold matter whether we have jurisdiction to

consider the merits of this appeal from an order of the Appellate

Division affirming the Superior Court’s interlocutory order

denying a motion to stay the court proceedings before it pending
 2

We have held that the FAA applies to local matters litigated

in the Superior Court of the Virgin Islands. See Gov’t of the

Virgin Islands v. United Indus. Workers, N.A., 169 F.3d 172,

175-78 (3d Cir. 1999). 

7

arbitration. As a predicate to that determination, we inquire also

into the jurisdiction of the Appellate Division to review the

Superior Court’s interlocutory order. We conclude that Section

16(a)(1)(A) of the FAA conferred appellate jurisdiction on both

courts. 9 U.S.C. § 16(a)(1)(A).

 GSI sought to stay the proceedings before the Superior

Court pursuant to Section 3 of the FAA, which provides as

follows: 

If any suit or proceeding be brought in any

of the courts of the United States upon any issue

referable to arbitration under an agreement in

writing for such arbitration, the court in which the

suit is pending, upon being satisfied that the issue

involved in such suit or proceeding is referable to

arbitration under such an agreement, shall on

application of one of the parties stay the trial of

the action until such arbitration has been had in

accordance with the terms of the agreement,

providing the applicant for the stay is not in

default in proceeding with such arbitration. 

9 U.S.C. § 3.2

 Section 16(a)(1)(A) provides that “[a]n appeal

may be taken from an order refusing a stay of any action under
 3

Section 16 provides in full as follows:

(a) An appeal may be taken from -

 (1) an order - 

(A) refusing a stay of any action under

section 3 of this title,

(B) denying a petition under section 4 of

this title to order arbitration to proceed,

(C) denying an application under section

206 of this title to compel arbitration,

(D) confirming or denying confirmation of

an award or partial award, or 

(E) modifying, correcting, or vacating an

award;

 (2) an interlocutory order granting, continuing,

or modifying an injunction against an arbitration

that is subject to this title; or 

 (3) a final decision with respect to an arbitration

that is subject to this title.

(b) Except as otherwise provided in section

1292(b) of title 28, an appeal may not be taken

from an interlocutory order -

 (1) granting a stay of any action under section 3

of this title;

8

section 3 of this title.” 9 U.S.C. § 16(a)(1)(A).3
 (2) directing arbitration to proceed under section

4 of this title;

 (3) compelling arbitration under section 206 of

this title; or

 (4) refusing to enjoin an arbitration that is

subject to this title.

9 U.S.C. § 16. 

9

We first examine whether Section 16(a)(1)(A) authorized

the Appellate Division to exercise jurisdiction over GSI’s appeal

of the Superior Court’s order denying its Section 3 motion.

GSI’s stay motion in the Superior Court alleged that the claim

at issue in that suit was within the scope of a written agreement

to arbitrate and claimed entitlement to a stay mandated by

Section 3. Its motion thus alleged a prima facie case of

entitlement to a Section 3 stay. That motion was denied. It

follows, from a literal reading of Section 16(a)(1)(A) and our

interpretive case law, we conclude, that that section conferred

jurisdiction on the Appellate Division to review the Superior

Court’s denial of a stay. 

In reaching this conclusion, we are mindful of the facts

that Section 3's mandatory stay provision applies only where the

claims at issue are “referable to arbitration under an agreement

in writing for such arbitration,” 9 U.S.C. § 3, and that the

Appellate Division, like the Superior Court, did not resolve

whether GSI was an “affiliate” of TBVI, an essential predicate

to a finding that Ehleiter’s claims were referable to arbitration
 4

Like Section 3 of the FAA, Section 4 applies only where the

parties have entered a written arbitration agreement. See 9

U.S.C. § 4 (providing in part that “[a] party aggrieved by the

alleged failure, neglect, or refusal of another to arbitrate under

a written agreement for arbitration may petition . . . for an order

directing that such arbitration proceed in the manner provided

for in such agreement”). 

10

under an agreement in writing. Instead, the Appellate Division,

like the Superior Court, found that GSI had waived any right it

may have had to arbitrate and did not reach the “affiliate” issue.

An affirmative finding on that issue was not, however, essential

to the jurisdiction of the Appellate Division. 

Sandvik AB v. Advent Int’l Corp., 220 F.3d 99 (3d Cir.

2000), and E.I. DuPont de Nemours & Co. v. Rhone Poulenc

Fiber & Resin Intermediates, S.A.S., 269 F.3d 187 (3d Cir.

2001), hold that Section 16(a)(1)(B) confers appellate

jurisdiction to review a denial of a petition for an order

compelling arbitration that alleges a prima facie case of

entitlement thereto under Section 4 of the FAA and, by analogy,

indicate that Section 16(a)(1)(A) confers such jurisdiction to

review the denial of a motion alleging prima facie entitlement to

a stay under Section 3.4

In Sandvik, the appellee contended that the appeal fell

“outside the FAA’s interlocutory appeal provisions because the

District Court[, although denying a petition for an order

compelling arbitration under Section 4, had] not reached a final

conclusion on the validity of the arbitration clause.” 220 F.3d

at 100. We rejected this contention and exercised jurisdiction
11

over the appeal pursuant to Section 16(a)(1)(B). Id. at 102-04.

 In DuPont, the district court had denied the defendant’s motion

to compel arbitration based on its finding that the plaintiff, a

non-signatory to the arbitration agreement, was not bound by the

agreement under third-party beneficiary, agency, or equitable

estoppel principles. 269 F.3d at 194. Citing Sandvik for

support, we exercised jurisdiction over the appeal pursuant to

Section 16(a)(1)(B) and affirmed the district court’s ruling on

the merits. Id. at 194, 194 n.3, 205. 

