Court Opinion

ID: 2970908
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:24:36.333273+00
Date Added: 2024-06-11T11:18:32.052189
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
            Pursuant to Sixth Circuit Rule 206            2   O.J. Distributing v. Hornell Brewing Co.    No. 01-1583
    ELECTRONIC CITATION: 2003 FED App. 0288P (6th Cir.)
                File Name: 03a0288p.06                                        _________________
                                                                                  COUNSEL
UNITED STATES COURT OF APPEALS
                                                          ARGUED: Matthew A. Gibb, GIBB LAW FIRM, Shelby
              FOR THE SIXTH CIRCUIT                       Township, Michigan, for Appellant. John A. Ruemenapp,
                _________________                         WEISMAN, YOUNG, SCHLOSS & RUEMENAPP,
                                                          Bingham Farms, Michigan, for Appellee. ON BRIEF:
O.J. DISTRIBUTING, INC., a/k/a   X                        Matthew A. Gibb, GIBB LAW FIRM, Shelby Township,
GREAT STATE BEVERAGE,             -                       Michigan, for Appellant. John A. Ruemenapp, WEISMAN,
                                  -                       YOUNG, SCHLOSS & RUEMENAPP, Bingham Farms,
           Plaintiff-Appellant,                           Michigan, for Appellee.
                                  -  No. 01-1583
                                  -
           v.                      >                        CLAY, J., delivered the opinion of the court, in which
                                  ,                       MOORE, J., joined. BATCHELDER, J. (pp. 28-31),
                                  -                       delivered a separate opinion concurring in part and dissenting
HORNELL BREWING                   -                       in part.
COMPANY , INC., d/b/a             -
FEROLITO, VULTAGGIO &             -                                           _________________
SONS, a/k/a ARIZONA               -
                                  -                                               OPINION
BEVERAGES,
                                  -                                           _________________
         Defendant-Appellee. -
                                 N                          CLAY, Circuit Judge. Plaintiff, O.J. Distributing, Inc.,
      Appeal from the United States District Court        a/k/a Great State Beverage, appeals from the district court’s
    for the Eastern District of Michigan at Detroit.      order entered on March 29, 2001 granting the motion brought
   No. 98-71940—Denise Page Hood, District Judge.         by Defendant, Hornell Brewing Company, Inc., d/b/a
                                                          Ferolito, Vultaggio & Sons, a/k/a AriZona Beverages, to
               Argued: January 28, 2003                   confirm an arbitration award, while dismissing Defendant’s
                                                          motion to dismiss Plaintiff’s amended complaint as moot, and
         Decided and Filed: August 14, 2003               dismissing Plaintiff’s motion for summary judgment as moot.
                                                          For the reasons set forth below, we VACATE the district
Before: BATCHELDER, MOORE, and CLAY, Circuit              court’s order confirming the arbitration award, and
                 Judges.                                  REMAND the case to the district court with instructions that
                                                          the case should proceed on the merits of Plaintiff’s claims
                                                          inasmuch as Defendant waived its right to arbitrate under the
                                                          Agreement.

                            1
No. 01-1583     O.J. Distributing v. Hornell Brewing Co.         3    4   O.J. Distributing v. Hornell Brewing Co.      No. 01-1583

                      BACKGROUND                                      default on September 30, 1998, with the Clerk of the United
                     Procedural History                               States District Court for the Eastern District of Michigan, and
                                                                      on October 2, 1998, Plaintiff filed a motion for Entry of
   Plaintiff, a Michigan corporation, filed suit against              Default Judgment.
Defendant, a New York corporation, in the Eastern District of
Michigan on May 11, 1998, on the basis of diversity of                   Defendant claims that it was not served with any papers
citizenship and the amount in controversy being over                  regarding Plaintiff’s actions with respect to the entry of
$75,000, claiming that in May of 1997, Defendant breached             default, but learned of Plaintiff’s actions by way of a voice-
the provisions of the “Distributing Agreement” (“the                  mail message from Plaintiff’s attorney to Defendant’s
Agreement”) held between the parties for the distribution of          counsel. Defendant responded by sending a letter to the
AriZona beverage products. Plaintiff mailed the complaint to          district court “Via Facsimile” with a copy to Plaintiff’s
Defendant’s corporate counsel along with a request for waiver         counsel wherein Defendant explained that entry of default
of service in May of 1998. The waiver had not been returned           was inappropriate because Defendant had not been served in
as of July of 1998, so Plaintiff sent an additional copy of the       the action, and that Defendant had served Plaintiff with a
complaint to Defendant’s corporate counsel via overnight              demand for arbitration as required under the Agreement. At
courier.                                                              that time, Defendant also filed a cross-motion to dismiss
                                                                      pursuant to Federal Rule of Civil Procedure 12(b)(5) for
   On or about August 4 and 5, 1998, Defendant sent two               insufficiency of service of process, and moved to dismiss or
letters to counsel for Plaintiff demanding arbitration.               stay the action pending arbitration.
Defendant based its demand on a provision of the Agreement
that provided for arbitration of any dispute that arose between          On October 5, 1998, Defendant initiated arbitration
the parties and that the arbitration must be commenced within         proceedings before the American Arbitration Association
180 days following the event giving rise to the claim, and            (“AAA”) in New York City, New York and, in accordance
further provided that “the failure to abide by such time              with the AAA rules, Defendant served the arbitration papers
requirement shall constitute a waiver by the Distributor              on Plaintiff via certified mail, return receipt requested. By
[Plaintiff] of any rights in respect of, and shall constitute a bar   letter dated October 20, 1998, the AAA acknowledged receipt
on, any claims by Distributor on the basis of such event or           of Defendant’s arbitration demand and requested Plaintiff’s
circumstance.” (J.A. at 52-53.) Defendant’s letters advised           responses thereto. The AAA also scheduled an administrative
counsel for Plaintiff of this provision in the Agreement              conference regarding the matter for October 27, 1998, and
requiring arbitration of all disputes.                                provided information and papers with which the parties were
                                                                      to begin the process of selecting arbitrators and hearing dates.
  On September 4, 1998, via “telecopier and mail,”
Defendant restated its objections to Plaintiff’s attempted              Plaintiff filed a motion on October 28, 1998, seeking a
service by overnight courier and reiterated that Plaintiff’s          temporary restraining order preventing Defendant from
claims were subject to “mandatory arbitration.” The letter            arbitrating the matter. On November 3, 1998, the district
also advised Plaintiff that Defendant “was willing to continue        court denied Plaintiff’s motion for a temporary restraining
a dialogue with you in the hopes of achieving at [sic] an             order, and scheduled a hearing for the various other motions.
amicable settlement of your claims. Please call if you are            Thereafter, the district court entered an order on April 2,
interested.” (J.A. at 115.) Plaintiff arranged for an entry of        1999, denying Defendant’s motion to dismiss, while also
No. 01-1583        O.J. Distributing v. Hornell Brewing Co.              5    6    O.J. Distributing v. Hornell Brewing Co.           No. 01-1583

