Opinion ID: 2536792
Heading Depth: 2
Heading Rank: 2

Heading: Waiver of right to arbitration

Text: Crews argues that Markel waived any right it may have had to arbitrate his claims against it by virtue of its waiting 256 days after the complaint was filed to assert its right to arbitrate, by first removing the case to federal court, and by initiating judicially supervised discovery. In support of his argument. Crews cites Companion Life Insurance Co. v. Whitesell Manufacturing, Inc., 670 So.2d 897, 899 (Ala. 1995) ([A] party may waive its right to arbitrate a dispute if it substantially invokes the litigation process and thereby substantially prejudices the party opposing arbitration.). In its brief on appeal, Markel claims to have not only answered the complaint, but also to have asserted its right to compel arbitration in the federal court. This fact, if so, is found in the brief, but not in the record, where, to avail, it must be. Central of Georgia Ry. v. Ashley, 159 Ala. 145, 158, 48 So. 981, 985 (1909). Market's brief refers to the appendices, which we have earlier declined to consider, as being extra to the record provided by the trial court. The notice of removal to federal court is the first response by Markel to the complaint filed by Crews contained in the record of the proceedings in state court. It makes no mention of an intent on Market's part to invoke its right to arbitrate the claims asserted in the complaint. That intent was first expressed in state court in Markel's motions to stay proceedings and compel arbitration and to stay discovery filed on May 12, 2006. This Court has formulated a two-pronged test for determining whether a party has waived its right to compel arbitration: It is well settled under Alabama law that a party may waive its right to arbitrate a dispute if it substantially invokes the litigation process and thereby substantially prejudices the party opposing arbitration. Whether a party's participation in an action amounts to an enforceable waiver of its right to arbitrate depends on whether the participation bespeaks an intention to abandon the right in favor of the judicial process and, if so, whether the opposing party would be prejudiced by a subsequent order requiring it to submit to arbitration. No rigid rule exists for determining what constitutes a waiver of the right to arbitrate; the determination as to whether there has been a waiver must, instead, be based on the particular facts of each case. Companion Life Insurance Co., 670 So.2d at 899. On appeal, Crews asserts that by removing the action to federal court and initiating discovery Market abandoned its right to arbitrate in favor of the judicial process and that he would be prejudiced by an order requiring him to arbitrate. If his assertions are accurate, both prongs of the test have been satisfied. Markel responds analogizing this case to U.S. Pipe & Foundry Co. v. Curren, 779 So.2d 1171 (Ala.2000), in which this Court held that a party had not substantially invoked the litigation process by removing a case to federal court when the party had asserted the affirmative defense of arbitration in its initial answer. That case is inapposite, however, because there is no evidence in the record indicating that Markel asserted arbitration as an affirmative defense against the complaint, which was filed August 29, 2005, until it filed its motion to stay the proceedings and compel arbitration on May 12, 2006, after over eight months of litigation. We need not answer this question, however, because, assuming arguendo that Markel did invoke the litigation process, Crews has been unable to show that he was substantially prejudiced. [W]hether there has been a waiver of a right to arbitration must be decided on a case-by-case basis. Companion Life Insurance Co., 670 So.2d at 899. In Companion Life Insurance Co., this Court held that the right to arbitrate had been waived when the motion to compel arbitration was filed five months after the complaint was filed and only after the party seeking to compel arbitration had suffered an adverse ruling in federal court. Id. There, the nonmovant demonstrated prejudice by producing an affidavit by his counsel that counsel had expended 33.4 hours of professional services to secure the remand of the case to state court, for a cost of about $4,175. He argued that he would be substantially prejudiced if ordered to arbitrate his claim. Id. Here, Crews has quantified no estimate of the time or money spent in federal court or elsewhere. He suggests that he provided significant discovery in response to requests, but the record shows only that he responded to interrogatories and a request for production, both of which were issued not by Markel, but by the other defendants. Regarding the standard for determining prejudice, we have stated: `Prejudice to the party opposing arbitration, not prejudice to the party seeking arbitration, is determinative of whether a court should deny arbitration on the basis of waiver. Price [v. Drexel Burnham Lambert, Inc. ], 791 F.2d [1156,] 1162 [(5th Cir.1986)] (footnote omitted). Both delay and the extent of the moving party's participation in judicial proceedings are material factors in assessing a plea of prejudice. Frye [v. Paine, Webber, Jackson & Curtis, Inc. ], 877 F.2d [396,] 399 [(5th Cir.1989)]. `Prejudice has been found in situations where the party seeking arbitration allows the opposing party to undergo the types of litigation expenses that arbitration was designed to alleviate. Morewitz v. West of England Ship Owners Mut. Protection & Indem. Ass'n, 62 F.3d 1356, 1366 (11th Cir.1995). Sufficient prejudice to infer waiver might be found, for example, if the party seeking the stay [for arbitration] took advantage of judicial discovery procedures not available in arbitration. Carcich v. Rederi A/B Nordie, 389 F.2d 692, 696 n. 7 (2d Cir.1968). . . .'  Hales v. ProEquities, Inc., 885 So.2d 100, 105-06 (Ala.2003). As Justice See noted in his dissent in Hales: `A party seeking to prove waiver of a right to arbitrate must demonstrate. . . prejudice to the party opposing arbitration resulting from such inconsistent acts. The party arguing waiver of arbitration bears a heavy burden of proof.' 885 So.2d at 110 (See, J., dissenting) (quoting Britton v. Co-op Banking Group, 916 F.2d 1405, 1412 (9th Cir. 1990)). Rogers v. State Farm Fire & Cas. Co., 984 So.2d 382, 387-88 (Ala.2007). In determining whether the plaintiffs in Rogers had shown substantial prejudice, this Court evaluated the amounts the plaintiffs had expended in the litigation before the defendant invoked the appraisal clause. [4] Finding that the plaintiffs had not adequately defined the expenses as applicable to the claim under consideration, this Court could not conclude that the plaintiffs have carried their heavy burden of showing substantial prejudice from [the defendant's] delayed invocation.. . . 984 So.2d at 388. As stated above, Crews provides no evidence indicating that he has expended time or money in the litigation process; he, like the Rogerses, has failed to carry his heavy burden of showing substantial prejudice by Markel's delay in asserting its right to compel arbitration. Accordingly, even if, arguendo, Markel did substantially invoke the litigation process by removing the action to federal court and by seeking arbitration only after the federal court remanded the case to the state court, Crews has failed to demonstrate substantial prejudice as the result of Markel's action. This Court has stated: In interpreting an arbitration provision, `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.' Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Dunes of GP, L.L.C. v. Bradford, 966 So.2d 924, 927 (Ala.2007) (emphasis omitted; emphasis added).