Given the parallel objectives of Sections 3 and 4 of the

FAA, we are confident that Section 16(a)(1)(A) confers

appellate jurisdiction to review a denial of a motion for a stay

pending arbitration which alleges a prima facie case of

entitlement thereto under Section 3 of the FAA. As we have

indicated, GSI has clearly alleged a prima facie case of

entitlement, as an “affiliate” of TBVI under the Agreement, to

a stay pending arbitration pursuant to Section 3. It follows that

Section 16(a)(1)(A) conferred jurisdiction upon the Appellate

Division to review the denial of a stay even though it made no

determination as to whether there was an agreement in writing

entitling GSI to arbitrate. 

Having concluded that the Appellate Division properly

exercised jurisdiction under Section 16(a)(1)(A), we now turn

to our own jurisdiction. Strictly speaking, the Appellate

Division’s decision might be viewed not as “an order refusing

a stay of an[] action under section 3,” 9 U.S.C. § 16(a)(1)(A),

but as an order affirming “an order refusing a stay of an[] action

under section 3.” As a substantive matter, however, the

Appellate Division’s order is identical in all material respects to
12

the Superior Court’s order refusing a stay pending arbitration.

On appeal to the Appellate Division, GSI sought the same

ultimate relief (i.e., a stay pending arbitration) as it did before

the Superior Court. Likewise, the Appellate Division’s order

affirming the Superior Court’s denial of GSI’s motion for a stay

pursuant to Section 3 had the same ultimate effect (i.e., denial of

a stay pending arbitration) as the Superior Court’s order. Had

the Appellate Division determined that the instant dispute was

arbitrable, it would have reversed the Superior Court’s decision

and directed the Superior Court to enter an order staying the

case pending arbitration. In our view, the procedural posture in

which the Appellate Division’s decision was rendered does not

make it any less “an order refusing a stay” than the order of the

Superior Court from which GSI appealed. 

In an analogous situation, we have recognized as much

in relying on Section 16(a)(1)(B) to exercise second-level

appellate review of a bankruptcy court order denying a petition

to compel arbitration. See In re Mintze, 434 F.3d 222, 227 (3d

Cir. 2006) (citing § 16(a)(1)(B) as one basis for jurisdiction over

district court’s order affirming the bankruptcy’s court denial of

motion to compel arbitration); see also MBNA Am. Bank, N.A.

v. Hill, 436 F.3d 104, 107 (2d Cir. 2006) (exercising §

16(a)(1)(A) jurisdiction over “district court’s order denying

arbitration” where district court affirmed bankruptcy court’s

refusal to stay adversary proceeding pending arbitration)

(emphasis added); In re Gandy, 299 F.3d 489, 493-94 (5th Cir.

2002) (“This court’s appellate jurisdiction to review the

bankruptcy court’s refusal to stay an adversary proceeding

pending arbitration is founded upon section 16(a)(1)(A) of the

Federal Arbitration Act . . . .”); In re Nat’l Gypsum Co., 118
13

F.3d 1056, 1061 (5th Cir. 1997) (same).

Moreover, only this construction of Section 16(a)(1)(A)

will fulfill the proarbitration purposes of the statute. In no

uncertain terms, Section 16 “makes clear that any order favoring

litigation over arbitration is immediately appealable and any

order favoring arbitration over litigation is not.” Ballay v. Legg

Mason Wood Walker, Inc., 878 F.2d 729, 732 (3d Cir. 1989);

see n.3, supra. By prohibiting interlocutory appeals of orders

favoring arbitration, Section 16 “relieves the party entitled to

arbitrate of the burden of continuing to litigate the issue while

the arbitration process is on-going, and it entitles that party to

proceed immediately to arbitration without the delay that would

be occasioned by an appeal of the District Court’s order to

arbitrate.” Lloyd v. Hovensa, LLC, 369 F.3d 263, 270 (3d Cir.

2004). At the same time, the availability of interlocutory review

under Section 16 of decisions favoring litigation avoids the

possibility that a litigant seeking to invoke his arbitration rights

will have to “endur[e] a full trial on the underlying controversy

before [he] can receive a definitive ruling on whether [he] was

legally obligated to participate in such a trial in the first

instance.” Sandvik, 220 F.3d at 104. 

Were we to conclude that Section 16(a)(1)(A) does not

permit us to exercise jurisdiction over an interlocutory appeal of

a decision by the Appellate Division affirming a Superior

Court’s denial of a motion to stay pursuant to Section 3, a party

wrongfully denied a stay would be forced to litigate the

underlying dispute exhaustively before being able to secure
 5

Other than under Section 16(a)(1)(A), there is no basis for

exercising jurisdiction over an interlocutory appeal in these

circumstances. See Medtronic AVE, Inc. v. Advanced

Cardiovascular Sys., Inc., 247 F.3d 44, 52 (3d Cir. 2001) (order

denying a stay of court proceedings pending arbitration “should

not be regarded as appealable as an order denying an

interlocutory injunction under [28 U.S.C. §] 1292(a)(1)”);

Queipo v. Prudential Bache Sec., Inc., 867 F.2d 721, 722 (1st

Cir. 1989) (denial of stay pending arbitration is not appealable

under the collateral order doctrine because such orders are “not

effectively unreviewable on appeal from a final judgment”). 

14

vindication of his right to avoid litigation.5 Upon entry of a final

judgment by the Superior Court, the litigant could seek appellate

review of the entire case, including the Superior Court’s order

refusing to stay the proceedings pending arbitration. While the

Appellate Division would likely be bound by its prior

determination of the issue under the law of the case doctrine,

nothing would preclude us from considering the merits of the

Superior’s Court order denying the stay. Were we to ultimately

conclude that the motion to stay pending arbitration had been

improperly denied, the final judgment of the Superior Court

would be vacated and the case would be remanded to the

Superior Court with directions to stay the proceedings pending

arbitration. 

