Opinion ID: 2139849
Heading Depth: 1
Heading Rank: 6

Heading: Court Shall Decide Issue of Waiver Based on Litigation-Related Conduct.

Text: Next, we address whether a court or an arbitrator should decide if a party has waived its right to arbitrate when the waiver allegation is based on that party's litigation-related activity. The U.S. Supreme Court, in Howsam v. Dean Witter Reynolds, Inc., [12] has set forth the rules that govern the allocation of functions between a court and an arbitrator. In that case, the Court held that the question whether an arbitration claim was barred by a 6-year limitations period embedded in the arbitration rules under which the parties had agreed to arbitrate was an issue for the arbitrator and not for the court. [13] The Court acknowledged that [t]he question whether the parties have submitted a particular dispute to arbitration, i.e., the `question of arbitrability' is `an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise.' [14] The Court began its analysis by discussing the role of judges in resolving issues related to arbitration. The Court stated that `question[s] of arbitrability,' which are presumptively for the court to decide, are limited to gateway disputes that the contracting parties would likely have expected a court to have decided ..., where they are not likely to have thought that they had agreed that an arbitrator would do so, and, consequently, where reference of the gateway dispute to the court avoids the risk of forcing parties to arbitrate a matter that they may well not have agreed to arbitrate. [15] The Court noted that at least two types of question were presumptively for a court to decide: first, whether the parties are bound by a given arbitration clause and second, whether an arbitration clause in a concededly binding contract applies to a particular type of controversy. [16] On the other hand, `procedural questions which grow out of the dispute and bear on its final disposition' are presumptively not for the judge, but for an arbitrator, to decide. [17] So, too, the Court continued, the presumption is that the arbitrator should decide `allegation[s] of waiver, delay, or a like defense to arbitrability.' [18] The Court stated that these are the types of question that parties would likely expect that an arbitrator would decide. [19] The Court concluded that the applicability of the 6-year limitations rule was a matter presumptively for the arbitrator, not for the judge. [20] The Court noted that the time limit rule in Howsam closely resembles the gateway questions that th[e] Court has found not to be `questions of arbitrability.' [21] The Court explained that the arbitrators were comparatively more expert about the meaning of their own rule and were comparatively better able to interpret and to apply the rule and that therefore, it was reasonable to infer that the parties intended the agreement to reflect that understanding. [22] Moreover, the Court reasoned that a goal of arbitration and judicial systems alike is to secure a fair and expeditious resolution of the underlying controversy. [23] And a law assuming an expectation that aligns decisionmakers with comparative expertise will further this goal. [24] In the present case, LaRue contends, relying on the Court's statements relating to waiver in Howsam, that Good Samaritan's waiver defense should be resolved by an arbitrator and not a court. Viewed in isolation, the Court's statement in Howsam that the presumption is that the arbitrator should decide `allegation[s] of waiver, delay, or a like defense to arbitrability' does provide general support for LaRue's position here. [25] However, since the Court's decision in Howsam, several courts have squarely addressed the issue now raised by LaRue in the present case. And these courts have persuasively concluded that when this language from Howsam is properly considered within the context of the entire opinion, it is clear that the Court was referring only to waiver, delay, or like defenses arising from noncompliance with contractual conditions precedent to arbitration, such as the particular time limit rule at issue in Howsam, and not to claims of waiver based on active litigation in courts, as is the situation in the present case. [26] In finding that the question of waiver based on litigation conduct is a decision presumptively for a judge rather than an arbitrator, courts have noted that this type of determination has historically been made by the courts. For example, both the First and Third Circuit Courts of Appeal have explained that questions of waiver based on litigation conduct have long been decided by the courts. The First Circuit observed, in Marie v. Allied Home Mortgage Corp., [27] that the overwhelming weight of pre- Howsam authority ... held that waiver due to litigation conduct was generally for the court and not for the arbitrator to decide. And in Ehleiter v. Grapetree Shores, Inc., [28] the Third Circuit similarly concluded that the Supreme Court did not intend its pronouncements in Howsam ... to upset the `traditional rule' that courts, not arbitrators, should decide the question of whether a party has waived its right to arbitrate by actively litigating the case in court. The statutory language of the FAA provides further support for the holding that waiver based on litigation conduct be decided by a court, rather than an arbitrator. In the present case, LaRue filed a motion to stay trial and compel arbitration pursuant to 9 U.S.C. § 3. Under 9 U.S.C. § 3, a court is only permitted to stay a court action pending arbitration if the applicant for the stay is not in default in proceeding with such arbitration. And in this context, courts have generally interpreted the term default to include waiver. [29] Thus, in cases where a stay is requested, the plain language of 9 U.S.C. § 3 appears to place a statutory command on courts to decide the issue of waiver themselves. [30] Several other reasons persuade us to find that a court, as opposed to an arbitrator, should decide waiver issues due to litigation-related activities. As already noted, the Supreme Court in Howsam stressed the importance of considering the comparative expertise of a decisionmaker when evaluating whether a court or arbitrator should be making the determination. [31] When considering the comparative expertise of courts and arbitrators, it becomes clear that a court, not an arbitrator, is better suited to address questions of waiver based on litigation-related activity. At the time the question of litigation-related waiver arises, the trial judge has already been directly involved in the course of the legal proceedings to that point and is better positioned to determine whether such conduct amounts to a waiver under applicable law. [32] And more fundamentally, given that the inquiry into whether a party has waived its right to arbitrate by litigating the case in court `heavily implicates judicial procedures,' a court should remain free to `control the course of proceedings before it and to correct abuses of those proceedings,' rather than being required to defer to the findings [of] an arbitrator with no previous involvement in the case. [33] Furthermore, because the question of litigation-related waiver necessarily involves matters occurring in the judicial forum, it is reasonable to believe that the contracting parties would expect a court to decide whether one party's actions before that court waived the right to arbitrate. [34] Finally, requiring that waiver claims due to litigation-related activity be sent to the arbitrator would be exceptionally inefficient. [35] If such claims were presented to the arbitrator, and the arbitrator determined that the defendant had waived its right to arbitrate, then the cases would inevitably return to the court from which they began, without any progress' having been made toward resolution of the underlying claims. Allowing courts to decide litigation-related waiver claims furthers a primary purpose of the FAA, which is to permit speedy resolution of disputes. [36] Given the considerations of, among other things, comparative expertise and judicial economy, we hold that a waiver defense raised in the context of prior litigation-related activity is presumed to be decided by a court, rather than an arbitrator. And shifting of this issue to an arbitrator is only proper where there is `clea[r] and unmistakable] evidence' of such an intent in the parties' arbitration agreement. [37] The arbitration agreement at issue in this case fails to meet this standard. LaRue does not contend, nor does our review of the language in the arbitration agreement reveal, a clear and unmistakable intent to have an arbitrator decide the issue of waiver based on litigation-related conduct. Accordingly, the question whether LaRue waived its right to arbitrate due to its participation in the present litigation was properly for the district court.