denying Plaintiff’s motion for entry of a default judgment, but               Plaintiff’s amended complaint. (J.A. at 216.) Plaintiff, in
granted Defendant’s motion to stay the proceedings pending                    turn, filed a motion for summary judgment. The district court
arbitration.                                                                  held a hearing on the various motions on August 11, 2000,
                                                                              and then entered a memorandum opinion and order on
  In the meanwhile, the arbitration set in New York City was                  March 29, 2001, confirming the arbitration award and finding
going forward. On April 19, 1999, Plaintiff filed its                         the remaining motions moot.
arbitration summary and statement of issues with the AAA
setting forth a claim for damages under the Agreement.                          Plaintiff timely appealed from the district court’s March 29,
Defendant, upon consent of the arbitrators, filed a motion to                 2001, memorandum opinion and order confirming the
enforce the 180-day contractual time limitations as set forth                 arbitration award and denying Plaintiff’s motion for summary
in the Agreement, and thereby requested a dismissal of                        judgment as moot. Oral argument was heard on January 28,
Plaintiff’s claims as time-barred. Defendant argued that the                  2003, after which Defendant moved to file a supplemental
180-day time limit barred Plaintiff’s claim and that “[u]nder                 brief as to a case raised by the panel at oral argument,
New York law (which governs this dispute as per ¶ 20.2 of                     General Star National Insurance Co. v. Administratia
the Agreement), it is well established that only the arbitrators              Asigurarilor de Stat, 289 F.3d 434 (6th Cir. 2002).
(and not the Courts) are charged with enforcing a contractual                 Defendant’s motion was granted and its supplemental brief
time limitation.” (J.A. at 531-32 (citation omitted).) Plaintiff              has been considered by this Court.
responded by claiming that the 180-day period did not begin
to run until April 8, 1998, and that Defendant’s filing of its                                                Facts
demand for arbitration on October 5, 1998 satisfied the time
limitation period. In the alternative, Plaintiff argued that                      A. Background of the Relationship Between the
because of Defendant’s alleged false and deceptive acts                              Parties
throughout the arbitration process, the limitations period
should be tolled under the doctrine of equitable tolling. A                     Defendant is a supplier of certain alcoholic and non-
hearing before the arbitrators was held on March 13, 2000,                    alcoholic beverages including AriZona brand teas and soft
regarding Defendant’s motion to dismiss Plaintiff’s claim as                  drinks.2 Plaintiff is a distributor of non-alcoholic beverage
untimely. 1 Thereafter, on or about March 30, 2000, the                       products in the greater Detroit, Michigan area. In April of
arbitrators issued their award dismissing Plaintiff’s claims in               1995, Defendant began supplying AriZona beverage products
their entirety.                                                               to Plaintiff for distribution in three Michigan counties:
                                                                              Wayne, Oakland, and Macomb. About two months later, on
  On May 5, 2000, Plaintiff, filed an amended complaint in                    June 16, 1995, Plaintiff entered into a sales agreement (“the
the district court. Defendant filed a motion on May 22, 2000,                 Sales Agreement”) with a third party for the purchase price of
seeking to confirm the arbitration award and to dismiss                       $70,000, for purposes of securing the rights to distribute
                                                                              AriZona products in two additional Michigan counties,
    1
      Although Defendant makes reference to testimo ny taken at this
hearing in its brief on app eal, (D efendant’s Br. on A ppe al at 9), no           2
transcript of the hearing is provided in the joint appendix and, according         Unless otherwise specified, throughout this opinion, the term
to Plaintiff, “there is no transcript of this hearing.” (Plaintiff’s Br. on   “Defendant” shall refer to Hornell and the names under which it has been
Appeal at 4.)                                                                 known or operated.
No. 01-1583     O.J. Distributing v. Hornell Brewing Co.      7    8   O.J. Distributing v. Hornell Brewing Co.      No. 01-1583

Livingston and Washtenaw.          According to Plaintiff,         to Plaintiff; and 4) AriZona’s actions constituted a breach of
Defendant had to consent to Plaintiff purchasing the rights to     the Agreement. (J.A. at 189.) The letter also advised
distribute AriZona products in these two additional counties.      AriZona that if it was not willing to act pursuant to the terms
Thereafter, on September 16, 1995, Plaintiff and Defendant         of the Agreement, Plaintiff would not hesitate to take legal
entered into the Agreement now at issue for the purpose of         action. The letter was copied to, among others, Don
providing the terms under which Defendant would supply and         Vultaggio and Lawrence I. Fox, and sent by certified mail
Plaintiff would distribute AriZona products.                       with return receipt requested. The record indicates that
                                                                   Vultaggio and Fox each received the letter. (J.A. at 191-92.)
  Each party not only performed under the Agreement, but
Plaintiff allegedly met and exceeded the set sales goals and          On April 29, 1997, attorney Lisa S. Derman, of MW&E
expended considerable time and resources in exceeding the          sent a letter to Plaintiff’s former counsel Smith, advising
expected market growth for AriZona products. Plaintiff             Smith that the “firm [McDermott, Will & Emery] [was]
claims that its efforts resulted in a large and profitable         litigation counsel for Hornell Brewing Co., Inc. d/b/a Ferolito,
customer list for AriZona products. The performance                Vultaggio & Sons (“Hornell”).” (J.A. at 196.) The letter also
continued until April of 1997, when AriZona informed               apprised Smith that his “letter of April 24, 1997, to Mr. Ted
Plaintiff that it was terminating the relationship.                Shanahan ha[d] been forwarded to [Hornell] for response.”
                                                                   (J.A. at 196.) Finally, the letter advised that MW&E was in
  B. Events Giving Rise to the Matter at Hand                      the process of reviewing the matter with Hornell, and would
                                                                   contact Smith after gathering “the relevant information.”
   AriZona sent a letter to Plaintiff on April 22, 1997,           (J.A. at 196.) The letter was copied to Shanahan and Fox.
informing Plaintiff that it was “concluding our non-alcoholic
supplier relationship with you” effective May 12, 1997. (J.A.        Smith sent a letter to Derman on May 2, 1997 advising her
at 155.) The letter was written on AriZona letterhead, signed      that he had received a direct communication from Shanahan
by Ted Shanahan, Eastern Division Manager, and copied to           asking Smith to contact him to “discuss an amicable
“Don Vultaggio” at Hornell Brewing in Long Island, New             resolution of the matter.” (J.A. at 194.) Smith stated that he
York, as well as to “Lawrence I. Fox” an attorney at               was hesitant to contact Shanahan directly inasmuch as
McDermott, Will, and Emory (“MW&E”) in New York, New               Derman had indicated that MW&E was representing Hornell,
York. The letter made no reference the Agreement.                  and asked Derman to advise accordingly.
   In response, on April 24, 1997, Eric Smith, Plaintiff’s then      Apparently Derman posted no objection to Smith directly
counsel, sent a letter to Shanahan acknowledging receipt of        contacting Shanahan, inasmuch as Shanahan sent a letter to
the termination letter and informing Shanahan that 1) “[t]he       Smith on May 7, 1997 indicating that, pursuant to a telephone
relationship between the parties is subject to an executed         conversation on May 5, 1997, Smith agreed to send Shanahan
Agreement dated September 16, 1995;” 2) the April 22, 1997         a complete copy “of a [sic] what O.J. Distributing claims is
letter did not constitute termination “for cause” and under the    their ‘contract’ along with case sales information for
terms of the Agreement, if Defendant terminated the                Washtenau [sic] and Livingston counties[,]” but that
Agreement without cause, Defendant had to provide Plaintiff        Shanahan had yet to receive the materials. (J.A. at 193.)
with at least thirty days notice; 3) AriZona’s legal obligations   Shanahan therefore asked Smith as to when the materials
under the Agreement demanded that certain monies be paid           would be sent. (J.A. at 193.)
No. 01-1583      O.J. Distributing v. Hornell Brewing Co.         9    10 O.J. Distributing v. Hornell Brewing Co.         No. 01-1583