Under this worst case scenario, vindication of the

litigant’s contractual right to arbitrate would come only after he

had been forced to expend substantial time and expense fully

litigating the matter in court, which is precisely what he sought

to avoid in the first place by bargaining for the speedy and
 6

As noted above, we previously entered an order granting

GSI’s motion to stay the proceedings before the Superior Court

pending our resolution of this appeal. There is a circuit split on

the question of whether the filing of an interlocutory appeal

pursuant to Section 16(a) of the FAA automatically deprives the

trial court of jurisdiction to proceed until such time as the appeal

is fully litigated or determined to be frivolous or forfeited.

Compare McCauley v. Halliburton Energy Servs., Inc., 413 F.3d

1158, 1162-63 (10th Cir. 2005) (automatic divestiture of trial

court jurisdiction unless appeal is frivolous or forfeited); Blinco

v. Greentree Servicing, LLC, 366 F.3d 1249, 1253 (11th Cir.

2004) (automatic divestiture of trial court jurisdiction unless

appeal is frivolous); Bradford-Scott Data Corp. v. Physician

Computer Network, Inc., 128 F.3d 504, 505 (7th Cir. 1997)

(endorsing automatic divestiture rule, reasoning that

“[c]ontinuation of proceedings in the district court largely

15

efficient dispute resolution procedure that the arbitral forum

offers. Even where, as here, the Superior Court and the

Appellate Division have found that the appealing party waived

its right to arbitrate by substantially litigating the dispute in

court, we believe the FAA’s strong policy favoring arbitration

will still be best served, at least in cases where the appeal is not

frivolous or forfeited, by allowing the party to obtain a definitive

ruling on the denial of its Section 3 motion by way of

interlocutory appeal to this Court, rather than requiring it to

continue litigating the case to final judgment before obtaining a

full round of appellate review on the waiver issue.

Exercising jurisdiction under Section 16(a)(1)(A) of the

FAA, we will now consider the merits of GSI’s appeal.6

 We
defeats the point of the appeal and creates a risk of inconsistent

handling of the case by two tribunals”), with Motorola Credit

Corp. v. Uzan, 388 F.3d 39, 53-54 (2d Cir. 2004) (no automatic

stay); Britton v. Co-op Banking Group, 916 F.2d 1405, 1412

(9th Cir. 1990) (same). In our order granting GSI’s motion to

stay, we expressed our agreement with the majority rule of

automatic divestiture where the Section 16(a) appeal is neither

frivolous nor forfeited.

16

review the decision of the Superior Court using the same

standard of review applied by the Appellate Division. Tyler v.

Armstrong, 365 F.3d 204, 208 (3d Cir. 2004); Gov't of the

Virgin Islands v. Albert, 241 F.3d 344, 347 n.3 (3d Cir. 2001);

Semper v. Santos, 845 F.2d 1233, 1235-36 (3d Cir. 1988). We

exercise plenary review of the Superior Court’s denial of GSI’s

motion to stay proceedings pending arbitration, Hoxworth v.

Blinder, Robinson & Co., Inc., 980 F.2d 912, 925 (3d Cir.

1992), but only review the Superior Court’s findings of fact for

clear error. Medtronic AVE, Inc. v. Advanced Cardiovascular

Sys., Inc., 247 F.3d 44, 53 (3d Cir. 2001). 

III.

Relying on the Supreme Court’s recent pronouncements

on the division of labor between courts and arbitrators in

Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002), and

Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (2003) (plurality

opinion), GSI insists that the waiver defense raised by Ehleiter

was within the exclusive province of an arbitrator to decide.

GSI also argues that the arbitration provisions of the Agreement

reserve resolution of waiver by litigation issues for the
17

arbitrator.

A. 

In Howsam, the Supreme Court granted certiorari to

resolve a disagreement among the Courts of Appeals over

whether the application of a National Association of Securities

Dealers (“NASD”) rule imposing a time limit on submission of

disputes for arbitration was a matter presumptively for the court

or for the NASD arbitrator. 537 U.S. at 82-83. The Court

acknowledged that “[t]he question whether the parties have

submitted a particular dispute to arbitration, i.e., the question of

arbitrability, is an issue for judicial determination unless the

parties clearly and unmistakably provide otherwise,” id. at 83

(citations and internal alteration omitted), and framed the issue

before it as “whether application of the NASD time limit

provision falls into the scope of this . . . interpretive rule.” Id.

 The Court first examined the role of judges in resolving

issues related to arbitration. The Court stated that “questions of

arbitability,” which are presumptively for the court to decide,

are limited to gateway disputes that the “contracting parties

would likely have expected a court to have decided . . . , where

they are not likely to have thought that they had agreed that an

arbitrator would do so, and, consequently, where reference of

the gateway dispute to the court avoids the risk of forcing the

parties to arbitrate a matter that they may well not have agreed

to arbitrate.” Id. at 83-84. The Court noted that disputes about

“whether the parties are bound by a given arbitration clause,”

and disagreements over “whether an arbitration clause in a

concededly binding contract applies to a particular type of
 7

The Court noted that the RUAA “incorporate[s] the holdings

of the vast majority of state courts and the law that has

developed under the [Federal Arbitration Act].” Id. at 84-85

(internal quotation marks omitted).

18

controversy” are two types of “question[s] of arbitrability” to be

decided by the court. Id. at 84. 

By contrast, “procedural questions which grow out of the

dispute and bear on its final disposition are presumptively not

for the judge, but for an arbitrator, to decide.” Id. at 84 (citation

and emphasis omitted). As an example, the Court cited John

Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964), where it

held that an arbitrator should decide whether the party seeking

arbitration had properly completed a grievance procedure that

served as a prerequisite to arbitration under the parties’

agreement. Id. (citing John Wiley, 376 U.S. at 557). “So, too,”

the Court continued, “the presumption is that the arbitrator

should decide ‘allegation[s] of waiver, delay, or a like defense

to arbitrability.’” Id. (quoting Moses H. Cone Mem’l Hosp. v.

Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)). The Court

observed that these are the types of questions that parties would

“likely expect” to be entrusted to an arbitrator for resolution. Id.

