Court Opinion

ID: 2671879
Source: CourtListenerOpinion
Date Created: 2014-05-01 00:00:42.4979+00
Date Added: 2024-06-11T12:36:19.461943
License: Public Domain

NOT PRECEDENTIAL
          UNITED STATES COURT OF APPEALS
               FOR THE THIRD CIRCUIT
                    _____________

                        No. 13-3819
                       _____________

SUPERMEDIA, f/k/a Idearc Media LLC f/k/a Idearc Media Corp.
            f/k/a Verizon Directories Corp.

                              v.

             AFFORDABLE ELECTRIC, INC.
                       District Court No. 2-12-cv-02329
                   _____________

SUPERMEDIA, f/k/a Idearc Media LLC f/k/a Idearc Media Corp.
            f/k/a Verizon Directories Corp.

                              v.

             MARTIN MORLEY, an Individual
                      District Court No. 2-13-cv-00176

           Affordable Electric Inc.; Martin Morley,
                                            Appellants
                     _______________

       On Appeal from the United States District Court
           for the Eastern District of Pennsylvania
        (D.C. Nos. 2-12-cv-02329 and 2-13-cv-00176)
          District Judge: Honorable Stewart Dalzell
                      _______________

         Submitted Under Third Circuit LAR 34.1(a)
                      April 8, 2014

   Before: AMBRO, JORDAN and ROTH, Circuit Judges.

                   (Filed: April 30, 2014)
                                    _______________

                                       OPINION
                                    _______________

JORDAN, Circuit Judge.

       Affordable Electric, Inc. (“AEI”), and its corporate officer, Martin Morley

(together, “Appellants”), appeal the denial by the United States District Court for the

Eastern District of Pennsylvania of Morley’s motion to compel arbitration, which AEI

joined. We agree with the District Court that Appellants waived any right to compel

arbitration, and we therefore affirm.

I.     Background

       On April 30, 2012, SuperMedia L.L.C. (“SuperMedia”), an advertising agency,

filed one of the two lawsuits involved in this appeal, Civil Action No. 12-2329. It sought

to recover damages from AEI for an alleged breach of contract, namely AEI’s alleged

failure to pay for advertising services that SuperMedia provided. The contract was

executed by Morley, who SuperMedia says “held himself out … as the ‘owner’ and/or

‘President’ of AEI” with the “authority to bind AEI to contracts with SuperMedia.”

(Appellee’s Br. at 2 (quoting App. at 44a).) After the Court denied AEI’s motion to

dismiss, AEI answered the Complaint and alleged as a defense that Morley had no

authority to bind it to the contract. Notably, AEI did not mention the contract’s

arbitration provision in its answer or cite it as an affirmative defense. See No. 12-2329,

AEI Answer, ECF No. 18. The District Court then set March 1, 2013, as the deadline for

submission of written discovery. No. 12-2329, Order, Jan. 7, 2013, ECF No. 21. After

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exchanging interrogatories, both parties filed motions to strike interrogatory objections

and compel interrogatory answers. Each also filed their responses to those motions.

       Meanwhile, SuperMedia brought a second action, Civil Action No. 13-176,

against Morley in the same court, this time for breach of warranty based on the

representations he made in forming the advertising contract. The Court consolidated the

two proceedings. After SuperMedia and AEI filed their discovery motions and

responses, Morley filed a motion to dismiss, which included a motion to compel

arbitration. He also argued that SuperMedia had failed to sufficiently allege fraud and

negligent misrepresentation and that those claims were time-barred under Texas law. In a

footnote in his motion, Morley stated that AEI joined him in seeking to compel

arbitration of SuperMedia’s claims. Morley also characterized the motion as “a motion

for judgment on the pleadings, which AEI requests.” (App. at 68a n.2.) AEI filed

nothing to dispute Morley’s claims about its legal positions.

       The District Court subsequently disposed of SuperMedia’s and AEI’s various

discovery requests and Morley’s motion to dismiss and compel arbitration in a single

order. Relevant here, it denied Morley’s motion to dismiss. Although it did not address

his arguments concerning the sufficiency of the pleadings, it ruled on the statute-of-

limitations issue that he had raised. It also denied the motion to compel arbitration,

finding that arbitration was barred because “Morley and AEI have been vigorous

litigants, participants in discovery by serving Interrogatories and Document Requests on

SuperMedia as well as objecting broadly and voluminously to SuperMedia’s discovery

requests.” (App. at 12a.) Morley and AEI have timely appealed that order.

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II.    Discussion1

       SuperMedia argues that Appellants waived arbitration,2 and Appellants of course

argue they did not.3 “Consistent with the strong preference for arbitration in federal

courts, waiver is not to be lightly inferred, and waiver will normally be found only where

the demand for arbitration came long after the suit commenced and when both parties had

engaged in extensive discovery.” Nino v. Jewelry Exch., Inc., 609 F.3d 191, 208 (3d Cir.

