Court Opinion

ID: 9955140
Source: CourtListenerOpinion
Date Created: 2024-03-27 19:00:39.20314+00
Date Added: 2024-06-11T08:15:17.502925
License: Public Domain

RECOMMENDED FOR PUBLICATION
                                Pursuant to Sixth Circuit I.O.P. 32.1(b)
                                       File Name: 24a0065p.06

                   UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT

                                                             ┐
 JASON SCHWEBKE,
                                                             │
                                    Plaintiff-Appellee,      │
                                                              >        Nos. 23-1507/1551
                                                             │
       v.                                                    │
                                                             │
 UNITED WHOLESALE MORTGAGE LLC dba UWM,                      │
 a Michigan Corporation,                                     │
                         Defendant-Appellant.                │
                                                             ┘

  Appeal from the United States District Court for the Eastern District of Michigan at Detroit.
                   No. 2:21-cv-10154—Denise Page Hood, District Judge.

                                   Argued: January 25, 2024

                              Decided and Filed: March 27, 2024

                   Before: GRIFFIN, BUSH, and LARSEN, Circuit Judges.
                                  _________________

                                            COUNSEL

ARGUED: Matthew T. Nelson, WARNER NORCROSS + JUDD LLP, Grand Rapids,
Michigan, for Appellant. Molly Savage, DEBORAH GORDON LAW, Bloomfield Hills,
Michigan, for Appellee. ON BRIEF: Matthew T. Nelson, Andrea J. Bernard, Charles R.
Quigg, WARNER NORCROSS + JUDD LLP, Grand Rapids, Michigan, Paul D. Hudson,
MILLER, CANFIELD, PADDOCK AND STONE, P.L.C., Grand Rapids, Michigan, for
Appellant. Molly Savage, Deborah L. Gordon, Elizabeth Marzotto Taylor, Sarah Gordon
Thomas, DEBORAH GORDON LAW, Bloomfield Hills, Michigan, for Appellee.
                                      _________________

                                             OPINION
                                      _________________

      LARSEN, Circuit Judge.          Jason Schwebke sued his employer, United Wholesale
Mortgage (UWM), alleging disability discrimination under state and federal law. For seven
 Nos. 23-1507/1551        Schwebke v. United Wholesale Mortg. LLC                         Page 2

months, UWM participated in extensive discovery—producing tens of thousands of pages of
documents, taking and defending depositions, and issuing third-party subpoenas—without ever
mentioning arbitration.    Then, with discovery nearly complete, UWM moved to compel
arbitration. The district court denied that motion because UWM implicitly waived its arbitration
right. We AFFIRM.

                                                I.

       Schwebke, who is deaf, was a software developer at UWM. In that role, he was required
to participate in multiple team meetings each week.       To meaningfully participate in those
meetings, he requested on-site sign-language interpreters. Schwebke says that UWM declined to
provide interpreters and asked him to use lower-cost alternatives. Those did not work well for
Schwebke. UWM fired him in May 2020.

       On January 22, 2021, Schwebke sued UWM. He claimed retaliation and failure to
accommodate under the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq., and
retaliation and discrimination under the Michigan Persons with Disabilities Civil Rights Act,
Mich. Comp. Laws § 37.1101 et seq.

       The parties’ employment relationship was governed by an employment agreement. That
agreement contained an arbitration clause requiring the parties to submit covered claims to
binding arbitration. The parties agree that Schwebke’s claims are covered. But UWM did not
raise the arbitration clause in its February 16, 2021, answer to Schwebke’s complaint, although it
did raise other defenses. UWM first raised the arbitration clause on August 30, 2021, when it
filed a motion to dismiss or, in the alternative, to stay proceedings and compel arbitration.
UWM’s counsel told the district court that UWM had not raised the arbitration clause earlier
“because [UWM’s counsel] didn’t know that there was an arbitration clause” in the employment
agreement. R. 56, Mot. Hr’g Tr., PageID 2424.

       In the intervening six-and-a-half months, the parties engaged in extensive discovery.
First, the parties participated in a discovery conference. Second, UWM served interrogatories
and requests for production. Third, the parties filed a joint discovery plan pursuant to Federal
Rule of Civil Procedure 26(f).      That plan had a provision addressing alternative dispute
 Nos. 23-1507/1551        Schwebke v. United Wholesale Mortg. LLC                         Page 3

resolution, but it made no reference to the arbitration clause. Fourth, UWM produced tens of
thousands of pages of documents in response to Schwebke’s discovery requests. Fifth, UWM
issued fourteen third-party subpoenas for education and employment records. Sixth, UWM
produced witnesses for deposition and participated in those depositions. Seventh, UWM took
Schwebke’s and a third-party witness’s depositions. Eighth, UWM filed its witness list and
agreed to an extension of the discovery deadline.