The Court summarized its analysis of the division of

labor between judge and arbitrator by quoting Section 6 of

Revised Uniform Arbitration Act of 2000 (“RUAA”),7

 and a

comment thereto: “[an] arbitrator shall decide whether a

condition precedent to arbitrability has been fulfilled,” and “in

the absence of an agreement to the contrary, issues of

substantive arbitrability . . . are for a court to decide and issues
19

of procedural arbitrability, i.e., whether prerequisites such as

time limits, notice, laches, estoppel, and other conditions

precedent to an obligation to arbitration have been met, are for

the arbitrators to decide.” Id. at 85 (quoting RUAA § 6(c) &

cmt. 2, 7 U.L.A. 12-13 (Supp. 2002) (emphasis in Howsam)). 

The Court concluded that the applicability of the NASD

time limit rule was an issue presumptively for the arbitrator,

rather than the court, to decide because: (a) “[t]he time limit rule

closely resembles the gateway questions that this Court has

found not to be ‘questions of arbitrability,’” id., such as

questions of “‘waiver, delay, or a like defense,’” id. (quoting

Moses H. Cone, 460 U.S. at 24-25), and “seems ‘an aspect of the

controversy which called the grievance procedures into play,’”

id. (quoting John Wiley, 376 U.S. at 559) (internal alterations

omitted); (b) “the NASD arbitrators, comparatively more expert

about the meaning of their own rule, are comparatively better

able to interpret and to apply it,” and thus “it is reasonable to

infer that the parties intended the agreement to reflect that

understanding,” id.; and (c) “for the law to assume an

expectation that aligns (1) decisionmaker with (2) comparative

expertise will help better secure a fair and expeditious resolution

of the underlying controversy - a goal of arbitration systems and

judicial systems alike.” Id.

Having determined that the NASD time limit rule was

presumptively for the arbitrator to interpret and apply, the Court

next rejected the appellee’s contention that the language of the

parties’ agreement reflected their intent to have the issue

resolved by the court prior to arbitration. The Court reiterated

that “parties to an arbitration agreement would normally expect
20

a forum-based decisionmaker to decide forum-specific

procedural gateway matters,” and found that the agreement did

not reflect a contrary intent of the parties. Id. at 86. 

In Green Tree, the Court held that the question of

whether the parties’ agreement prohibited the use of class

arbitration procedures was an issue for the arbitrator because

“[i]t concerns contract interpretation and arbitration

procedures,” rather than “judicial procedures.” 539 U.S. at 452-

53. The Court reaffirmed the general division of labor

articulated in Howsam, noting that the issues which relate to

“what kind of arbitration proceeding the parties agreed to” are

presumptively for the arbitrator to decide, while issues related

to “whether they agreed to arbitrate a matter,” are presumptively

entrusted to the court for resolution. Id. at 452 (emphasis

omitted). 

B.

 We begin our analysis by observing that our Court has

long decided questions of waiver based on litigation conduct

instead of referring the issue to an arbitrator, see, e.g., Wood v.

Prudential Ins. Co. of Am., 207 F.3d 674, 680 (3d Cir. 2000);

Great Western Mortgage Corp. v. Peacock, 110 F.3d 222, 233

(3d Cir. 1997); PaineWebber Inc. v. Faragalli, 61 F.3d 1063,

1068-69 (3d Cir. 1995); Hoxworth, 980 F.2d at 925-27; Gavlik

Constr. Co. v. H.F. Campbell Co., 526 F.2d 777, 783-84 (3d

Cir. 1975), as have our sister circuits. See generally 2 I.R.

Macneil et al., Federal Arbitration Law § 21.3 (Supp. 1999). In

the wake of Howsam and Green Tree, we have continued to

resolve waiver claims based on litigation conduct, see Palcko v.
 8

In Marie, the district court found that the defendant had

waived its right to arbitrate by, among other things, participating

in the administrative proceedings underlying the parties’

dispute. Id. at 11. 

21

Airborne Express, Inc., 372 F.3d 588, 596-98 (3d Cir. 2004),

albeit without analysis, and the district courts in our Circuit

appear to have unanimously followed suit. See, e.g., Yanes v.

Minute Maid Co., No. Civ. A. 02-2712, 2006 WL 521541, at *2-

*5 (D.N.J. March 2, 2006); Expofrut S.A. v. M/V ACONCAGUA,

280 F. Supp. 2d 374, 376-77 (E.D. Pa. 2003), aff’d, 110 Fed.

Appx. 224 (3d Cir. Sept. 28, 2004) (unpublished). But see

Bellevue Drug Co. v. Advance PCS, 333 F. Supp. 2d 318, 323-

25 (E.D. Pa. 2004) (citing Palcko as authority for deciding

question of waiver based on litigation conduct after Howsam,

but expressing reservations). 

Finding persuasive the First Circuit’s analysis in Marie

v. Allied Home Mortgage, 402 F.3d 1 (1st Cir. 2005), one of the

few post-Howsam/Green Tree cases that has squarely addressed

the issue before us, we conclude the Supreme Court did not

intend its pronouncements in Howsam and Green Tree to upset

the “traditional rule” that courts, not arbitrators, should decide

the question of whether a party has waived its right to arbitrate

by actively litigating the case in court. 

The precise question before the First Circuit in Marie was

whether “waiver of the right to arbitrate due to inconsistent

activity in another litigation forum remains an issue for the court

even after the Howsam and Green Tree holdings,” 402 F.3d at

3, which the court answered in the affirmative.8

 The First
22

Circuit started its analysis by noting that, under the FAA, a court

is only required to stay an action pending arbitration if “the

applicant for the stay is not in default in proceeding with such

arbitration,” 9 U.S.C. § 3 (emphasis added), and observed that

courts have generally interpreted the term “default” to mean

“waiver” in this context, citing several cases in which courts

determined that a party seeking arbitration had “waived” its

entitlement to a stay under Section 3 by actively litigating the

dispute in court. Marie, 402 F.3d at 13 (citing Patten Grading

& Paving, Inc. v. Skanska USA Building, Inc., 380 F.3d 200,

204-05 (4th Cir. 2004); Ivax Corp. v. B. Braun of Am., Inc., 286

F.3d 1309, 1316 n.17 (11th Cir. 2002); MicroStrategy, Inc. v.