2010) (quoting PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1068–69 (3d Cir. 1995))

(internal quotation marks omitted). Under that principle, the parties rely on our non-

exclusive list of factors, known as the Hoxworth factors, to determine whether prejudice,

       1
         The District Court had subject matter jurisdiction under 28 U.S.C. § 1332. We
exercise jurisdiction pursuant to 9 U.S.C. § 16(a) as the appeal is from a denial of a
motion to compel arbitration. “We … exercise plenary review over the District Court’s
determination of whether [Appellants], through [their] litigation conduct, waived [their]
right to compel arbitration.” Nino v. Jewelry Exch., Inc., 609 F.3d 191, 200 (3d Cir.
2010).
        Appellants also appeal the District Court’s denial of Morley’s motion to dismiss,
which AEI joined. Because the portion of the order that disposed of their failure-to-state-
a-claim and statute-of-limitations arguments is not ripe for interlocutory appeal – it has
nothing to do with the issue of arbitration – we do not have pendent appellate jurisdiction
to consider it. See E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin
Intermediates, S.A.S., 269 F.3d 187, 204 (3d Cir. 2001) (“Where … [the unappealable
order] is not ‘interrelated’ or ‘intertwined’ with the merits of the immediately appealable
order, Courts of Appeals exercise restraint and forego review until the unrelated issue is
appealable in its own right.”).
       2
         SuperMedia also contends that Appellants are not entitled to invoke the
arbitration provision because Morley was not a party to the contract and because the
provision exempts collection claims from arbitration. Because we determine, as
discussed below, that Appellants waived any alleged right to arbitration under the
provision, we need not review the provision itself.
       3
        Appellants also argue that the District Court and SuperMedia were estopped
from, respectively, denying and opposing the motion to compel arbitration. We
summarily reject those arguments as meritless.
                                             4
the “touchstone” for evaluating an asserted waiver of the right to compel arbitration,

exists. Hoxworth v. Blinder, Robinson, & Co., 980 F.2d 912, 926-27 (3d Cir. 1992).

Those factors are (1) the timeliness of the motion to compel arbitration; (2) “the degree to

which the party seeking to compel arbitration has contested the merits of its opponent’s

claims”; (3) whether the moving party provided sufficient notice to the nonmoving party

of its “intention to seek arbitration”; (4) the extent of the moving party’s “non-merits

motion practice”; (5) whether the moving party has assented to the court’s pretrial orders;

and (6) the degree of discovery engaged in by the parties. Id. (citations omitted).

       We need not discuss all of the factors to explain that Appellants have waived any

right to arbitration. Regarding AEI, it waited more than 11 months from the Complaint’s

filing to say anything about arbitration – around the same amount of time as the period at

issue in Hoxworth, in which we found waiver to apply. See id. at 925-26. Furthermore,

AEI had already tested the merits of SuperMedia’s Complaint in its own motion to

dismiss and had failed at that time to raise the issue of arbitration. Also, AEI never

notified SuperMedia of its intent to request arbitration. Just as it failed to mention the

issue in its motion to dismiss, it did not cite the arbitration provision or mention the

matter at all in its answer to the Complaint. In fact, AEI’s request is a change in its

litigation position; it challenged the enforceability of the arbitration provision in a related

state-court proceeding that included SuperMedia’s pre-bankruptcy entity, Idearc Media

L.L.C. (“Idearc”). The Bucks County Court of Common Pleas docket indicates that

AEI’s assertion may have played a role in the state court judge’s determination denying

                                               5
Idearc’s motion to compel arbitration.4 Attempting to invoke the arbitration provision

after arguing that it is without effect would certainly qualify as a surprise tactic.5 Finally,

as the District Court noted, AEI has been a “vigorous litigant[]” in the underlying

proceeding, engaging in significant discovery activity prior to joining Morley’s motion.

(App. at 11a.) AEI points to nothing of significance to rebut those considerations

weighing for waiver. Therefore, it has waived arbitration under the contract.

       Morley’s case is a closer call – unlike AEI, he filed his motion to compel

arbitration just over two months after the filing of the Complaint. He also did not engage

in significant discovery. But an application of the factors to his litigation activities also

points to waiver, for three reasons. First, Morley, along with AEI, elected to engage in

litigation on the merits by filing a third-party complaint against SuperMedia and two of

its employees. Morley filed that complaint prior to filing his motion to compel

arbitration and even replied to the third-party answer. Second, in his reply to the third-

party answer, Morley expressly “denied there is a contract and/or that there is any

binding agreement or term of the Third Party Plaintiff to arbitrate disputes.” (Supp. App.

at 193.) As with AEI’s change of position, Morley’s midstream about-face on the

applicability of a contracted-for arbitration provision supports the conclusion that he

provided no notice to SuperMedia that he intended to seek arbitration. Third, Morley

       4
       Neither party included in the record the state court order denying Idearc’s motion
to compel arbitration; SuperMedia only provided the docket.
       5
         Although likely relevant, we need not determine whether Appellants are
judicially estopped from arguing that they are entitled to arbitration under the provision
because we affirm the District Court’s order on the grounds upon which that Court relied.
                                               6
complied with pretrial orders, including participation in the pretrial conference and

acquiescence in the consolidation of the two cases, types of activities that are

“inconsistent[] with an intent to arbitrate.” Gray Holdco, Inc. v. Cassady, 654 F.3d 444,

460 (3d Cir. 2011). The factors thus weigh in favor of applying waiver to Morley, and

the District Court did not err in doing so.

III.   Conclusion

       Accordingly, we will affirm that portion of the District Court’s order denying the

motion to compel arbitration.

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