United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 08-3448

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Southeastern Stud & Components,

Inc., 

Appellee,

v.

American Eagle Design Build

Studios, LLC,

Appellant,

American Eagle Communities,

LLC; Salvatore R. Carabetta; CEI

Investment Corporation; Little

Rock Family Housing, LLC; Shaw

Infrastructure, Inc., 

Defendants.

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Appeal from the United States

District Court for the

Eastern District of Arkansas.

 [PUBLISHED] 

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Submitted: June 11, 2009

 Filed: December 7, 2009

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Before BYE, HANSEN, and BENTON, Circuit Judges. 

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HANSEN, Circuit Judge.
1

The Honorable William R. Wilson, Jr., United States District Judge for the

Eastern District of Arkansas.

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American Eagle Design Build Studios, LLC (AEDBS) and Southeastern Stud

& Components, Inc. (SES) entered into a Subcontract Work Agreement (Subcontract),

which contained an arbitration clause. After a dispute arose, SES filed a lawsuit

against AEDBS. Over a year after SES first filed its complaint, AEDBS filed a

motion to compel arbitration. The district court1

 denied AEDBS's motion to compel

arbitration, and AEDBS now appeals. For the following reasons, we affirm.

I.

AEDBS was the prime contractor constructing housing on an Air Force base

in Little Rock, Arkansas. On August 23, 2006, SES and AEDBS entered into the

Subcontract, which stated that SES was to provide labor and materials to the housing

project. The Subcontract contained an arbitration clause that said, "[a]ny dispute

between [SES] and [AEDBS] arising out of this Agreement or breach thereof, . . .

may, at the option of [AEDBS], be submitted to arbitration." (J.A. at 486-87.)

A dispute arose involving payment for work performed under the Subcontract.

On June 26, 2007, SES filed suit against AEDBS and several other parties. AEDBS

did not move to compel arbitration at that time but, over the course of the following

year, answered SES's complaint, filed responses and objections to SES's request for

production of documents and filed a motion for judgment on the pleadings without

raising the issue of arbitration. AEDBS claims that during this period it did not

believe it could enforce the arbitration agreement under Arkansas law. On July 15,

2008, SES filed a second amended complaint. At that point, following an unpublished

decision by the United States District Court for the Eastern District of Arkansas,

AEDBS asserts that it believed it could enforce the arbitration agreement. In its July

29, 2008, answer to AEDBS's second amended complaint, AEDBS raised arbitration
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as an affirmative defense, and on September 3, 2008, AEDBS filed a motion to

compel arbitration. Before the district court, SES argued that the arbitration clause

was unenforceable because: (1) there was no mutuality of obligation as the decision

to enforce the arbitration clause was left entirely to AEDBS; (2) AEDBS had waived

its right to arbitration by participating in the litigation; and (3) SES would be

prejudiced by the arbitration.

The district court denied AEDBS's motion to compel arbitration, finding that

while the arbitration clause was enforceable despite its lack of mutuality, AEDBS had

waived its right to arbitration and SES would be prejudiced by the arbitration.

AEDBS appeals, arguing that it did not waive its right to arbitrate the agreement by

participating in the litigation.

II.

In reviewing the district court's determination that AEDBS waived its right to

arbitrate the agreement, "[w]e review de novo the legal determination of waiver but

examine the factual findings underlying that ruling for clear error." Lewallen v. Green

Tree Servicing, L.L.C., 487 F.3d 1085, 1090 (8th Cir. 2007).

We note that there is a "'strong federal policy in favor of arbitration,'" such that

"'any doubts concerning waiver of arbitrability should be resolved in favor of

arbitration.'" Id. (quoting Dumont v. Saskatchewan Gov't Ins., 258 F.3d 880, 886 (8th

Cir. 2001)). However, "[a] party may be found to have waived its right to arbitration

if it: '(1) knew of an existing right to arbitration; (2) acted inconsistently with that

right; and (3) prejudiced the other party by these inconsistent acts.'" Id. (quoting

Ritzel Commc'ns v. Mid-Am. Cellular Tel. Co., 989 F.2d 966, 969 (8th Cir. 1993)).

AEDBS asserts that, at the time SES filed its complaint against AEDBS, it did

not believe that it had the right to arbitrate. According to AEDBS, before March
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2008, Arkansas law required mutuality of obligation within the contract's arbitration

agreement, even if there was sufficient mutuality within the rest of the contract. See

Showmethemoney Check Cashers, Inc. v. Williams, 27 S.W.3d 361, 367 (Ark. 2000)

("Given the lack of mutuality to support the arbitration agreement, we hold the

arbitration clause contained in the [contract] does not constitute a valid enforceable

agreement to arbitrate . . . ."). AEDBS claims that it did not know it had the right to

arbitrate until it discovered the March 2008 unpublished opinion, Enderlin v. XM

Satellite Radio Holdings, Inc., No. 4:06-CV-0032, 2008 WL 830262 (E.D. Ark. Mar.

