Opinion ID: 3001335
Heading Depth: 2
Heading Rank: 1

Heading: Stay of Proceedings Pending Arbitration

Text: Halim’s first argument on appeal is that the district court improperly treated Gatsby’s motion to dismiss as a motion to stay. Gatsby sought to dismiss Halim’s complaint on the basis of a binding arbitration clause in the auction agreement. The district court, finding that Gatsby had properly invoked the arbitration clause, stayed the case pending arbitration. Halim’s argument is without merit. As this Court has noted on numerous occasions, “the proper course of action when a party seeks to invoke an arbitration clause is to stay the proceedings rather than to dismiss outright.” E.g., Cont’l Cas. Co. v. Am. Nat’l Ins. Co., 417 F.3d 727, 732 n.7 (7th Cir. 2005) (citing Tice v. Am. Airlines, Inc., 288 F.3d 313, 318 (7th Cir. 2002)). It is undisputed that one of the grounds on which Gatsby sought to dismiss Halim’s complaint was the arbitration clause. By seeking dismissal of the complaint based on a binding arbitration clause in the auction agreement, Gatsby successfully invoked the arbitration clause and the court properly stayed the proceedings. In his challenge to the district court’s stay of the case, Halim also asserts that the district judge erred in find- ing that Gatsby had not waived its right to arbitrate 6 No. 07-1615 the dispute. Halim contends that Gatsby’s decisions to remove the case to federal court first and then to seek dismissal of the case “on the merits” constituted an implicit waiver of Gatsby’s right to arbitrate. Factual determinations on which a district court predicates a finding of waiver are reviewed for clear error, while legal questions of whether a party’s conduct amounts to waiver are reviewed de novo. Ernst & Young LLP v. Baker O’Neal Holdings, Inc., 304 F.3d 753, 756 (7th Cir. 2002). A party may waive a contractual right to arbitrate expressly or implicitly. Sharif v. Wellness Int’l Network, Ltd., 376 F.3d 720, 726 (7th Cir. 2004). Courts must “determine whether based on all the circumstances, the party against whom the waiver is to be enforced has acted inconsistently with the right to arbitrate.” Id. (quoting Ernst & Young, 304 F.3d at 757). Although a variety of factors may be considered, diligence or a lack thereof should weigh heavily in the court’s determination of whether a party implicitly waived its right to arbitrate. Id. A party does not waive its right to arbitrate a dispute by filing a motion to dismiss or a motion to transfer venue. Id. at 726-27. Halim relies on Cabintree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388 (7th Cir. 1995), for his position that Gatsby waived its right to arbitrate by removing the case to federal court and then filing a motion to dismiss, thereby asking the district court to “rule on the merits of the case.” In Cabintree, the plaintiffs filed suit in state court and the defendant removed the case to federal court based on diversity of citizenship. 50 F.3d at 389. After participating in pretrial activities for six months, including receiving over two thousand documents in discovery, the defendant moved to stay the action pending arbitration just five months before trial. Id. at 390-91. Based on the Cabintree defendant’s combined No. 07-1615 7 actions, this Court held that the defendant had implicitly waived its right to arbitrate the dispute. See id.; see also Sharif, 376 F.3d at 727 (noting the failure by the Cabintree defendant to make a reasonable determination to proceed in arbitration rather than in litigation); Ernst & Young, 304 F.3d at 757 (explaining how the Cabintree defendant’s participation in adversary proceedings in litigation was a manifestation of intent to forego arbitration). This Court has explicitly held that simply moving to dismiss a case does not waive one’s right to arbitrate. E.g., Sharif, 376 F.3d at 726-27 (holding that a motion to dismiss or transfer venue does not constitute waiver of one’s right to arbitrate). Moreover, although this Court has considered removal in determining whether there was implicit waiver of an arbitration clause, it has not found waiver where removal was the only action taken by the party against whom the waiver was to be enforced. See, e.g., Cabintree, 50 F.3d at 390-91 (finding removal and participation in several months of litigation to be inconsistent with intent to arbitrate); Grumhaus v. Comerica Sec., Inc., 223 F.3d 648, 651 (7th Cir. 2000) (finding filing of complaint in state court, and then waiting more than a year to demand arbitration after state court dismissal to be inconsistent with intent to arbitrate). Here, Gatsby removed the case to federal court ap- proximately six weeks after Halim filed the complaint. Within thirty days of removal and before any other pleadings were filed in the case, Gatsby sought to dismiss the case by invoking the arbitration clause. By doing so, Gatsby asserted its intent to resolve the dispute in arbitration and not litigation. Gatsby did not participate in any pretrial activities prior to invoking the arbitration clause, nor did Gatsby unreasonably delay its arbitration demand. Absent any other action, removal alone did 8 No. 07-1615 not amount to implicit waiver of its right to arbitrate. We find that the district court properly found that Gatsby did not waive its right to arbitrate and therefore properly stayed the case pending arbitration.