REVISED April 22, 2009

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 08-20140

GERALDINE NICHOLAS, Individually and as Administratrix of the Estate

of James Nicholas

Plaintiff-Appellant

v.

KBR INC; M W KELLOGG CO; BROWN & ROOT; HALLIBURTON

Defendants-Appellees

Appeal from the United States District Court 

for the Southern District of Texas

Before HIGGINBOTHAM, ELROD, and HAYNES, Circuit Judges.

HAYNES, Circuit Judge:

Geraldine Nicholas appeals the district court’s denial of her motion to

compel arbitration of her contract dispute with KBR, Inc., the successor

corporation of her deceased husband’s former employer, M.W. Kellogg Co.

Nicholas contends that the district court improperly ruled that she waived her

right to arbitrate her dispute with KBR. For the reasons set forth below, we

conclude that the district court did not err when it found that Nicholas

substantially invoked the judicial process to the prejudice of KBR.

Consequently, we affirm the district court’s judgment.

United States Court of Appeals

Fifth Circuit

F I L E D

April 15, 2009

Charles R. Fulbruge III

Clerk
No. 08-20140

2

I. FACTS

James Nicholas was an employee of Kellogg when he developed

mesothelioma, a fatal form of lung cancer associated with asbestos exposure. On

December 24, 1998, Kellogg executed a written severance agreement with Mr.

Nicholas (the “Agreement”). Under the Agreement, Kellogg agreed to continue

Mr. Nicholas’s “company-provided” benefits and Mr. Nicholas agreed to release

Kellogg from liability for any claims he had against it. The Agreement also

contained an arbitration clause.

Mr. Nicholas took a medical leave of absence from his job in late 1998 and

continued to receive health insurance benefits at active employee rates. He died

in December 2006.

Mr. Nicholas’s wife, Geraldine Nicholas, filed this lawsuit in Texas state

court on January 17, 2007, alleging that KBR breached the Agreement with her

husband by failing to pay his life insurance benefits. Although Nicholas did not

attach the Agreement to her original petition, she described in her petition a

severance agreement executed by Kellogg and her husband in “December of

1998.” She also alleged that the agreement she described contained Kellogg’s

guarantees of additional“benefits,”“salary,” and “payments,” and Mr. Nicholas’s

release of Kellogg from any potential liability. Nicholas’s petition, however,

neither mentioned the Agreement’s arbitration clause nor gave any other

indication that she wanted to arbitrate her claims.

KBR removed the case to federal court on February 23, 2007. Thereafter,

Nicholas filed a motion to remand, or, in the alternative,to amend the pleadings.

On April 18, 2007, the district court denied Nicholas’s motion to remand, but

granted her motion for leave to amend. In denying the motion to remand, the

district courtfound that section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B)

(2006), completely preempted Nicholas’s state law claims because they sought
No. 08-20140

1

“Q: What caused you to believe that [your husband had signed an arbitration

agreement] in that time frame? A: I found a document in his file. Q: And what document was

that? A: It was a letter agreement he signed dated December of ‘98.’”

2

“Q: So when you found the original [ofthe Agreement] in this spring 2007 time frame,

are you saying that you may have seen that document or at least a copy of that document

before? A. Yes. Q: Do you know when you first saw the document or a copy of it? A: No, I

couldn’t tell you when.”

3

to recover benefits allegedly due her deceased husband under KBR’s benefits

plan. See Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 66 (1987).

Nicholas filed her first amended complaint on May 2, 2007. The amended

complaint reiterated Nicholas’s allegations concerning KBR’s breach of the

Agreement. As she did in her original petition, Nicholas did not mention the

Agreement’s arbitration clause or otherwise indicate that she wanted to

arbitrate her claims.

On June 19, 2007, the parties filed their Joint Discovery/Case

Management Plan. Shortly thereafter, the district court issued a scheduling

order. The order set a discovery cutoff of February 1, 2008, a pretrial motions

deadline of February 22, 2008, and a docket call for April 25, 2008.

Shortly after the district court issued its scheduling order, KBR served

written discovery on Nicholas. Nicholas responded to that discovery without

raising arbitration or otherwise objecting. Nicholas also sat without objection

for her deposition.

In her deposition, portions of which were included as an attachment to

KBR’s response to the motion to compel, Nicholas admitted that a copy of the

Agreement was in her possession in her late husband’s files.1 She also admitted

that she may have seen a copy of that document prior to finding the original in

his files in the spring of 2007.2 She further admitted to having a discussion in

January of 2007 with someone at KBR regarding whether her husband signed

an agreement to arbitrate.
No. 08-20140

4

On November 20, 2007 – more than ten months after Nicholas sued KBR

inTexas state court – Nicholas filed the underlying motion to compel arbitration.