  Smith replied in a May 9, 1997, letter to Shanahan                   did not return Gibb’s letters or phone calls. Gibb asked that
indicating, among other things, that Shanahan’s “summation             Vultaggio contact him regarding the matter.
of our conversation [was] not accurate. I am not sending you
a copy of anything O.J. Distributing drafted. It is AriZona’s             Gibb sent a letter to attorney John Calandra of MW&E on
contract that it uses for its distributors in this area. It has been   January 15, 1998, regarding Plaintiff’s claims against
executed by your representative.” (J.A. at 197.) Smith also            Defendant. The letter states that “[a]ttached is a copy of the
discussed monies owed to Plaintiff under the terms of the              Sales Agreement assigning Hornell’s Distributor Agreement
Agreement. (J.A. at 197-98.) Smith sent another letter to              with [Plaintiff].” (J.A. at 160.) The letter further provides a
Shanahan on May 14, 1997, indicating additional monies                 summary of damages that Plaintiff believes it is due under the
owed to Plaintiff under the terms of the Agreement. (J.A. at           terms of the Agreement.
200.)
                                                                           Several days later, on January 27, 1998, Gibb sent a letter
   On June 5, 1997, Shanahan sent a letter to Smith requesting         to Calandra and Fox requesting that they advise how they
copies of Plaintiff’s last twelve months “Sales & Inventory”           were going to proceed inasmuch as they had “already stated
reports for O.J. Distributing. Shanahan advised that “[w]e are         that attempts at litigation or arbitration would be opposed
hoping to amicably resolve this matter as soon as possible.”           . . . .” (J.A. at 162.) Gibb added that he “look[ed] forward to
(J.A. at 201.) On July 1, 1997, Smith sent a letter to                 discussing how these claims may be settled or if it will be
Shanahan in response to the June 5, 1997, correspondence               necessary to send this matter to arbitration or the federal
indicating that all of the information requested had been sent,        court.” (J.A. at 162.)
and that Smith therefore had “all of the information required
to make the calculations necessary to move forward toward a              On February 11, 1998, Gibb sent yet another letter to
resolution of this matter.” (J.A. at 199.) Thus, Smith asked           Calandra requesting that Calandra respond to Gibb’s
that Shanahan provide his “calculations by the next week’s             January 15, 1998 letter and advise how Hornell wished to
end so that we know more precisely where this matter is                proceed. Gibb also requested that “[i]n the event this matter
going to ultimately head.” (J.A. at 199.) Smith added, “[i]f           does proceed to litigation, would you prefer to accept service
we are going to resolve the situation, we need to address it           or should Hornell be served personally?” (J.A. at 163.)
immediately.” (J.A. at 199.)                                           Several weeks later, on March 27, 1998, having heard no
                                                                       reply, Gibb sent a letter to Calandra stating that “[m]y client
   Plaintiff’s current counsel Matthew Gibb, sent a letter to          has not received a response to their claim against Hornell
attorney Lawrence I. Fox at MW&E on December 12, 1997,                 Brewing. As no offer of settlement or request for arbitration
indicating that Gibb was representing Plaintiff and that Gibb          appears likely, I am advising my client to seek relief from the
was writing regarding the breach of the Agreement by Fox’s             United States District Court. Please advise on how service
client, Hornell. Gibb requested that Fox contact him                   should be perfected in this matter. I understand your client is
regarding the matter. A few weeks later, on January 9, 1998,           not registered to do business in Michigan under their
Gibb sent letter to Don Vultaggio at Hornell Brewing                   corporate name and therefore, they do not have a local
indicating that Gibb represented Plaintiff, that Hornell               resident agent. . . . If you have a better solution to this matter,
terminated the Agreement with Plaintiff, and that Gibb                 please call.” (J.A. at 164.)
attempted to resolve the matter with Lawrence Fox, but Fox
No. 01-1583    O.J. Distributing v. Hornell Brewing Co. 11        12 O.J. Distributing v. Hornell Brewing Co.       No. 01-1583

   Donna Messina, corporate counsel to Hornell, sent a letter       attorneys fees. I do not believe that this matter is being
to Gibb on April 8, 1998, indicating that Hornell was not           given its proper attention and therefore, feel the Federal
aware of the existence of any Agreement with Plaintiff, and         Court is my client’s only source of relief. If Hornell has
asked that if such a document existed. Gibb forwarded a copy        an offer in this matter, please fax it to my office upon
to Messina. On that same day, Gibb responded with a letter          your return on June 29, 1998. I look forward to hearing
to Messina and enclosed Plaintiff’s “Notice of Lawsuit and          from you.”
Request for Waiver of Service of Summons.” (J.A. at 168.)
Gibb added, “[a]s your company is not registered to do            (J.A. at 172.)
business in Michigan, I trust that you, as General Counsel,
have the authority to accept this complaint. A self-addressed,      On August 4, 1998, yet another attorney from MW&E,
stamped envelope is enclosed for your assistance.” (J.A. at       James R. Anderson, sent a letter to Plaintiff stating:
168.)
                                                                      We represent Hornell Brewing Co., Inc. d/b/a Ferolito,
  Several weeks later, on May 26, 1998, Gibb sent a letter to       Vultaggio & Sons (“Hornell”) and have received a copy
Fox of MW&E stating:                                                of a summons and complaint in an action styled O.J.
                                                                    Distributing, Inc. v. Hornell Brewing Co., Inc., No. 98-
  When we last spoke I understood that your client,                 71940 (E.D. Mich) (the “Action”).
  Hornell Brewing, was going to make a preliminary offer
  of settlement by May 22, 1998. As of the date of this               Under ¶ 20.3(b) of the above-referenced Distributor
  correspondence, I have not received anything to present           Agreement (the “Distributor Agreement”), the claims
  to my clients. Is the offer forthcoming? . . . If no offer        asserted by O.J. Distributing, Inc. (“O.J.”) in the Action
  is pending in this matter, I need to know if Hornell is           are subject to mandatory arbitration in New York City.
  agreeing to waive service of [sic] if they desire to incur        Accordingly, Hornell hereby demands arbitration in New
  costs under Rule 4. Please advise what position your              York City of O.J.’s claims and such counterclaims as
  client is taking.                                                 Hornell may choose to interpose.