       The court-ordered discovery deadline was August 26, 2021, but the parties agreed to
extend the deadline to accommodate a few more depositions. UWM then filed its motion to
dismiss or, in the alternative, to stay proceedings and compel arbitration on August 30, 2021.
After filing the motion, UWM produced three more witnesses for deposition, served two more
third-party subpoenas, and produced documents in response to Schwebke’s discovery requests.
Schwebke moved for summary judgment on November 16, 2021.

       The district court held a hearing on UWM’s motion on December 1, 2021. After the
hearing, the Supreme Court decided Morgan v. Sundance, Inc., 596 U.S. 411 (2022), which
addressed arbitration waiver. Id. at 417. The parties filed supplemental briefs in response to the
decision. The district court, having considered those briefs, denied UWM’s motion. The district
court reasoned that UWM implicitly waived its right to compel arbitration because its conduct
was completely inconsistent with reliance on its arbitration right. UWM appeals.

                                               II.

       We review the denial of a motion to compel arbitration de novo. Borror Prop. Mgmt.,
LLC v. Oro Karric N., LLC, 979 F.3d 491, 494 (6th Cir. 2020). When the district court denies
the motion based on waiver, we review the underlying factual determinations for clear error and
then decide de novo whether those facts constitute waiver. See Sandler v. All Acquisition Corp.,
954 F.2d 382, 384–85 (6th Cir. 1992); White v. Samsung Elecs. Am., Inc., 61 F.4th 334, 338 (3d
Cir. 2023).
 Nos. 23-1507/1551              Schwebke v. United Wholesale Mortg. LLC                                       Page 4

                                                          A.

         This case asks us to decide when a party has waived its contractual right to arbitrate by
participating in litigation. Until recently, federal courts, including this one, held that a party who
participates extensively in litigation has not waived its right to arbitrate unless “its conduct has
prejudiced the other side.” Morgan, 596 U.S. at 414; see O.J. Distrib., Inc. v. Hornell Brewing
Co., 340 F.3d 345, 356 (6th Cir. 2003). That prejudice requirement was thought to flow from the
Federal Arbitration Act’s “policy favoring arbitration.” Morgan, 596 U.S. at 414. But in
Morgan, the Supreme Court abrogated the prejudice prong of the analysis. “The federal policy is
about treating arbitration contracts like all others, not about fostering arbitration.” Id. at 418. So
courts asking whether a party has waived a right to arbitrate should not make harm to others a
prerequisite. Instead, they should apply ordinary waiver rules, looking for the “intentional
relinquishment or abandonment of a known right.” Id. at 417 (quoting United States v. Olano,
507 U.S. 725, 733 (1993)).1

         Morgan arose out of the Eighth Circuit. There, under pre-Morgan precedent, a party
waived its right to arbitrate when it: (1) knew of the right; (2) acted inconsistently with the right;
and (3) prejudiced the other party through its inconsistent action. Id. at 415. Morgan held that
the Eighth Circuit could not “condition a waiver of the right to arbitrate on a showing of
prejudice.” Id. at 417. But the Court said that, on remand, the Eighth Circuit could apply its
existing waiver test stripped of the prejudice requirement. Id. at 419.

         Before Morgan, this circuit applied a similar rule. We held that a “party may waive an
agreement to arbitrate” when it both: “(1) tak[es] actions that are completely inconsistent with
any reliance on an arbitration agreement; and (2) delay[s] its assertion to such an extent that the
opposing party incurs actual prejudice.” Hurley v. Deutsche Bank Tr. Co. Americas, 610 F.3d
334, 338 (6th Cir. 2010) (internal quotation marks and citation omitted).