Lauricia, 268 F.3d 244, 249 (4th Cir. 2001); County of

Middlesex v. Gevyn Constr. Corp., 450 F.2d 53, 56 n.2 (1st Cir.

1971)). The court opined that the “default” language in Section

3 “would seem to place a statutory command on courts, in cases

where a stay is sought, to decide the waiver issue themselves.”

Id.

Recalling that the Supreme Court in Howsam had

“relie[d] heavily” on a comment from Section 6 of the RUAA in

its discussion of the division of labor between judges and

arbitrators, the Marie court went on to observe that another

comment within the same section of the RUAA provides that

“[w]aiver is one area where courts, rather than arbitrators, often

make the decision as to enforceability of an arbitration clause,”

id. (quoting RUAA § 6, cmt. 5, 7 U.L.A. 16 (Supp. 2004)), and

cites cases involving waiver based on litigation conduct as

support for this proposition. See RUAA § 6, cmt. 5, 7 U.L.A. 16

(Supp. 2004). 
 9

To date, the First Circuit’s analysis in Marie has been

expressly adopted by at least one state supreme court, see

Ocwen Loan Servicing, LLC v. Washington, 939 So.2d 6, 12-14

(Ala. 2006), as well as several federal district courts in other

Circuits. See, e.g., Reidy v. Cyberonics, Inc., No. 1:06-CV-249,

2007 WL 496679, at *3-*4 (S.D. Ohio Feb. 8, 2007); Vega v.

Contract Cleaning Maintenance, No. 03 C 9130, 2006 WL

1554383, at *5 (N.D. Ill. June 1, 2006).

23

Turning finally to the “comparative expertise

considerations” that informed the Supreme Court’s resolution of

the “who decides” question in Howsam and Green Tree, the

Marie court observed that the trial judge, having been directly

involved in the entire course of the legal proceedings, is better

positioned to determine whether the belated request for

arbitration is a thinly veiled attempt to forum shop. Id. at 13.

More fundamentally, because the inquiry into whether a party

has waived its right to arbitrate by litigating the case in court

“heavily implicates ‘judicial procedures,’” id. (quoting Green

Tree, 539 U.S. at 452-53), Marie emphasized that the court

should remain free to “control the course of proceedings before

it and to correct abuses of those proceedings,” rather than being

required to defer to the findings an arbitrator with no previous

involvement in the case. Id.; see also RUAA § 6 cmt. 5, 7

U.L.A. 16 (Supp. 2004) (observing that, as a matter of judicial

economy, “a party . . . who pursues an action in a court

proceeding but [then] later claims arbitrability . . . [should] be

held to a decision of the court on waiver”). 

We find the First Circuit’s thorough analysis convincing,

and GSI fails to persuade us otherwise.9

 Viewed in isolation,
 10As noted, the above-quoted passage from Howsam includes

an excerpt from Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Corp., 460 U.S. 1 (1983). In Moses H. Cone, the

Supreme Court was called upon to decide whether the district

court had erred in staying the action pending resolution of an

ongoing state proceeding involving the same issue, viz., the

arbitrability of the plaintiff’s claims. The Court concluded that

the district court abused its discretion in staying the case, relying

in part on the fact that federal law (the FAA), rather than state

law, governed the arbitrability issue. In the course of its

discussion of the FAA, the Court commented that “[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.” Id. at 24-25

(emphasis added). In our view, Moses H. Cone established only

that arbitrability defenses such as waiver should be “addressed

with a healthy regard for the federal policy favoring arbitration,”

id. at 24, not that these defenses should presumptively be

resolved by an arbitrator. In fact, in Germany v. River Terminal

Ry. Co., 477 F.2d 546 (6th Cir. 1973), one of the cases cited by

Moses H. Cone as support for the proposition in question, the

court resolved of a claim of waiver based on litigation conduct.

24

the Supreme Court’s statement in Howsam that “the

presumption is that the arbitrator should decide ‘allegations of

waiver, delay, or a like defense to arbitrability,’” 537 U.S. at 84

(quoting Moses H. Cone, 460 U.S. at 25) (internal alteration

omitted), certainly provides general support for GSI’s position

here.10 Properly considered within the context of the entire
See id. at 547-48 (finding no waiver where party first raised

arbitration in an amended pleading because the right to arbitrate

may only be waived “by the actions of a party which are

completely inconsistent with any reliance” on the arbitration

agreement). 

25

opinion, however, we believe it becomes clear that the Court

was referring only to waiver, delay, or like defenses arising from

non-compliance with contractual conditions precedent to

arbitration, such as the NASD time limit rule at issue in that

case, and not to claims of waiver based on active litigation in

court. As the Appellate Division recognized, this latter type of

waiver implicates “courts’ authority to control

judicial procedures or to resolve issues . . . arising from judicial

conduct,” JA at 543, which we believe parties would expect the

court to decide itself. 