(J.A. at 171.) Then, on June 22, 1998, in response to a               Hornell reserves its right to assert in such arbitration
facsimile, Gibb sent a letter to Messina acknowledging that he      any and all defenses it may have to O.J.’s claims,
was in receipt of the facsimile, and advised that his “previous     including but not limited to those relating to the
correspondence [was] clear as to what [his] client requires in      formation and terms of the Distributor Agreement.
this matter,” and that if Hornell “ha[d] a counter proposal,
[Plaintiff] would be happy to consider it. However, at this           Please have your attorney contact me to discuss the
point, [Plaintiff] cannot delay any longer.” (J.A. at 172.)         selection of arbitrators and other procedural and
Gibb concluded:                                                     logistical matters.

  “I have not received the waiver of service as requested         (J.A. at 112-13.) Anderson copied Messina on the letter.
  with my client’s complaint. Therefore, I am forced to
  effectuate personal service in this matter. Under Rule 4          Anderson sent a letter to Gibb on August 5, 1998,
  of FRCP, I will be entitled to all costs, including             indicating that Gibb’s service of process was ineffective, and
                                                                  reiterating that Plaintiff’s claims were subject to arbitration.
No. 01-1583     O.J. Distributing v. Hornell Brewing Co. 13         14 O.J. Distributing v. Hornell Brewing Co.         No. 01-1583

Anderson copied Donna Messina on the letter. Anderson sent            A. Legal Standards
another letter to Gibb on September 4, 1998, 1) confirming
that Hornell’s time to answer and/or move in response to              The process by which a default may be entered by the clerk
Plaintiff’s complaint had been extended to September 18,            of court, and a default judgment entered thereafter by the
1998; 2) advising that Hornell was not waiving any objection        district court, has been succinctly stated as follows:
to the service of complaint; 3) Plaintiff’s claims were subject
to arbitration; and 4) Hornell was willing to continue in               The Federal Rules of Civil Procedure require a
dialogue in the hope of reaching an amicable settlement.              defendant to serve an answer within twenty days of being
(J.A. at 115.)                                                        served with a summons and complaint. Fed. R. Civ. P.
                                                                      12(a)(1)(A). Rule 55 permits the clerk to enter a default
  On October 2, 1998, Anderson sent a letter to the district          when a party fails to defend an action as required. The
court regarding the entry of default, and adding that “Hornell        court may then enter a default judgment. Fed. R. Civ. P.
has advised plaintiff’s attorney on numerous occasions that           55(b)(1). A party against whom a default judgment has
there is no basis for this action because the contract that O.J.      been entered may petition the court to set aside the
seeks to enforce herein requires arbitration of the present           default judgment under Rules 55(c) and 60(b) for good
dispute.” (J.A. at 116.) Thereafter, on October 5, 1998,              cause, and upon a showing of mistake, or any other just
Anderson sent a letter to Plaintiff enclosing the “Demand for         reason.
Arbitration, filed today [October 5, 1998], instituting
proceedings before the American Arbitration Association in          Weiss v. St. Paul Fire & Marine Ins. Co., 283 F.3d 790, 794
New York.” (J.A. at 118.) The letter was copied to Gibb and         (6th Cir. 2002).
Messina.
                                                                       “[I]t is important to distinguish between an entry of default
                        DISCUSSION                                  and a default judgment.” United States v. Real Property &
                                                                    All Furnishings Known as Bridwell’s Grocery & Video, 195
I. Entry of Default                                                 F.3d 819, 820 (6th Cir. 1999) (hereinafter “Real Property”).
                                                                    That is, “‘a stricter standard of review applies for setting aside
  Plaintiff first argues that the district court erred in setting   a default once it has ripened into a judgment.’” Id. (quoting
aside the clerk’s entry of default and in dismissing Plaintiff’s    Waifersong, Ltd. Inc. v. Classic Music Vending, 976 F.2d
motion for a default judgment.                                      290, 292 (6th Cir. 1992)). Specifically, “‘once the court has
                                                                    determined damages and a judgment has been entered, the
  The decision whether to set aside an entry of default under       district court’s discretion to vacate the judgment is
Federal Rule of Civil Procedure 55(c) is reviewed for an            circumscribed by public policy favoring finality of judgments
abuse of discretion. United Coin Meter Co., Inc. v. Seaboard        and termination of litigation’” as reflected in Rule 60(b).
Coastline R.R., 705 F.2d 839, 844 (6th Cir. 1983) (citing           Weiss, 283 F.3d at 794 (quoting Waifersong, 976 F.2d at
Keegel v. Key West & Caribbean Trading Co., Inc., 627 F.2d          292). However, under Federal Rule of Civil Procedure 55(c),
372, 373 (D.C. Cir. 1980)).                                         “[f]or good cause shown, the court may set aside an entry of
                                                                    default . . . .”
No. 01-1583       O.J. Distributing v. Hornell Brewing Co. 15              16 O.J. Distributing v. Hornell Brewing Co.        No. 01-1583

  “‘[T]he district court enjoys considerable latitude under the              B. Analysis
‘good cause shown’ standard of Rule 55(c)’ to grant a
defendant relief from a default entry.” Real Property, 195                  Plaintiff attempted to receive a waiver of service from
F.3d at 820 (quoting Waifersong, 976 F.2d at 292). The                     Defendant pursuant to Federal Rule of Civil Procedure 4(d).
criteria used to determine whether “good cause” has been                   Rule 4(d)(2) provides in part:
shown for purposes of granting a motion under Rule 55(c) are
whether “‘(1) the default was willful, (2) set-aside would                      An individual, corporation, or association that is
prejudice plaintiff, and (3) the alleged defense was                         subject to service under subdivision (e), (f), or (h) and
meritorious.’”3 United Coin Meter Co., 705 F.2d at 844                       that receives notice of an action in the manner provided
(citations omitted) (quoting Keegel, 627 F.2d at 373); see also              in this paragraph has a duty to avoid unnecessary costs of
Real Property, 195 F.3d at 820. It has been found that a                     serving the summons. To avoid costs, the plaintiff may
district court abuses its discretion in denying a motion to set              notify such a defendant of the commencement of the
aside an entry of default when two of the three factors have                 action and request that the defendant waive service of a
been demonstrated by the defendant: the defendant had a                      summons. The notice and request
meritorious defense and no prejudice would result to the
plaintiff if the matter were to go forward. See Shepard                          (A) shall be in writing and shall be addressed
Claims Servs., Inc. v. Willaim Darrah & Assoc., 796 F.2d                       directly to the defendant, if an individual, or else to an
190, 193-94 (6th Cir. 1986).                                                   officer or managing or general agent (other agent
                                                                               authorized by appointment or law to receive service of
   Due process requires proper service of process for a court                  process) of a defendant subject to service under
to have jurisdiction to adjudicate the rights of the parties.                  subdivision (h);
Amen v. City of Dearborn, 532 F.2d 554, 557 (6th Cir. 1976).
Therefore, if service of process was not proper, the court must            Fed. R. Civ. P. 4(d)(2)(A). Rule 4(h) provides in relevant
set aside an entry of default. Id.; see also Omni Capital Int’l,           part:
Ltd. v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104 (1987)
(“Before a federal court may exercise personal jurisdiction                  Unless otherwise provided by federal law, service upon
over a defendant, the procedural requirement of service of                   a domestic or foreign corporation or upon a partnership
summons must be satisfied.”); Bank One of Cleveland, N.A.                    or other unincorporated association that is subject to suit
v. Abbe, 916 F.2d 1067 (6th Cir. 1990).                                      under a common name, and from which a waiver of
                                                                             service has not been obtained and filed, shall be effected:
                                                                                 (1) in a judicial district of the United States in the
                                                                               manner prescribed for individuals by subdivision
                                                                               (e)(1), or by delivering a copy of the summons and
                                                                               of the complaint to an officer, a managing or general
    3                                                                          agent, or to any other agent authorized by
     The three-part inquiry made by a district court in determining good
cause to set aside an entry of default has also been characterized as          appointment or by law to receive service of process
whether (1) the plaintiff will be prejud iced; (2) de fendant has a            and, if the agent is one authorized by statute to
meritorious defense; and (3) defendant’s culpable conduct led to the
default. Berthelsen v. v. Kane, 907 F.2d 61 7, 620 (6th Cir. 1990).
No. 01-1583     O.J. Distributing v. Hornell Brewing Co. 17        18 O.J. Distributing v. Hornell Brewing Co.      No. 01-1583

