Opinion ID: 1880976
Heading Depth: 3
Heading Rank: 2

Heading: Whether an Arbitration Clause Can Be Waived

Text: The first issue regarding waiver of arbitration is whether Modern Piping had an absolute right under Iowa Code section 679A.2 to arbitration and a stay of the pending judicial proceedings. The interpretation of section 679A.2 is a question of law, and we review the district court's interpretation for correction of errors of law. Iowa R.App. P. 4. Modern Piping contends that as long as the contract at issue contains an arbitration clause as provided in section 679A.1 and Blackhawk refused to arbitrate, the district court did not have any discretion under section 679A.2 to deny Modern Piping's motion for an order to stay proceedings and compel arbitration. We disagree. We have previously recognized that circumstances may exist under which a party may be deemed to have waived a contractual right to arbitration. Most recently, in Clinton National Bank v. Kirk Gross Co., 559 N.W.2d 282 (Iowa 1997), we considered whether the filing of a mechanic's lien constitutes waiver of the right to request arbitration under a contract provision. In Clinton National Bank, the parties entered into a contract for the remodeling of a bank. The contract included an arbitration clause covering all disputes between the parties. A dispute arose over the quality of carpet installed, and the bank refused to pay the remaining amount due on the contract. The contractor filed a mechanic's lien, and shortly thereafter the bank sued, claiming the contractor breached its warranty by installing substandard carpeting. The contractor filed a motion to dismiss the warranty suit on the ground that the arbitration agreement was mandatory and took priority over the suit. It also withdrew its mechanic's lien filing. In its resistance to the motion to dismiss, the bank argued the contractor had waived its right to arbitration by filing the mechanic's lien. The district court granted the contractor's motion to dismiss. Clinton Nat'l Bank, 559 N.W.2d at 283. In considering the waiver issue on appeal, we found that because arbitration is a favored method of settling civil disputes, evidence of an alleged waiver must be compelling, especially in view of the fact that section 679A.1, which identifies certain circumstances under which arbitration will not be recognized, does not even mention waiver. Id. at 284. After considering cases from other jurisdictions regarding the actions necessary to constitute waiver of arbitration, we concluded that the contractor's mere filing of a mechanic's lien did not constitute court action, and therefore did not establish waiver of the right to arbitration. Id. Despite our conclusion that the contractor's actions in this case did not rise to the level of a waiver, we implicitly recognized that waiver of an arbitration provision is possible even in light of the arguably mandatory language of section 679A.2. In Des Moines Asphalt & Paving Co. v. Colcon Industries Corp., 500 N.W.2d 70 (Iowa 1993), we considered the issue of timeliness in connection with a motion to compel arbitration. In that case, Colcon, a general contractor, was sued by Des Moines Asphalt, a subcontractor who had not been paid by Colcon because the owner of the property refused to make full payment for the work, alleging the paving had been completed improperly. Colcon filed a cross-claim against the property owner. The owner's answer contained an affirmative defense alleging the dispute was subject to an irrevocable arbitration clause in the parties' contract. Shortly thereafter, the owner filed a motion to stay the proceedings and compel arbitration. The district court denied the motion six weeks later on the ground it was untimely. Des Moines Asphalt, 500 N.W.2d at 71. After confirming the validity of the arbitration clause as required by section 679A.1, we found the district court had abused its discretion under section 679A.2 in denying the property owner's motion to compel arbitration. The length of the delay between the time the general contractor served the property owner with notice of the suit and the filing of the motion to compel arbitration was approximately two months. We concluded that, as a matter of law, the property owner acted in a timely fashion and had not waived its right to arbitration under the contract, at least as far as that right was controlled by section 679A.2. Id. at 73. Despite the focus on timeliness, our holding in Des Moines Asphalt clearly addresses the ultimate issue of waiver of arbitration rights. If we had concluded that the property owner had not filed its motion to compel in a timely fashion, its right to arbitration would have been waived. Therefore, despite the seemingly mandatory language found in section 679A.2, our decisions in both Des Moines Asphalt and Clinton National Bank acknowledge that a contractual right to arbitration can be waived by the conduct of the party desiring arbitration. As an alternative argument, Modern Piping contends that the issue of waiver should be decided by the arbitrator. In Des Moines Asphalt, where we found an abuse of discretion by the trial court, we recognized that if the contract so provides the arbitrator is allowed to make this initial decision regarding timeliness of the request for arbitration. Modern Piping garners no benefit from this authority, however, since its contract with Blackhawk contains no such provision.