Contrary to GSI’s suggestion, we do not find the Eighth

Circuit’s decision in Nat’l Am. Ins. Co. v. Transamerica

Occidental Life Ins. Co., 328 F.3d 462 (8th Cir. 2003) helpful

here. Transamerica involved a dispute arising out of two

separate reinsurance contracts between Transamerica and

NAICO. After the dispute had been pending in arbitration

before a panel of three arbitrators for over a year, one of the

arbitrators assigned to the case resigned. Pursuant to Section 5

of the FAA, NAICO petitioned a federal district court for an

order naming an arbitrator to fill the vacancy left by the

resignation. See 9 U.S.C. § 5 (authorizing parties to arbitration

proceedings to petition a court for designation and appointment

of arbitrators in certain circumstances). Notwithstanding the

parties’ active participation in arbitration, Transamerica filed a
26

counterclaim asserting that NAICO had waived its right to

arbitrate by, as described by the Eighth Circuit on appeal,

“engag[ing] in arbitration with three other insurance companies

in 1994 concerning four reinsurance contracts, two of which

involved Transamerica and are the subject of the present

dispute.” Id. at 464; see id. at 463 (“Transamerica

counterclaimed that NAICO had waived the right to arbitrate

because the disputed contract was subject of a prior

arbitration.”); id. at 463-64 (“Transamerica argued before the

district court that NAICO had waived the right to arbitrate

because the 1990 reinsurance contracts were the subject of prior

arbitration.”). The district court appointed a new arbitrator

pursuant to Section 5 and declined to rule on Transamerica’s

counterclaim, concluding that the issue of waiver should be

decided by the arbitration panel. 

The Eighth Circuit affirmed on appeal, addressing

Transamerica’s waiver argument in the following brief

discussion:

Finally, Transamerica contends that NAICO has

waived the right to arbitrate because NAICO

pursued litigation in the Oklahoma courts on

reinsurance contracts to which Transamerica is a

party. However, the United States Supreme Court

has recently reiterated [in Howsam] that the

presumption is that the arbitrator should decide

allegations of waiver, delay, or a like defense to

arbitrability. Therefore, once the panel is

reconstituted with the arbitrator appointed by the

district court, the issue of waiver may be
27

presented for the panel’s consideration.

Id. at 466 (internal citation and alteration omitted). 

We confess to some uncertainty about the nature of the

waiver conduct at issue in Transamerica. Although the Eighth

Circuit described Transamerica’s waiver argument in this last

passage as being based on NAICO’s pursuit of “litigation in the

Oklahoma courts,” on three different occasions, as noted above,

the court described Transamerica’s waiver argument as being

based exclusively on NAICO’s participation in a prior

arbitration proceeding involving the underlying dispute between

the parties, which perhaps suggests that any prior court action

brought by NAICO had been referred to, and resolved in,

arbitration. To the extent that Transamerica may be understood

as a case involving waiver by prior arbitration conduct, rather

than by prior litigation conduct, the case is plainly

distinguishable from ours on this basis. 

To the extent that Transamerica may be fairly read as

involving a claim of waiver based on litigation conduct, we

believe the result reached by the Eighth Circuit can be explained

by the rather unique procedural circumstances of that case. In

a typical waiver case, such as the one before us, a party

opposing arbitration urges the trial court to deny a motion made

under Section 3 or Section 4 of the FAA on the ground that his

opponent waived its right to arbitrate by actively participating

in the underlying proceedings before that court. As noted

above, considerations of comparative expertise and judicial

economy, among others, dictate that a waiver defense raised in

this context be decided by the court, rather than being referred
 11We note that the Eighth Circuit has continued to decide

typical claims of waiver based on litigation conduct in cases

since Transamerica. See, e.g., Kelly v. Golden, 352 F.3d 344,

348-50 (8th Cir. 2003). 

28

to an arbitrator with no prior involvement with the case.11 

In Transamerica, by contrast, the district court was

asked, in the course of considering a petition to appoint a new

arbitrator to an arbitration panel that had been presiding over

proceedings on the parties’ underlying dispute for more than a

year, to decide whether the petitioner had waived its right to

arbitrate by previously litigating the same contractual dispute in

a case brought before another court. In these circumstances,

referring the waiver issue to an arbitration panel that already has

intimate familiarity with the parties’ underlying dispute would

be preferable to having it decided by a trial judge with no prior

involvement in the case. In short, whether viewed as a case

involving a claim of waiver based on arbitration conduct or a

claim of waiver based on litigation conduct, we believe the

Eighth Circuit’s decision in Transamerica does not support

GSI’s position here. 

We now make explicit that which is implicit in our

decision in Palcko; we hold that waiver of the right to arbitrate

based on litigation conduct remains presumptively an issue for

the court to decide in the wake of Howsam and Green Tree.

C.

We must still consider GSI’s argument that the
 12As noted above, the arbitration provision in the Agreement

not only encompasses any claims Ehleiter has against his

employer, TBVI, but also his claims against “affiliated

companies” of TBVI. Like the Superior Court and the Appellate

Division, we will assume for purposes of this appeal that GSI is

an affiliate of TBVI and was therefore entitled to avail itself of

the arbitration provisions in the Agreement. 

 13We share the First Circuit’s concern about the

enforceability of arbitration agreements that expressly authorize

the arbitrator to resolve claims of waiver based on litigation

conduct. See Marie, 402 F.3d at 14 n. 10 (“The ‘default’

language in Section 3 of the FAA, which as we noted includes

waiver, perhaps gives courts a duty, which cannot be shifted by

contract between the parties, to determine whether waiver has

occurred.”). Because we are not confronted with such an

agreement in this case, however, we do not resolve this question

here.

29

Agreement provides for resolution of the waiver defense raised

here by an arbitrator, notwithstanding any presumption to the

contrary.12 An issue that is presumptively for the court to decide

will be referred to the arbitrator for determination only where

the parties’ arbitration agreement contains “clear and

unmistakable evidence” of such an intent. First Options of

Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (quoting

AT&T Technologies, Inc. v. Communications Workers of Am.,

475 U.S. 643, 649 (1986)) (alterations omitted). The Agreement

in this case fails to satisfy this onerous standard.13

GSI primarily relies on the following arbitration
30

provision in the Agreement:

17. MATTERS ARBITRABLE

All claims or matters arising out of or

relating in any fashion to this Agreement, to the

breach of this Agreement, or to Employee’s

dealings with Employer, Employee’s employment

or the suspension or termination of Employee’s

employment with Employer shall be considered

arbitrable. Arbitrable matters include, but are not

limited to, the following: claims for wrongful or

retaliatory discharge or wrongful treatment under

Virgin Islands or Federal law, including, but not

limited to, the Civil Rights Acts of 1866, 1871,

1964, and 1992, Title VII, the Equal Employment

Opportunity Act, the Equal Pay Act, the Fair

Labor Standards Act, the Age Discrimination in

Employment Act, the Americans with Disabilities

Act, the Family and Medical Leave Act, and

Titles 10 and 24 of the Virgin Islands Code;

claims for employment discrimination under

Virgin Islands law or Federal law; defamation,

infliction of emotional distress, and all other

matters sounding in tort; claims relating to

Employee benefits; and the issue of arbitrability

of any claim or dispute.