    receive service and the statute so requires, by also             The district court did not err in concluding that service of
    mailing a copy to the defendant . . . .                        process was not effected inasmuch as Plaintiff failed to
                                                                   receive a waiver of summons from Defendant, and failed to
Fed. R. Civ. P. 4(h).                                              demonstrate that it served an “authorized agent” by virtue of
                                                                   an unknown receptionist signing for the overnight package for
  The district court noted that despite Plaintiff’s attempts, it   purposes of complying with Rule 4(d) or Rule 4(h). See LSJ
had not received a waiver of summons pursuant to Rule 4(d),        Inv. Co., Inc. v. O.L.D., Inc., 167 F.3d 320, 322 (6th Cir.
and that, as a result, Plaintiff was required to comply with       1999) (noting that where the facts are undisputed,
formal service of process. (J.A. at 716.) Specifically, the        determination of whether there was adequate service of
court opined:                                                      process is a question of law); see also Friedman v. Estate of
                                                                   Presser, 929 F.2d 1151, 1154-156 (6th Cir. 1991) (finding
    I think the parties agree that [Plaintiff’s] request for       that service of process under Rule 4(c)(2)(C)(ii), as amended
  waiver was in writing. It is unclear whether it was              by current Rule 4(d), requires copy of return of notice and
  addressed to the appropriate officer or agent of                 acknowledgment form).
  [Defendant], and it’s not clear whether the request
  informed [Defendant] of the consequences of complying              Therefore, the question becomes whether Plaintiff effected
  or not complying with the request under Rule 4(d).               service of process under the alternative method of Rule 4(h);
                                                                   that being, the manner prescribed for individuals under Rule
                                ***                                4(e)(1). See Fed. R. Civ. P. 4(h)(1). Federal Rule of Civil
                                                                   Procedure 4(e)(1) provides:
    Because [Defendant] didn’t give its consent to waive
  service, [Plaintiff] was then required to follow the formal          Unless otherwise provided by federal law, service
  procedure for service of process; and it’s undisputed, I           upon an individual from whom a waiver has not been
  think, that [Plaintiff] did not properly affect [sic] service      obtained and filed, other than an infant or an incompetent
  on [Defendant] under the rules.                                    person, may be effected in any judicial district of the
                                                                     United States:
    [Plaintiff] sent [Defendant] the Complaint and
  Summons by Airborne in care of [Defendant’s] in-house                  (1) pursuant to the law of the state in which the
  counsel.                                                             district court is located, or in which service is
                                                                       effected, for the service of a summons upon the
     It is not clear to me that under the Federal Rules                defendant in an action brought in the courts of
  overnight mail is not a proper – is a proper method of               general jurisdiction of the State; . . . .
  serving an officer agent or authorized agent. And even
  if were proper service, it is not clear that the receptionist      The district court found that Plaintiff had complied neither
  – it’s clear that the receptionist signed for it. And there      with Michigan’s procedures for effecting service of process,
  isn’t any evidence, I don’t think, in this record that she is    nor those of New York. On appeal, Plaintiff provides no
  an authorized agent of [Defendant] to receive that kind of       argument as to whether it complied with the laws of either
  document.                                                        Michigan or New York for effecting service of process. From
                                                                   our independent review of those procedures, we conclude that
(J.A. at 716-17.)
No. 01-1583     O.J. Distributing v. Hornell Brewing Co. 19         20 O.J. Distributing v. Hornell Brewing Co.           No. 01-1583

the district court did not err in finding that the procedures of    Arbitration Act requires that ‘the court in which the suit is
both states were not properly met. See Mich. Ct. R. 2.105(D)        pending, upon being satisfied that the issue involved in such
(stating that service of summons and copy of the complaint          suit or proceeding is referable to arbitration . . . shall . . . stay
must be made upon officer, resident agent, director, trustee,       the trial of the action . . . .’” ATAC Corp. v. Arthur
or person in charge of an office or business establishment of       Treacher’s Inc., 280 F.3d 1091, 1094-095 (6th Cir. 2002)
the corporation, and sending a summons and copy of the              (quoting 9 U.S.C. § 3).
complaint by registered mail to principal office of
corporation); N.Y. CPLR § 311 (McKinney 1999) (“Personal               “[T]here is a strong presumption in favor of arbitration, and
service upon a corporation or governmental subdivision shall        . . . waiver of the right to arbitration is not to be lightly
be made by delivering the summons as follows: . . . to any          inferred.” Cotton v. Slone, 4 F.3d 176, 179 (2d Cir.1993); see
other agent authorized by appointment or by law to receive          also E. L. Kellett, Annotation, Delay in Asserting Contractual
service.”)                                                          Right to Arbitration as Precluding Enforcement Thereof, 25
                                                                    A.L.R. 3d 1171 (1969) (providing cases and general
  Accordingly, the district court did not err in finding that       principles regarding when delay in enforcing an arbitration
Plaintiff had not properly effected service of process on           right constitutes waiver, laches, or default). However, as this
Defendant, see LSJ Inv. Co., Inc., 167 F.3d at 322, and             Court recently recognized:
therefore did not abuse its discretion in setting aside the entry
of default. See Amen, 532 F.2d at 557. In light of this               “[a]n agreement to arbitrate may be waived by the
holding, we need not weigh the three factors a court considers        actions of a party which are completely inconsistent with
when setting aside an entry of default when service of process        any reliance thereon.” Germany v. River Terminal Ry.
has been properly effected, and Plaintiff’s claim regarding the       co., 477 F.2d 546, 547 (6th Cir. 1973) (per curiam).
district court’s denial of its motion for a default judgment is       Although a waiver of the right to arbitration is “not to be
moot.                                                                 lightly inferred,” MicroStrategy, Inc. v. Lauricia, 268
                                                                      F.3d 244, 249 (4th Cir. 2001) (internal quotation marks
II. Stay Pending Arbitration                                          omitted), a party may waive the right by delaying its
                                                                      assertion to such an extent that the opposing party incurs
  Plaintiff next argues that the district court erred in granting     actual prejudice. Doctor’s Assocs., Inc. v. Distajo, 107
Defendant’s motion to stay the proceedings pending                    F.3d 126, 131 (2d Cir. 1997) (recognizing that a party
arbitration where Defendant’s actions constituted a waiver of         waives the right to arbitrate where it delays the
the arbitration provision.                                            invocation of that right to the extent that the opposing
                                                                      party incurs “unnecessary delay or expense”) (internal
  This Court reviews a district court’s determination as to the       quotation marks omitted).
arbitrability of a matter de novo. M&C Corp. v. Erwin Behr
GMBH & Co., 143 F.3d 1033, 1037 (6th Cir. 1998).                    Gen. Star Nat’l Ins. Co. v. Administratia Asigurarilor de Stat,
                                                                    289 F.3d 434, 438 (6th Cir. 2002) (alterations in Gen. Star
  A. Legal Standards                                                Nat’l Ins. Co.).
  “When a suit is brought in federal court on issues that by          In General Star National Insurance Co. v. Administratia
written agreement are subject to arbitration, the Federal           Asigurarilor de Stat (“General Star”), the Plaintiff, General
No. 01-1583     O.J. Distributing v. Hornell Brewing Co. 21        22 O.J. Distributing v. Hornell Brewing Co.       No. 01-1583