In the motion, Nicholas did not address the potential waiver of her right to

arbitrate.

On December 4, 2007, Nicholas noticed the deposition of a third-party

witness, Jim Wilhite, and proceeded to take his deposition on December 18,

2007.

On January 4, 2008, KBR filed a response to Nicholas’s motion to compel

arbitration and argued that Nicholas waived her right to arbitration by

substantially invoking the judicial process to the prejudice of KBR. In the

motion, KBR specifically argued that Nicholas was aware of the Agreement’s

arbitration clause when she filed her original petition in Texas state court in

January 2007. Nicholas did not respond to KBR’s argument that she waived

arbitration. Indeed, she filed no reply or evidence of any kind.

The district court denied Nicholas’s motion to compel arbitration. The

court found that Nicholas’s decision to file suit indicated a “disinclination” to

arbitrate her claims, and that her failure to assert her right to arbitration for

over ten months prejudiced KBR. Nicholas appeals that decision, arguing that

the district court improperly ruled that she substantially invoked the judicial

process to the prejudice of KBR.

II. DISCUSSION

We have jurisdiction of this appeal even though the district court’s denial

of Nicholas’s motion to compel arbitration is an interlocutory ruling. See Green

Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 86 (2000); 9 U.S.C. § 16(a)(1)(C).

We review the legal question of whether Nicholas’s conduct amounts to a waiver

of arbitration de novo; however, we review the factual findings underlying the

district court’s waiver determination only for clear error. Subway Equip.

Leasing Corp. v. Forte, 169 F.3d 324, 326 (5th Cir. 1999). The district court’s
No. 08-20140

5

factual findings are clearly erroneous only if, after reviewing the record, we are

firmly convinced that a mistake has been made. Baldwin v. Stalder, 137 F.3d

836, 839 (5th Cir. 1998).

The right to arbitrate a dispute, like all contract rights, is subject to

waiver. Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494, 497 (5th

Cir. 1986). Although waiver of arbitration is a disfavored finding, “[w]aiver will

be found when the party seeking arbitration substantially invokes the judicial

process to the detriment or prejudice of the other party.” Id. at 496-97. A party

generally invokes the judicial process by initially pursuing litigation of claims

then reversing course and attempting to arbitrate those claims. See Gulf Guar.

Life Ins. Co. v. Conn. Gen. Life Ins. Co., 304 F.3d 476, 484 (5th Cir. 2002). But

“waiver can also result from some overt act in Court that evinces a desire to

resolve the arbitrable dispute through litigation rather than arbitration.” Id.

(internal quotations omitted). One of the primary goals of arbitration is to avoid

the expense of litigation. Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156,

1158 (5th Cir. 1986). In reviewing the question of whether the district court

properly found waiver, then, we must look at two questions: (1) did Nicholas

substantially invoke the judicial process, and if, so (2) was KBR prejudiced

thereby?

A. Invocation of the Judicial Process

In the vast majority of cases involving the question of waiver, it is the

party being sued that belatedly seeks arbitration. Here, in contrast, it is the

plaintiff, who, despite filing suit and pursuing her claims in court for more than

ten months, now seeks to compel arbitration. The district court concluded that

Nicholas substantially invoked the judicial process by filing suit and pursuing

her claims for over ten months before invoking her right to arbitrate. We agree.

Although this circuit has not expressly drawn a distinction between the

waiver analysis when applied to a plaintiff and that applied to a defendant, we
No. 08-20140

3 Nicholas argues that a plaintiff who files suit without mentioning an arbitration

clause is the same as a defendant who files a counterclaim without mentioning an arbitration

clause. However, the two are not necessarily the same. A plaintiff chooses the judicial forum,

a defendant is then compelled to respond. Under Federal Rule of Civil Procedure 13(a)(1)(A),

a counterclaim is compulsory if it, among other things, “arises out of the transaction or

occurrence that is the subject matter of the opposing party’s claim.” A defendant, then, is

subject to the potential risk of losing his claim if he fails to assert it as a counterclaim in

response to a plaintiff’s lawsuit. Thus, the two situations are not analogous.