25, 2008) (unpublished). In Enderlin, the United States District Court for the Eastern

District of Arkansas stated that "Arkansas law requiring mutuality within the

arbitration paragraph itself is preempted by the [Federal Arbitration Act] because it

places the arbitration clause on unequal footing with other contract terms that do not

each have to be mutual." Enderlin, 2008 WL 830262, at *10. Before this, according

to AEDBS, it believed the arbitration agreement was invalid because there was no

mutuality of obligation. See Appellant's Br. at 18 ("[I]n the face of such adverse case

authority, AEDBS did not believe (i.e. 'know') that it had a valid and enforceable right

to arbitrate its dispute with SES despite the existence of the arbitration clause within

its Subcontract with SES.").

However, as early as 1984 the Supreme Court held that the Federal Arbitration

Act (FAA) "preempts a state law that withdraws the power to enforce arbitration

agreements." Southland Corp. v. Keating, 465 U.S. 1, 16 n.10 (1984). Over a decade

later, the Court again explained that "[c]ourts may not . . . invalidate arbitration

agreements under state laws applicable only to arbitration provisions. . . . Congress

precluded States from singling out arbitration provisions for suspect status, requiring

instead that such provisions be placed 'upon the same footing as other contracts.'"

Doctor's Assocs. v. Casarotto, 517 U.S. 681, 687 (1996) (quoting Scherk v. AlbertoCulver Co., 417 U.S. 506, 511 (1974)) (internal citations omitted). Thus, pursuant to

Supreme Court precedent, it should have been clear to AEDBS that the arbitration

agreement was at least arguably enforceable because Arkansas could not have
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imposed additional requirements that applied only to arbitration agreements.

Moreover, in 2003, five years before Enderlin, the United States District Court for the

Western District of Arkansas stated that, "mutuality of obligation is not required for

arbitration clauses so long as the contract as a whole is supported by consideration."

Scherrey v. A.G. Edwards & Sons, Inc., No. 02-2286, 2003 U.S. Dist. LEXIS 11010,

at *10 (W.D. Ark. Apr. 15, 2003) (unpublished). Thus, in spite of AEDBS's

assertions, Enderlin did not make new law; it merely correctly applied existing law.

In fact, Enderlin could not have changed anything as one district court is not bound

by the holdings of others, even those within the same district. See, e.g., Gasperini v.

Ctr. for Humanities, 518 U.S. 415, 430 n.10 (1996) ("If there is a federal district court

standard, it must come from the Court of Appeals, not from the over 40 district court

judges in the Southern District of New York, each of whom sits alone and renders

decisions not binding on the others."); Jones v. Unum Life Ins. Co. of Am., 486 F.

Supp. 2d 864, 867 (E.D. Ark. 2007) ("'[D]istrict court decisions are not treated as

binding precedents in other cases. District court rulings have influence only to the

extent that jurists in other cases find them convincing.'" (quoting IBM Credit Corp.

v. United Home for Aged Hebrews, 848 F. Supp. 495 (S.D.N.Y. 1994))). As the

district court correctly noted, "AEDBS was free at any time to make the same

argument as the Defendant in Enderlin, but AEDBS did not." Southeastern Stud &

Components, Inc. v. Am. Eagle Design Build Studios, No. 4:07CV00593, 2008 WL

4531706, at *2 (E.D. Ark. Oct. 9, 2008) (unpublished). Further, AEDBS drafted the

Subcontract containing the arbitration agreement. Cf. Ritzel Commc'ns, 989 F.2d at

969 ("The Goodwin group drafted the Stock Purchase agreement that contains the

arbitration provisions, and thus knew of the existing right of arbitration."). 

AEDBS points to Ackerberg v. Johnson, 892 F.2d 1328 (8th Cir. 1989), in

support of its argument that it did not knowingly waive its right to arbitrate because

the "delay in filing a motion to compel arbitration was based on unfavorable or

uncertain law." (Appellant's Br. at 22.) In Ackerberg, the defendants failed to file a

motion to compel arbitration on a claim related to the Securities Act of 1933, 15
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U.S.C. §§ 77a to 77aa, in spite of an arbitration agreement. Ackerberg, 892 F.2d at

1332. At the time the complaint was filed, the issue was controlled by Wilko v. Swan,

346 U.S. 427 (1953), which prohibited arbitration of claims made under the 1933 Act.

However, after the complaint was filed, the Supreme Court reversed Wilko in

Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484 (1989).

After Rodriguez de Quijas, the defendants moved to compel arbitration on the 1933

Act claims, but the district court held that the defendants waived their right to

arbitration by acting inconsistently with their right to arbitration by participating in

the litigation process. Ackerberg, 892 F.2d at 1331. We disagreed, explaining that

before Rodriguez de Quijas, the defendants correctly relied on Wilko for the

proposition that their 1933 Act claims were not arbitrable, and a motion to compel

arbitration on those claims would have been futile. Id. at 1332. Because the

defendants moved to compel arbitration "as soon as the law appeared to allow an

arbitration procedure" and because any motion to compel arbitration prior to that

would have been futile, we held that the defendants did not waive their right to

arbitrate the 1933 Act claims. Id. at 1333.