Star National Insurance Company, an Ohio corporation,                arbitration from July 1992 until October 1993 and [the
brought suit against Astra, S.A. (“Astra”), a Romanian state-        plaintiff] bore the costs of proceeding to try to obtain the
owned insurance company, asserting claims for breach of              sums it thought owed”); Stone v. E.F. Hutton & Co., 898
contract and unjust enrichment. 289 F.3d at 436. Astra had           F.2d 1542, 1543 (11th Cir. 1990) (per curiam) (holding
assumed the reinsurance contracts of the defendant,                  that the defendant waived its right to arbitrate where it
Administratia Asigurarilor de Stat. Id. Astra did not respond        delayed its assertion of the right for 20 months).
to the plaintiff’s complaint, and the plaintiff moved for a
default judgment which the district court granted. Id. About       Gen. Star Nat’l Ins. Co., 289 F.3d at 438 (alterations and
one year later, Astra filed a motion to vacate the default         emphasis in Gen. Star Nat’l Ins. Co.).
judgment. Id. Astra claimed that the default judgment was
void because of an alleged lack of subject matter jurisdiction        Thus, while there is a strong presumption in favor of
due, in part, to a clause in the reinsurance contract requiring    enforcing arbitration rights, both this Court and our sister
the parties to submit any disputes arising under the contract      circuits have been willing to find under appropriate
to mandatory arbitration, thereby making the issue of whether      circumstances that a party has waived its right to arbitrate by
Astra was a successor in interest to the defendant a matter for    virtue of its actions in delaying the right to the point of
arbitration, not a matter for the district court. Id. at 438.      prejudicing the other party. See id.
Astra also contended that the default judgment should be set
aside based on improper service of process. Id. at 437. The          B. Analysis
district court denied Astra’s motion to set aside the entry of a
default judgment, and Astra appealed. Id.                             Like Astra in General Star, Defendant in the matter at hand
                                                                   waived its right to arbitrate due to its actions of engaging in
   On appeal, this Court examined Astra’s claim that the           negotiations with Plaintiff for approximately fifteen months
district court lacked subject matter jurisdiction to hear the      (April of 1997 through August of 1998), while at the same
matter due to the contract’s mandatory arbitration provision.      time denying the existence of the Agreement and, therefore,
In doing so, the Court also considered whether Astra waived        the arbitration provision, to the prejudice of Plaintiff. As the
its right to arbitrate, and opined as follows:                     record indicates, by way of letter dated April 24, 1997 to
                                                                   Shanahan at AriZona, Plaintiff’s former counsel, Eric Smith,
  Astra did not assert its purported right to arbitrate until it   informed Shanahan that “[t]he relationship between the
  filed its motion to vacate the default judgment on               parties is subject to an executed Agreement dated September
  March 16, 2000. General Star gave Astra actual notice            16, 1995.” (J.A. at 189.) The record further indicates that
  of the lawsuit on October 16, 1998. Thus for 17 months,          this letter also informed Vultaggio at Hornell and attorney
  Astra remained idle while General Star incurred the costs        Lawrence I. Fox at MW&E of the Agreement in that Smith’s
  associated with this action. Astra, moreover, sought             letter was copied to these individuals and received by them.
  arbitration only after the district court had entered a          In addition, the record indicates that attorney Lisa S. Derman
  default judgment against it. Under these circumstances,          at MW&E was also aware of the Agreement’s existence by
  we believe that Astra has waived its right to arbitrate.         way of Smith’s April 24, 1997 letter, in that Derman sent a
  Menorah Ins. Co. v. INX Reinsurance Corp., 72 F.3d               letter to Smith on April 29, 1997, apprising Smith that his
  218, 222 (1st Cir. 1995) (concluding that the defendant          letter had been forwarded to her for a “response.” (J.A. at
  waived its right to arbitrate where it “chose not to invoke      196.)
No. 01-1583     O.J. Distributing v. Hornell Brewing Co. 23        24 O.J. Distributing v. Hornell Brewing Co.      No. 01-1583