6

have recognized thatthe decision to file suittypically indicates a “disinclination”

to arbitrate. Joseph Chris Pers. Servs. Inc. v. Rossi, 249 Fed. Appx. 988, 991 (5th

Cir. 2007) (unpublished); see also Miller, 781 F.2d at 497 (concluding that a

party revealed a “disinclination to resort to arbitration” by, among other things,

filing suit in state court without mentioning its desire to arbitrate). We have

not, however, gone as far as the Seventh Circuit on this issue, and we do not do

so here, as we continue to require a showing of prejudice, even if there is a

substantial invocation of the process. See Cabinetree of Wis., Inc. v. Kraftmaid

Cabinetry, Inc., 50 F.3d 388, 390 (7th Cir. 1995) (holding that a party’s “election

to proceed before a nonarbitral tribunal for the resolution of a contractual

dispute is a presumptive waiver of the right to arbitrate.”).3

We conclude that the act of a plaintiff filing suit without asserting an

arbitration clause constitutes substantial invocation of the judicial process,

unless an exception applies. Indeed, short of directly saying so in open court,

it is difficult to see how a party could more clearly “evince[ ] a desire to resolve

[a] . . . dispute through litigation rather than arbitration,” Gulf Guar., 304 F.3d

at 484, than by filing a lawsuit going to the merits of an otherwise arbitrable

dispute. We emphasize that the legal standard for waiver is the same regardless

of which party is the party alleged to have waived arbitration. Differences

between the two sides arise from the voluntariness and timing of their actions,

not the legal standard. 
No. 08-20140

7

That is not to say there can be no exceptions. There are lawsuits that can

be filed that would not be inconsistent with seeking arbitration. For example,

a plaintiff might file suit solely to obtain a threshold declaration as to whether

a valid arbitration agreement existed. See Republic Ins. Co. v. Paico Receivables

LLC, 383 F.3d 341, 345 (5th Cir. 2004) (determining that party’s decision to file

suit to determine whether a valid arbitration clause existed did not indicate a

disinclination to arbitrate because filing suit for this purpose is not inconsistent

with the right to arbitrate). A plaintiff might also have to file suit to obtain

injunctive relief pending arbitration. See Joseph, 249 Fed. Appx. at 991

(refusing to conclude that filing suit in that case indicated a disinclination to

arbitrate because plaintiff filed suit solely to obtain injunctive relief pending

arbitration and both state law and the parties’ contract permitted filing suit for

this limited purpose). Other situations may arise justifying an exception; the

list here should not be seen as exhaustive. 

This case presents no situation that would constitute an exception.

Rather, as the district court concluded, Nicholas had no reason to file suit other

than to litigate the claims she now seeks to arbitrate. Under these

circumstances, we find that Nicholas’s decision to file suit on her otherwise

arbitrable claims constitutes substantial invocation of the judicial process as to

those claims. 

Other evidence supports the district court’s conclusion that Nicholas

engaged in substantial litigation activity before asserting her right to

arbitration. She filed a motion to remand following removal, arguing that

ERISA did not completely preempt her state law claims; the district court

disagreed and denied that motion. Nicholas’s belated decision to seek

arbitration is particularly troubling given that it came on the heels of this
No. 08-20140

4 Nicholas contends that she did not seek an affirmative ruling from the court because

she did not seek a motion for summary judgment. However, by filing a motion to remand

contending that ERISA did not control this case and then losing on that point, she litigated a

very significant legal question. There is no guarantee that an arbitration panel would follow

the district court’s ERISA ruling, and appellate review of an arbitrator’s award is severely

circumscribed. See Citigroup Global Mkts. Inc. v. Bacon, No. 07-20670, 2009 U.S. App. LEXIS

4543 (5th Cir. Mar. 5, 2009) (holding that manifest disregard of the law is no longer an

independent ground for vacating an arbitration award under the Federal Arbitration Act).

Thus, this determination by the district court – and Nicholas’s subsequent efforts to evade that

determination – is significant.

8

adverse ruling.4 See Cabinetree, 50 F.3d at 391 (expressing particular concern

with plaintiffs that want to test the waters in litigation before deciding whether

they would be better off in arbitration). Moreover, after the district court denied

the motion to remand, Nicholas filed an amended complaint, made initial

disclosures, engaged in a meet-and-confer, and responded to KBR’s discovery

requests. The motion to compel arbitration also arrived shortly after a counsel

change. 

Before this court, Nicholas now argues as an excuse for her substantial

invocation of the judicial process that neither she nor her lawyers had a copy of

the Agreement when she filed suit, and thus she claims that she sued KBR in

ignorance of her right to arbitrate. However, Nicholas failed to raise this point

in the district court. KBR specifically argued in its response to Nicholas’s motion

to compel arbitration that Nicholas was aware of the Agreement’s arbitration

clause when she filed her original petition in January 2007. Yet, Nicholas chose

not to file a reply and respond to that argument. Indeed, a review of the record

reveals that Nicholas nowhere sought to contravene KBR’s claim that she

waived arbitration in the court below. Thus, we need not address Nicholas’s

arguments concerning her lack of knowledge of an agreementto arbitrate or her

need to authenticate it for the first time on appeal. See, e.g., LeMaire v.

