Court Opinion

ID: 9496331
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:23:34.635829+00
Date Added: 2024-06-11T17:57:30.183482
License: Public Domain

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 484 (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 incurs actual prejudice.”)1 In General Star, the defendant’s actions were inconsistent with the right to arbitrate because the defendant allowed a complaint to sit for a year and a half while the plaintiff incurred the costs of maintaining the litigation. Hornell’s actions in the current ease — denying the existence of the agreement prior to O.J. Distributing’s filing the complaint and demanding arbitration relatively quickly after the filing of the complaint — are clearly distinguishable from the actions of the defendant in General Star. Furthermore, the only prejudice suffered by the plaintiff arose from its failure to timely file the complaint and not from any delay by the defendant in seeking arbitration once the complaint was filed.
The terms of the Distributor Agreement required the plaintiff to “formally” assert its claim “no later than 180 days following the event or circumstances giving rise to the underlying claim....” Although the defendant’s denial of the existence of the agreement delayed the plaintiffs attempts to negotiate a settlement of the underlying claim, that denial did not prevent O.J. Distributing from “formally” asserting its claim with a properly filed complaint. The plaintiff has never 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 complaint. None of the actions of Hornell cited by the majority opinion prevented O.J. Distributing from timely filing the complaint. A party’s denial of the existence of an agreement giving rise to a cause of action does not foreclose a complaining party’s ability *361to formally bring its charge within the time period specified in the agreement. The impact of Hornell’s denial of the contract is completely separate from the question of whether the plaintiff suffered prejudice from the timing of the demand for arbitration once the complaint was filed. No action or delay by Hornell caused the plaintiff to file its complaint after the 180-day deadline had already expired.2 Unlike the facts in General Star, there was no one-year or greater delay by the defendant in demanding arbitration that prejudiced that plaintiff in the present case.
General Star does not stand for the proposition that a party to an agreement containing a mandatory arbitration clause must demand arbitration once it is notified that another party might bring suit to enforce rights allegedly violated under the agreement. This is not a case where the plaintiff filed suit within the deadline and the defendant “participated in the litigation” beyond the specified deadline and then moved to dismiss based on a mandatory arbitration clause, or, as in General Star, failed to appear for over a year, forcing the plaintiff to incur costs and delay while attempting to vindicate their rights in court. The obligation on the part of the defendant to demand arbitration arises once the defendant is faced with a properly filed claim. Only where a plaintiff properly files a complaint against the defendant and the defendant subsequently extends the litigation or delays asserting its arbitration rights does the question of prejudice to the plaintiff raise the possibility that the defendant waived 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.

. The court in General Star relied upon two cases in which the defendants who waited more than a year following the filing of complaint to assert their rights to arbitrate were found to have waived any right to arbitrate the claim. See Gen. Star, 289 F.3d at 438 (citing Menorah Ins. Co. v. INX Reinsurance Corp., 72 F.3d 218 (1st Cir.1995), and Stone v. E.F. Hutton & Co., 898 F.2d 1542 (11th. Cir.1990)).

. The possibility that Hornell acted in bad faith when it denied the existence of the contract is not relevant to the question of whether or not it acted inconsistently with its right to arbitrate any formally filed claim. The only time pertinent to the issue raised by General Star is the time after O.J. Distributing filed the complaint. Accordingly, I disagree with the majority opinion's assertion that the defendant “slept on its rights for approximately fifteen months (April of 1997 through August of 1998) while Plaintiff incurred costs associated with the matter and was prejudiced as a result.” Supra majority at 24. Specifically, we hold above that the district court did not err in finding that the plaintiff failed to properly effectuate service of process on the defendant. Supra majority at- 18. Therefore, the defendant demanded arbitration before the court gained personal jurisdiction over Hornell, e.g., Omni Capital Int'l v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104, 108 S.Ct. 404, 98 L.Ed.2d 415 (1987), which is completely contrary to the facts of General Star. Moreover, the only costs relevant to the analysis under General Star are the costs associated "with the action,” Gen. Star, 289 F.3d at 438, which is usually considered an actual judicial proceeding, not the communications between the parties prior to the lawsuit. See Black’s Law Dictionary 28-29 (Deluxe 7th ed. 1999).