   The record goes on to show that, apparently by way of           your client, Hornell Brewing, was going to make a
permission from Derman, Smith and Shanahan engaged in              preliminary offer of settlement by May 22, 1998. As of the
negotiations, Shanahan requested a copy of the Agreement           date of this correspondence, I have not received anything to
from Smith in a telephone conversation that occurred on            present to my clients. Is the offer forthcoming?” (J.A. at
May 5, 1997, and Smith sent Shanahan a copy of the                 171.) No settlement was reached, and Gibb indicated in a
agreement on or about May 9, 1997. It also appears from the        June 22, 1998 letter to Messina that it appeared that federal
record that from May of 1997 through July of 1997,                 court was his “client’s only source of relief.” (J.A. at 172.)
negotiations continued between Smith and Shanahan as to the
amount of monies owed to Plaintiff apparently under the              Finally, after months of communications and negotiations
terms of the Agreement.                                            with at least six representatives or attorneys for Defendant,
                                                                   Plaintiff received a letter from yet another attorney at
   The record indicates that the matter was not resolved,          MW&E, James R. Anderson, indicating that Plaintiff’s claims
Plaintiff obtained new counsel, Gibb, and on December 12,          as made in its complaint were subject to the mandatory
1997, Gibb sent a letter to Fox at MW&E regarding                  arbitration provision in the Agreement, and that Defendant
Defendant’s breach of the Agreement and requested that Fox         was “demand[ing] arbitration in New York City of O.J.’s
contact Gibb. Having received no response from Fox, Gibb           claims and such counterclaims as [Defendant] may choose to
contacted Vultaggio at Hornell by way of letter dated              interpose.” (J.A. at 112-13.) Anderson sent a similar letter to
January 9, 1998, regarding Defendant’s breach of the               Gibb on August 5, 1998 reiterating that Plaintiff’s claims
Agreement. The record next indicates that on January 15,           were subject to arbitration. It was not until October 5, 1998,
1998, Gibb sent a letter to attorney Calandra at MW&E and          after the entry of default had been made by the clerk of court,
stated that “[a]ttached is a copy of the Sales Agreement           that Defendant made a demand for arbitration in New York.
assigning Hornell’s Distributor Agreement with [Plaintiff].”
(J.A. at 160.) The letter further provides a summary of              Under these facts, it is clear that Defendant was aware of
damages that Plaintiff believes it is due under the terms of the   the Agreement’s existence, and in fact had possession of the
Agreement. Despite Gibb’s repeated letters to Calandra             Agreement by way of Plaintiff’s counsel in May of 1997,
during the period of January of 1998 through March of 1998,        January of 1998, and April of 1998, and therefore was also
wherein Gibb in requested that Calandra respond and advise         aware of the arbitration provision therein. However,
Gibb how Defendant wished to proceed, particularly with            Defendant did not maintain that Plaintiff’s claims were
respect to the case going to court, Calandra failed to reply.      subject to arbitration until August of 1998, and did not
                                                                   demand arbitration until October of 1998, after the entry of
  It was not until April 8, 1998 that Messina, corporate           default was made. Thus, as in General Star, Defendant slept
counsel for Hornell, sent a letter to Gibb again denying the       on its rights for approximately fifteen months (April of 1997
existence of the Agreement, and requesting that a copy of the      through August of 1998) while Plaintiff incurred costs
Agreement be sent to her. The record indicates that Gibb           associated with the matter and was prejudiced as a result.
complied with the request on that same day, and letters were       Accordingly, as in General Star, we find that Defendant
thereafter exchanged between Messina and Gibb clearly              waived its right to arbitrate the matter. See 289 F.3d at 438.
indicating that the two were in the midst of settlement
negotiations. For example, in a May 26, 1998 letter to                While these actions by themselves appear to be sufficient
Messina, Gibb stated, “[w]hen we last spoke I understood that      to conclude that Defendant waived its right to arbitrate under
No. 01-1583     O.J. Distributing v. Hornell Brewing Co. 25          26 O.J. Distributing v. Hornell Brewing Co.                    No. 01-1583

General Star, the fact that the arbitration provision contains       contrary and despite Plaintiff providing Defendant with a
a 180-day limitation provides a further basis to conclude that       copy of the Agreement when requested— and after engaging
Defendant waived its right to arbitrate. That is, for about one      in talks with Plaintiff, thus providing a basis for Plaintiff to
year Defendant appeared to engage in negotiations with               believe that Defendant agreed that the matters were not the
Plaintiff as if the claims were, as Plaintiff has consistently       type for which arbitration applied.
maintained, not subject to arbitration; then, after suit was filed
Defendant prolonged the matter for two more months before              In short, for more than a year Defendant acted “completely
claiming that the matter was governed by the Agreement’s             inconsistent with any reliance” upon the arbitration provision,
arbitration provision. However, at this point, Defendant made        and “delay[ed] its assertion to such an extent that the
the claim that the matter was one for arbitration under the          opposing party [Plaintiff] incur[red] actual prejudice”
Agreement, secure in the knowledge that the 180-day                  inasmuch as the 180-day period for resolving matters
limitation had long expired inasmuch as the alleged breach of        pursuant to the arbitration provision had long passed.
which Plaintiff complained occurred in April of 1997. In fact,       General Star, 289 F.3d at 438. The district court found at
when Defendant submitted the matter to arbitration, it did so        oral argument that Defendant had not waived its right to
making a preliminary motion to dismiss Plaintiff’s claims as         arbitrate, noting that Defendant had made Plaintiff aware by
time-barred. Under these facts, Plaintiff suffered “actual           way of the August of 1998 letter that the matter was to be
prejudice” by Defendant’s “delaying its assertion” regarding         arbitrated pursuant to the Agreement. The district court erred
arbitrability, see General Star, 289 F.3d at 438, and                in so finding inasmuch as Defendant had denied the
Defendant should therefore be found to have waived its               Agreement’s existence for more than a year and knew by the
arbitration rights. Id.                                              time that it demanded arbitration that the 180-day limitation
                                                                     had expired.
  In its brief on appeal, Defendant argues that once Plaintiff
“formally asserted its claims,” Defendant “immediately                 Because Defendant waived its right to arbitrate, all of
demanded arbitration, and consistently asserted that                 Plaintiff’s claims should have been decided on the merits
[Plaintiff’s] claims must be arbitrated.” Defendant’s Br. at         before the district court, thus making it unnecessary for us to
25. Defendant further argues that “although it had no                address Plaintiff’s claim that the district court erred in finding
obligation to do so, [Defendant] commenced the arbitration           that all issues raised in its complaint were subject to
that [Plaintiff] could have initiated—and in fact was required       arbitration, or to address any of Plaintiff’s other claims raised
to initiate under the Agreement within 180 days of the               on appeal.4
occurrence of the events giving rise to its claims.”
Defendant’s Br. at 25. We are not persuaded by Defendant’s
arguments. The record indicates that Defendant did not                   4
“immediately demand arbitration” after Plaintiff filed its                  During the district court’s ruling on the various motions, the court
                                                                     “noted and preserved for the record” that Mr. Ruemenapp, counsel for
complaint in May of 1998, but waited for sixty days before           Defendant, stipulated on the record that he “accept[ed] service on behalf
doing so via Defendant’s August of 1998 letter to Plaintiff,         of all the claim s involved[.]” (J.A. at 7 27.) Specifically, the district court
and waited approximately five months before formally                 inquired of defense counsel, “That is your stipulatio n, and you accept
demanding arbitration in New York. Again, Defendant did so           service on behalf of all the claims invo lved?” (J.A. at 727 .) Defense
after a year or more of claiming that it was unaware of the          counsel replied, “That’s correct.” (J.A. at 727.) The district court
                                                                     concluded, “Okay. So noted and p reserved for the record.” (J.A. at 727 .)
Agreement’s existence—despite Plaintiff’s assertions to the          Thereafter, in its April 2, 1999, order which, among other things, set aside
No. 01-1583        O.J. Distributing v. Hornell Brewing Co. 27                   28 O.J. Distributing v. Hornell Brewing Co.                No. 01-1583

