Opinion ID: 1780860
Heading Depth: 3
Heading Rank: 2

Heading: Who Decides the Merits?

Text: ¶ 103. The Fifth Circuit has observed that: There is a strong presumption against a finding that a party waived its contractual right to arbitrate, and any doubts thereabout must be resolved in favor of arbitration. Ordinarily a party waives its right to arbitrate when it initially pursues litigation and then reverses course and attempts to arbitrate.... However, waiver can also result from `some overt act in Court that evinces a desire to resolve the arbitrable dispute through litigation rather than arbitration.' Gulf Guar. Life Ins. Co. v. Conn. Gen. Life Ins. Co., 304 F.3d 476, 484 (5th Cir.2002) (citations omitted). The Fifth Circuit also requires a showing of material prejudice if waiver is to be found. Walker v. J.C. Bradford & Co., 938 F.2d 575, 578 (5th Cir.1991). ¶ 104. The procedure to be followed where § 3 is invoked has been carefully and clearly explained by the Fourth Circuit. Section 3 call[s] for an expeditious and summary hearing, with only restricted inquiry into factual issues. Glass v. Kidder Peabody & Co., 114 F.3d 446, 453 (4th Cir.1997) (quoting Moses H. Cone Mem'l Hosp., 460 U.S. at 22, 103 S.Ct. 927). The court presented with a motion to stay under § 3 must first determine if the issues in dispute meet the standards of either `substantive arbitrability' or `procedural arbitrability.' Id. Substantive arbitrability is shown upon the court's finding that (1) a valid arbitration agreement exists and (2) the specific dispute falls within the scope of what the parties agreed to arbitrate. Id. Cf. Taylor, 826 So.2d at 713. Once the court finds affirmatively on these two questions, the dispute must then be referred to arbitration. Id. All other issues raised before the court not relating to these two determinations fall within the ambit of procedural arbitrability, which includes but is not limited to, `whether grievance procedures or some part of them apply to a particular dispute, whether such procedures have been followed or excused, or whether the unexcused failure to follow them avoids the duty to arbitrate.' 114 F.3d at 453 (quoting John Wiley, 376 U.S. at 557, 84 S.Ct. 909) (emphasis added). The Fourth Circuit stated: It is clear from these decisions, which represent over thirty years of Supreme Court and federal circuit court precedent, that issues of `substantive arbitrability' are for the court to decide, and questions of `procedural arbitrability,' as defined in John Wiley, are for the arbitrator to decide. Id. at 454 (emphasis added). Hence, in reviewing the trial court's order denying a stay in the present case, it is important to keep this distinction clearly in mind. ¶ 105. The trial court should therefore have confined itself to the issue of substantive arbitrability. Sanderson Farms argues that the underlying dispute in this case is clearly arbitrable pursuant to the Agreement. In fact, the Gatlins admit as much in their complaint, which alleges wilful and intentional acts and omissions of the Defendant, Sanderson Farms, Inc. constituting breach of the contract between the parties (emphasis added). Further, the arbitration clause of the Agreement clearly says: Any controversy or claim arising between the parties..., including, but not limited to, disputes relating to this Agreement, or any breach of this Agreement, ... will be settled by binding arbitration. (emphasis added). ¶ 106. The Gatlins' complaint claims breach of contract, and the Agreement says that any claim of breach of the agreement will be settled by binding arbitration. Further, Mr. Gatlin, in effect, admitted that there was a valid arbitration agreement by initiating arbitration proceedings pursuant to the agreement. He only abandoned that pursuit a year later because he allegedly was unable to afford the costs. Thus, the test of substantive arbitrability is met. ¶ 107. The Gatlins' argument that Sanderson Farms waived or defaulted on [19] any right to enforce the arbitration clause by failing to pay half of the filing fee is procedural, having to do with whether procedures have been followed, as John Wiley puts it. The merits of the Gatlins' claim that Sanderson Farms should have paid $1,000 towards the filing fee are simply not before this Court, or any court, in view of the FAA's purpose of expediting arbitration by curtailing judicial involvement. ¶ 108. In the case sub judice, Sanderson Farms has not actively participated in the lawsuit and has not substantially invoked the litigation machinery. To the contrary, every action taken by Sanderson Farms has been an effort to have the suit dismissed and arbitration compelled. It thus cannot be said that Sanderson Farms has substantially invok[ed] the litigation machinery. Mercury Constr. Corp., 656 F.2d at 940 (citation omitted).