AEDBS argues that, like the defendants in Ackerberg, it did not waive its right

to arbitrate because it asserted its right to arbitrate "the very day it learned of

Enderlin's precedential support for the enforcement of its Arbitration Agreement with

SES" (Appellant's Br. at 23), and because any motion to compel arbitration prior to

Enderlin would have been futile. However, as discussed above, even prior to Enderlin

the law was clear that Arkansas could not have imposed additional requirements that

applied only to arbitration agreements. Thus, Enderlin did not decide new law or

reverse previous case law as Rodriguez de Quijas did. Instead, as explained above,

it merely correctly applied existing law. Contrary to what AEDBS claims, a motion

to compel arbitration prior to Enderlin would not have been futile ab initio. Thus,

AEDBS's reliance on Ackerberg is misplaced. Accordingly, AEDBS knew of its

contractual right to arbitration when SES filed the lawsuit in June 2007. 
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Second, AEDBS acted inconsistently with its existing right to arbitrate. "A

party acts inconsistently with its right to arbitrate if the party '[s]ubstantially invoke[s]

the litigation machinery before asserting its arbitration right.'" Lewallen, 487 F.3d at

1090 (quoting Ritzel Commc'ns, 989 F.2d at 969) (alteration in original). "A party

substantially invokes the litigation machinery when, for example, it files a lawsuit on

arbitrable claims, engages in extensive discovery, or fails to move to compel

arbitration and stay litigation in a timely manner." Id. While we have not previously

clarified explicitly what constitutes a "timely manner" for the purposes of determining

whether a party substantially invoked the litigation machinery, in Lewallen we stated

that an eleven-month delay was "inconsistent with" a party asserting its "right to

arbitrate." Id. at 1092. Here, SES filed its suit on June 26, 2007, and AEDBS did not

assert its right to arbitrate until July 29, 2008, a delay of thirteen months. While

AEDBS claims that it did not believe it had the right to arbitrate until Enderlin, we

have explained that "[t]o safeguard its right to arbitration, a party must 'do all it could

reasonably have been expected to do to make the earliest feasible determination of

whether to proceed judicially or by arbitration.'" Id. at 1091 (quoting Cabinetree of

Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 391 (7th Cir. 1995)). At the time

SES filed its complaint against AEDBS, federal law—including that decided by the

Supreme Court—had established that arbitration agreements did not require additional

mutuality beyond what was required for the contract as a whole. If AEDBS had done

all it could reasonably have been expected to do in making the earliest feasible

determination of whether to proceed judicially or by arbitration, see id., it would have

discovered that the Supreme Court's previous rulings permitted arbitration agreements

even when they did not contain additional mutuality of obligation. Upon discovering

this, it would have determined that the arbitration agreement in the Subcontract was

valid and enforceable. By failing to do all it could reasonably have been expected to

do, AEDBS failed to safeguard its right to arbitration. Accordingly, AEDBS

substantially invoked the litigation machinery by moving for judgment in its favor and

by failing to move to compel arbitration and stay litigation in a timely manner, and,
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by not asserting its right to arbitrate for thirteen months, AEDBS acted inconsistently

with its right to arbitrate. See id. at 1090-92.

Third, SES was prejudiced by AEDBS's acts that were inconsistent with

exercising its right to arbitration. "A party is so prejudiced when the 'parties use

discovery not available in arbitration, when they litigate substantial issues on the

merits, or when compelling arbitration would require a duplication of efforts.'" Id. at

1093 (quoting Kelly v. Golden, 352 F.3d 344, 349 (8th Cir. 2003)). Here, SES

incurred expense and experienced a substantial delay from the litigation with AEDBS,

as SES had to respond to AEDBS's responses and objections to SES's request for

production of documents and to AEDBS's motion for judgment on the pleadings, in

which AEDBS repeatedly failed to raise the issue of arbitration. While AEDBS was

not the only party engaged in the litigation against SES, and because AEDBS failed

to raise the issue of arbitration earlier, SES was forced to continue the expense of

litigation against AEDBS. Thus, SES suffered prejudice from AEDBS's actions. See

Kelly, 352 F.3d at 350 ("Golden was prejudiced by Kelly's delay in seeking

arbitration. He incurred expense and experienced substantial delay as a result of the

extensive litigation and would be required to extensively duplicate his efforts if he

were now required to participate in arbitration.").

Because AEDBS had knowledge of its existing right to arbitrate but acted

inconsistently with that right and prejudiced SES by those actions, AEDBS waived

its right to arbitration. See Lewallen, 487 F.3d at 1090.

III.

Accordingly, the judgment of the district court is affirmed.

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