                           CONCLUSION                                              _____________________________________________
   For the above-stated reasons, the district court’s order                        CONCURRING IN PART, DISSENTING IN PART
confirming the arbitration award is VACATED, and the case                          _____________________________________________
is REMANDED to the district court with instructions that the
case should proceed on the merits of Plaintiff’s claims.                            ALICE M. BATCHELDER, Circuit Judge, concurring in
                                                                                 part and dissenting in part. I concur in the majority opinion’s
                                                                                 holding that the district court did not err in finding that the
                                                                                 plaintiff failed properly to effectuate service of process on the
                                                                                 defendant, and therefore, the court did not abuse its discretion
                                                                                 in setting aside the entry of default. Because I believe that the
                                                                                 majority opinion’s reliance on Gen. Star Nat’l Ins. Co. v.
                                                                                 Administratia Asigurarilor de Stat, 289 F.3d 434 (6th Cir.
                                                                                 2002), is misplaced, I respectfully dissent from the finding
                                                                                 that the defendant waived its right to arbitrate. I believe,
                                                                                 contrary to the majority’s conclusion, that Hornell’s denial of
                                                                                 the existence of the Distributor Agreement, although arguably
                                                                                 suspicious, was not contrary to its rights under that agreement
                                                                                 to arbitrate any properly filed complaint brought by the
                                                                                 plaintiff pursuant to that agreement.
                                                                                   General Star involved a situation in which, following a
                                                                                 lawsuit properly filed by the plaintiff, the defendant waited
                                                                                 more than one year from the entry of a default judgment, and
                                                                                 almost seventeen months following the commencement of the
                                                                                 suit, before finally appearing before the court and moving to
                                                                                 vacate the judgment on the basis of a mandatory arbitration
                                                                                 clause contained within the agreement between the parties.
                                                                                 Gen. Star, 289 F.3d at 438 (emphasizing the amount of time
                                                                                 between the filing of the complaint and the demand for
                                                                                 arbitration, and finding that “a party may waive the right by
                                                                                 delaying its assertion to such an extent that the opposing party
the entry of d efault and stayed the matter pending arbitration, the district    incurs actual prejudice.”)1 In General Star, the defendant’s
court ordered that “Plaintiff shall serve [sic] have fourteen (14) days from
the date of this Order to serve Defendant, and John Ruemenapp stated on
the record that he is authorized to acc ept service of the Summons and
Complaint in this case on behalf of Defendant.” (J.A. at 203.) Inasmuch              1
as there is no thing in the record to indicate that service of process was not         The court in General Star relied upon two cases in which the
effected in compliance with this order, it would appear that Defendant has       defendants who waited more than a year following the filing of complaint
been served and that the matter may proceed before the district court on         to assert their rights to arbitrate were fo und to have w aived any right to
the merits.                                                                      arbitrate the claim. See Gen. Star, 289 F.3d at 438 (citing Menorah Ins.
No. 01-1583      O.J. Distributing v. Hornell Brewing Co. 29              30 O.J. Distributing v. Hornell Brewing Co.                  No. 01-1583

actions were inconsistent with the right to arbitrate because             expired.2 Unlike the facts in General Star, there was no one-
the defendant allowed a complaint to sit for a year and a half            year or greater delay by the defendant in demanding
while the plaintiff incurred the costs of maintaining the                 arbitration that prejudiced that plaintiff in the present case.
litigation. Hornell’s actions in the current case—denying the
existence of the agreement prior to O.J. Distributing’s filing               General Star does not stand for the proposition that a party
the complaint and demanding arbitration relatively quickly                to an agreement containing a mandatory arbitration clause
after the filing of the complaint—are clearly distinguishable             must demand arbitration once it is notified that another party
from the actions of the defendant in General Star.                        might bring suit to enforce rights allegedly violated under the
Furthermore, the only prejudice suffered by the plaintiff arose           agreement. This is not a case where the plaintiff filed suit
from its failure to timely file the complaint and not from any            within the deadline and the defendant “participated in the
delay by the defendant in seeking arbitration once the                    litigation” beyond the specified deadline and then moved to
complaint was filed.                                                      dismiss based on a mandatory arbitration clause, or, as in
                                                                          General Star, failed to appear for over a year, forcing the
   The terms of the Distributor Agreement required the                    plaintiff to incur costs and delay while attempting to vindicate
plaintiff to “formally” assert its claim “no later than 180 days          their rights in court. The obligation on the part of the
following the event or circumstances giving rise to the                   defendant to demand arbitration arises once the defendant is
underlying claim . . . .” Although the defendant’s denial of              faced with a properly filed claim. Only where a plaintiff
the existence of the agreement delayed the plaintiff’s attempts           properly files a complaint against the defendant and the
to negotiate a settlement of the underlying claim, that denial            defendant subsequently extends the litigation or delays
did not prevent O.J. Distributing from “formally” asserting its           asserting its arbitration rights does the question of prejudice
claim with a properly filed complaint. The plaintiff has never            to the plaintiff raise the possibility that the defendant waived
asserted that it was unaware of either the existence of the
Distributor Agreement or the requirement that it formally
bring its claim within 180 days of the act giving rise to the                 2
                                                                                 The possibility that Hornell acted in bad faith when it denied the
complaint. None of the actions of Hornell cited by the                    existence of the contract is not relevant to the question of whether or not
majority opinion prevented O.J. Distributing from timely                  it acted inconsistently with its right to arbitrate any formally filed claim.
filing the complaint. A party’s denial of the existence of an             The only time pertinent to the issue raised by General Star is the time
agreement giving rise to a cause of action does not foreclose             after O.J. Distributing filed the comp laint. Acc ordingly, I disagree w ith
                                                                          the majority opinion’s assertion that the defendant “slept on its rights for
a complaining party’s ability to formally bring its charge                approximately fifteen mo nths (April of 1997 through Aug ust of 1998)
within the time period specified in the agreement. The impact             while Plaintiff incurred costs associated with the matter and was
of Hornell’s denial of the contract is completely separate from           prejudiced as a result.” Supra majority at 24. Specifically, we hold above
the question of whether the plaintiff suffered prejudice from             that the district court did not err in finding that the p laintiff failed to
the timing of the demand for arbitration once the complaint               prope rly effectuate service of process on the defendant. Supra majority
                                                                          at 18. Therefore, the defendant demanded arb itration before the court
was filed. No action or dely by Hornell caused the plaintiff to           gained personal jurisdiction over Ho rnell, e.g., Omni Capital Int’l v.
file its complaint after the 180-day deadline had already                 Rudolf Wolff & Co., Ltd ., 484 U.S. 97, 104 (1987), which is completely
                                                                          contrary to the facts of General Star. Moreover, the only costs relevant
                                                                          to the analysis under Gen eral Star are the costs associated “with the
                                                                          action,” Gen. Star, 289 F.3d at 438, which is usually considered an actual
Co. v. INX Reinsurance Corp., 72 F.3d 218 (1st Cir. 1995), and Stone v.   judicial proceeding, not the communications between the parties prior to
E.F. Hutton & Co., 898 F.2d 15 42 (11th. Cir. 1990)).                     the lawsuit. See B LACK’S L A W D IC T IO N A R Y 28-29 (Deluxe 7th ed. 1999).
No. 01-1583   O.J. Distributing v. Hornell Brewing Co. 31

the right to arbitrate—this case presents neither of these
scenarios. Accordingly, on the issue of the waiver, I
respectfully dissent. I would therefore affirm the district
court’s decision in its entirety.