JA at 202-03 (emphasis added).

While it is clear from this provision that the parties
 14As noted above, we assume for purposes of this appeal that

GSI is an affiliate of TBVI and was therefore entitled to avail

itself of the arbitration provisions in the Agreement. Because it

is otherwise undisputed that Ehleiter’s claims against GSI are

31

intended to have an arbitrator determine the gateway question of

whether the underlying substantive dispute between them is

arbitrable, whether it be a Title VII claim, a common law tort

action, or any other legal claim for relief, we do not believe that

this provision similarly evinces a clear and unmistakable intent

to have an arbitrator decide procedural questions of arbitrability

that arise only after the parties have bypassed a gateway

determination of substantive arbitrability by the arbitrator and

actively litigated the underlying dispute in court. There are no

references to waiver of arbitration in this or any other provision

of the Agreement. We cannot interpret the Agreement’s silence

regarding who decides the waiver issue here “as giving the

arbitrators that power, for doing so . . . [would] force [an]

unwilling part[y] to arbitrate a matter [he] reasonably would

have thought a judge, not an arbitrator, would decide.” First

Options, 514 U.S. at 945. Litigants would expect the court, not

an arbitrator, to decide the question of waiver based on litigation

conduct, and the Agreement here does not manifest a contrary

intent.

IV.

Finally, GSI argues that, even if the Superior Court had

authority to resolve the waiver issue, it erred in finding that GSI

had waived any right it may have had to arbitrate Ehleiter’s

claim.14
arbitrable under the Agreement, the only remaining question

before us is whether GSI has waived its right to arbitrate. 

 15In Hoxworth, we found that the defendants waived their

right to arbitration based on the following litigation conduct: (a)

participating in numerous pretrial proceedings during the more

than eleven months before moving to compel arbitration; (b)

filing a motion to dismiss the complaint for failure to state a

claim and a motion to disqualify plaintiffs’ counsel; (c) taking

the deposition of each of the named plaintiffs, depositions that

would not have been available in arbitration; (d) taking a

deposition which prompted plaintiffs to file a motion to protect

their right to depose that deponent in the future; (e) submitting

inadequate responses to plaintiffs’ discovery requests, which

prompted the plaintiffs to file two motions to compel, which the

32

In Hoxworth, we observed that “prejudice is the

touchstone for determining whether the right to arbitrate has

been waived” by litigation conduct. 980 F.2d at 925. After

surveying the case law of our court and other circuits, we

compiled a nonexclusive list of factors relevant to the prejudice

inquiry: “[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 its 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.”

Id. at 926-27 (internal citations omitted).15 Under the Hoxworth
defendants opposed; (f) filing of a motion to stay discovery; (g)

consenting to the district court’s first pretrial order; and (h)

filing of a lengthy memorandum in opposition to plaintiffs’

motion for class certification. Id. at 925-26. “Only . . . after

defendants’ motion to dismiss the complaint was denied and

plaintiffs’ motion to compel discovery was granted, did [one of

the defendants] file its motion to compel arbitration.” Id. at 926.

33

test, “[w]aiver will normally be found only ‘where the demand

for arbitration came long after the suit commenced and when

both parties had engaged in extensive discovery.’” Faragalli,

61 F.3d at 1068-69 (quoting Gavlik., 526 F.2d at 783).

Although waiver “is not to be lightly inferred,” Great Western,

110 F.3d at 233 (citing Faragalli, 61 F.3d at 1068), we will “not

hesitate[] to hold that the right to arbitrate has been waived”

where a sufficient showing of prejudice has been made by the

party seeking to avoid arbitration. Hoxworth, 980 F.2d at 926.

 Each of the Hoxworth factors strongly weigh in favor of

a finding of waiver in this case. Although delay alone does not

constitute sufficient prejudice to support waiver, we first

observe that GSI’s delay of nearly four years before invoking its

right to arbitrate far exceeds the eleven month time lapse at issue

in Hoxworth, and dwarfs the delay involved in cases where we

have found no waiver. See Palcko, 372 F.3d at 598 (38 days);

Wood, 207 F.3d at 680 (1 1⁄2 months); Faragalli, 61 F.3d at 1069

(two months); Gavlik, 526 F.2d at 783-84 (defendant moved for

stay pending arbitration “immediately” after removing the action

to federal court); accord Restoration Pres. Masonry, Inc. v.

Grove Europe Ltd., 325 F.3d 54, 61 (1st Cir. 2003) (while

“[t]here are no per se rules as to the length of delay necessary to
34

amount to waiver, . . . . the four years’ delay . . . , encompassing

a period of active . . . litigation, greatly exceeds that found

acceptable in this circuit”). 

During the intervening four-year period, the parties

engaged in extensive discovery, with both sides exchanging

several sets of interrogatories, requests for production of

documents, and expert witness reports, as well as participating

in the depositions of numerous witnesses. After the parties

were unable to resolve the case in mediation, GSI filed a motion

for summary judgment, requiring Ehleiter to defend his claims

on the merits and inviting final resolution of the case in a

judicial forum. GSI engaged in substantial non-merits motion

practice as well, including filing a motion to implead a third

party defendant. 