Louisiana, 480 F.3d 383, 387 (5th Cir. 2007) (“[A]rguments not raised before the

district court are waived and cannot be raised for the first time on appeal.”).
No. 08-20140

9

Even if we reached this question for the first time on appeal, the result

would not be different. Despite Nicholas’s claims in the brief, the evidence from

her deposition does not support her claim of ignorance. Indeed, it is a somewhat

curious argument to claim ignorance of an agreement upon which one sues. As

stated above, the deposition shows that she had the Agreement all along in her

husband’s files and may have seen a copy of it before the spring 2007 time frame

when she found the original. She admits discussing the issue of arbitration with

a KBR employee before she filed suit, which atleast put her on notice ofthe need

to inquire. 

Nicholas substantially invoked the judicial process. Accordingly, we agree

with the district court’s resolution of this prong.

B. Prejudice

In addition to invocation of the judicial process, the party opposing

arbitration must demonstrate prejudice before we will find a waiver of the right

to arbitrate. Prejudice in the context of arbitration waiver refers to delay,

expense, and damage to a party’s legal position. Subway Equip. Leasing Corp.

v. Forte, 169 F.3d 324, 327 (5th Cir. 1999) (citation omitted). What constitutes

a waiver of arbitration is a fact-dependent inquiry. Tenneco Resins, Inc. v. Davy

Int’l, AG, 770 F.2d 416, 420 (5th Cir. 1985).

While delay in asserting the right to arbitrate will not alone result in

waiver, Gulf, 304 F.3d at 484, such delay “does bear on the question of prejudice,

and may, along with other considerations, require a court to conclude that

waiver has occurred.” Republic, 383 F.3d at 346 (citation omitted). We have

recognized that, “‘where a party fails to demand arbitration . . ., and, in the

meantime engages in pretrial activity inconsistent with an intent to arbitrate,

the party later opposing a motion to compel arbitration may more easily show

that its position has been compromised, i.e., prejudiced.’” Id. at 347 (quoting

Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1161 (5th Cir. 1986)).
No. 08-20140

5 Though prompt in relation to the filing of the motion and response, the court’s ruling

came after the discovery cutoff date set in the pretrial order and just ten days before the

deadline for filing dispositive motions. At that point, trial docket call was only a couple of

months away.

10

Nicholas’s delay in asserting her right to arbitrate was substantial and

wholly unexplained in the district court. She judicially pursued her claims for

over ten months without mentioning the Agreement’s arbitration clause or her

desire for arbitration. In this relatively straightforward case, that delay

virtually guaranteed that the district court would not rule on Nicholas’s motion

to compel until the parties had completed discovery and KBR had begun

preparing its motion for summary judgment.5

Although KBR did not put on evidence in terms of dollars and cents of its

litigation costs in the district court, the record supports the district court’s

finding that KBR’s litigation activities were significant in the context of this

dispute: KBR removed the case to federal court based on ERISA preemption

principles; successfully opposed Nicholas’s motion to remand; answered

Nicholas’s complaints; propounded discovery requests; and deposed Nicholas.

After Nicholas filed her motion to compel arbitration but before the district court

ruled on it, KBR participated in Nicholas’s deposition of a third-party witness.

While these litigation activities in the context of a larger, more complex case

might be characterized as minimal, it was not unreasonable for the district court

to find that they carry particular significance given the limited scope and

relatively straightforward nature of Nicholas’s denial-of-benefits claims. Indeed,

by sitting on her rights for over ten months, Nicholas forced KBR to conduct the

bulk of activity necessary to defend against her claims. Short of actually trying

the case, it is unclear what additional litigation costs KBR could have incurred

in this dispute. These are precisely the expenses of litigation that arbitration is

designed to avoid. See Price, 791 F.2d at 1161-62. Also, as mentioned above,
No. 08-20140

6While Nicholasnotes that Rule 9 ofthe American Arbitration Association Employment

Arbitration Rules grants arbitrators authority to order discovery, including depositions, the

arbitrator’s exercise of that authority is completely discretionary. Thus, Nicholas could not

have obtained this deposition in arbitration as a matter of right. 

11

KBR would be prejudiced by having to re-litigate in the arbitration forum the

ERISA issue already decided by the district court in its favor.

Moreover, itis questionable whether Nicholas would have been permitted

to depose a third-party witness in arbitration.6 As we have recognized, “while

discovery relating to non-arbitrable claims is not prejudicial, where the pretrial

activity [is] related to all of the parties’ claims, including those that [are]

conceded to be arbitrable, [compelling] arbitration would result in prejudice.”

Republic, 383 F.3d at 346.

Given these facts, we cannot conclude that the district court clearly erred

in finding that Nicholas’s delay in seeking arbitration prejudiced KBR.

III. CONCLUSION

Because Nicholas substantially invoked the judicial process to the

prejudice of KBR, the district court’s waiver determination is AFFIRMED and

the case is REMANDED for further proceedings in accordance with this opinion.