GSI scrupulously assented to the trial court’s procedural

orders. At the court’s request, GSI and Ehleiter submitted a

joint stipulation certifying their readiness for trial by a certain

date. When the court later scheduled the case for trial, GSI

promptly sought a continuance and proposed new trial dates, yet

again reaffirming its amenability to judicial resolution of the

parties’ dispute. 

 Courts have not hesitated to find waiver under similar

(and arguably less egregious) circumstances. See, e.g.,

Restoration Pres., 325 F.3d at 61-62 (waiver where, over fouryear period, parties were involved in numerous depositions and

pretrial conferences and trial was less than two months away);

Com-Tech Assocs. v. Computer Assocs. Int’l , Inc., 938 F.2d

1574, 1576-78 (2d Cir. 1991) (waiver where defendant actively
35

participated in discovery and filed dispositive motions over

course of eighteen months and trial was only three months

away); S&H Contractors, Inc. v. A.J. Taft Coal Co., Inc., 906

F.2d 1507, 1514 (11th Cir. 1990) (waiver where defendant

delayed eight months, engaging in merits and non-merits motion

practice and taking several depositions in the interim).

GSI insists that the circumstances of this case do not

compel a finding of waiver under Hoxworth because Ehleiter

has failed to demonstrate that his legal position has been

actually prejudiced by GSI’s delay in invoking its arbitration

rights. GSI notes that, in contrast to Hoxworth, where the

defendants had taken “the deposition of each of the named

plaintiffs, depositions that would not have been available in

arbitration” and “inadequately answered plaintiffs’ discovery

requests, prompting plaintiffs to file two motions to compel,”

Hoxworth, 980 F.2d at 925, Ehleiter has not suggested that GSI

took advantage of discovery procedures only available in the

trial court while thwarting his own efforts to obtain discoverable

information. In further contrast to Hoxworth, GSI stresses that

it did not wait for a ruling on the merits of Ehleiter’s claims

before seeking arbitration, but instead specifically asked the

Superior Court to resolve its motion to stay before addressing its

pending summary judgment motion. 

In Hoxworth, we observed the plaintiffs in that case had

“characterized the prejudice they suffered from defendants’

failure to raise arbitration promptly as twofold: plaintiffs

devoted substantial amounts of time, effort, and money in

prosecuting the action, while defendants were able to use the

Federal Rules to conduct discovery not available in the
 16Ehleiter’s attorney submitted an affidavit in the Superior

Court stating that “over $40,000 has been expended by the

plaintiff in the prosecution of this case.” JA at 244. Although

GSI challenges counsel’s statement as “uncorroborated,” in

view of the extensive discovery and motion practice engaged in

by the parties, there is no question that Ehleiter spent substantial

amounts of time, effort, and money, whatever the precise

amount, litigating this action before GSI filed its motion to stay.

See Restoration Preserv., 325 F.3d at 61 (noting that

36

arbitration forum.” Id. at 926. While our waiver determination

in Hoxworth was supported by evidence of both substantive

prejudice and prejudice resulting from the unnecessary delay

and expense incurred by the plaintiffs as a result of the

defendants’ belated invocation of their right to arbitrate, we did

not suggest that a party claiming waiver must demonstrate the

presence of both types of prejudice to prevail. To the contrary,

we recognized that “‘where a party fails to demand arbitration

during pretrial proceedings, and, in the meantime, engages in

pretrial activity inconsistent with an intent to arbitrate, the party

later opposing . . . arbitration may more easily show that its

position has been compromised, i.e., prejudiced,’” id. (quoting

Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1161

(5th Cir. 1986)), because under these circumstances we can

readily infer that the party claiming waiver has already invested

considerable time and expense in litigating the case in court, and

would be required to duplicate its efforts, to at least some

degree, if the case were now to proceed in the arbitral forum.

Prejudice of this sort is not mitigated by the absence of

substantive prejudice to the legal position of the party claiming

waiver.16 
“[p]rejudice to the plaintiffs is easily inferred from the necessary

expenditures” over a four-year period of active litigation). 

37

 GSI also contends that Ehleiter was not prejudiced by

the extensive discovery that took place prior to the filing of

GSI’s motion to stay because much of the same discovery was

conducted in a District Court case brought by Ehleiter against

other defendants who did not have an agreement to arbitrate

with Ehleiter. In support of this assertion, GSI simply points us

to a docket sheet from that District Court action. Although the

docket sheet reveals that Ehleiter and the defendants in the

District Court action engaged in various forms of discovery, it

is impossible for us to discern from this document the extent to

which the discovery in that case overlapped with the discovery

in the Superior Court action. Without further substantiation,

GSI’s argument does not undercut a finding of prejudice in this

case. 

Even were we to assume that some of the same discovery

would have taken place in the District Court litigation had GSI

promptly invoked its right to arbitration in the Superior Court

action, a finding of prejudice would still be warranted on the

record before us. The fact remains that GSI put Ehleiter to the

expense of having to engage in at least “some case-specific

written and deposition discovery” in the Superior Court action,

as GSI itself concedes, JA at 311, and all the other Hoxworth

factors strongly support a finding of prejudice here.

In short, Hoxworth compels a finding of waiver under

these circumstances. See Hoxworth, 980 F.2d at 925-27; see

also Doctor’s Assocs., Inc. v. Distajo, 107 F.3d 126, 131 (2d
 17We have considered all of GSI’s remaining arguments and

conclude that no further discussion is necessary.

38

Cir. 1997) (“The ‘prejudice’ that supports a finding of waiver

can be ‘substantive’ prejudice to the legal position of the party

opposing arbitration, such as when the party seeking arbitration

loses a motion on the merits and then attempts, in effect, to

relitigate the issue by invoking arbitration, or obtains

information through discovery procedures not available in

arbitration. Additionally, . . . a party may be prejudiced by the

unnecessary delay or expense that results when an opponent

delays invocation of its contractual right to arbitrate.”) (internal

citations omitted) (emphasis added).17

V.

For the foregoing reasons, we will affirm the judgment

of the Appellate Division.