         1
           The Supreme Court declined to address whether “waiver,” as opposed to “forfeiture, estoppel, laches or
procedural timeliness,” is the right analytical framework to assess whether a “party’s litigation conduct results in the
loss of a contractual right to arbitrate.” Morgan, 596 U.S. at 416. Noting that the Courts of Appeals have generally
resolved such cases “using the terminology of waiver,” the Court “assume[d] without deciding they are right to do
so.” Id. at 416–17. The parties in this case do not challenge that assumption, so we continue to use the language of
waiver contained in our pre-Morgan caselaw.
 Nos. 23-1507/1551         Schwebke v. United Wholesale Mortg. LLC                         Page 5

       We have not yet had an opportunity to consider Morgan’s effect on our rule. At a
minimum, Morgan eliminated the prejudice requirement. See 596 U.S. at 417. In this case, we
need not decide whether Morgan did more than that because the parties agree that, once stripped
of its prejudice requirement, our pre-Morgan caselaw remains intact. Given this posture, we
assume without deciding that our precedent asking whether a party’s actions are “completely
inconsistent” with reliance on arbitration survives Morgan.

                                                B.

       We have decided one case very similar to this one: Johnson Associates Corp. v. HL
Operating Corp., 680 F.3d 713 (6th Cir. 2012). That case largely determines the outcome here.
The defendant in Johnson Associates: (1) waited eight months before moving to compel
arbitration; (2) did not raise arbitration as an affirmative defense; (3) asserted other affirmative
defenses; (4) asserted a counterclaim; (5) participated in a case management conference;
(6) participated in settlement discussions facilitated by a magistrate judge; (7) filed a case
management order; (8) served interrogatories and requested documents; (9) noticed eight
depositions; and (10) agreed to extend the discovery deadline. Id. at 715–16. We held that the
defendant’s conduct “considered together” was “completely inconsistent” with reliance on
arbitration. Id. at 719. In making that determination, we emphasized that the defendant “failed
to raise arbitration in its answer,” “asserted a counterclaim,” “and actively scheduled and
requested discovery, including depositions, rather than moving to compel arbitration following
the end of formal settlement discussions.” Id. at 718–19.

       UWM engaged in conduct similar to that of the defendant in Johnson Associates.
UWM: (1) waited seven months before moving to compel arbitration; (2) did not raise
arbitration as an affirmative defense; (3) raised other affirmative defenses; (4) participated in a
discovery conference; (5) filed a joint discovery plan; (6) served interrogatories and requested
documents; (7) noticed two depositions; and (8) agreed to an extension of the discovery deadline.

       Furthermore, UWM engaged in conduct beyond what occurred in Johnson Associates. In
Johnson Associates, we found it significant that the defendant had “actively scheduled and
requested discovery.” Id. at 718. Yet in that case, “no discovery responses had been exchanged
 Nos. 23-1507/1551         Schwebke v. United Wholesale Mortg. LLC                         Page 6

and no depositions had been taken.” Johnson Assocs. Corp. v. HL Operating Corp., 2010 WL
4942788, at *1 (M.D. Tenn. Nov. 30, 2010), aff’d, 680 F.3d 713. Here, far more extensive
discovery was nearly complete. UWM deposed two witnesses, produced three witnesses for
deposition and participated in those depositions, and produced tens of thousands of pages of
documents in response to several discovery requests. UWM also issued fourteen third-party
subpoenas, filed a witness list, and entered a joint discovery plan that addressed alternative
dispute resolution without mentioning arbitration.

       UWM argues that several of these actions are insignificant. First, UWM argues that its
responsive discovery should be given little weight because it was merely an attempt to meet the
issues raised in litigation. We have said that “attempts to meet all issues raised in litigation,”
without more, are not sufficient to support a finding of waiver. See Germany v. River Terminal
Ry. Co., 477 F.2d 546, 547 (6th Cir. 1973) (per curiam). UWM is right that responsive conduct
is less inconsistent with reliance on arbitration than affirmative conduct. But that does not mean
that producing discovery without protest or reference to the arbitration clause is irrelevant to the
totality-of-the-circumstances analysis.    Second, UWM argues that its affirmative discovery
should also be discounted because “arbitration also involves discovery.” Appellant Br. at 24.
That includes third-party subpoenas, UWM argues, because it would have had access to such
subpoenas in arbitration, enforceable either in federal court under the Federal Arbitration Act, 9
U.S.C. § 1 et seq., or in state court under Michigan’s Uniform Arbitration Act, Mich. Comp.
Laws § 691.1681 et seq.        We find that argument unpersuasive.        The parties dispute the
availability of enforcement in federal or state court for subpoenas issued by an arbitrator. And
regardless of whether such enforcement is available, the fact that arbitration may also involve
subpoenas and other forms of discovery does not change the fact that UWM requested discovery
while the case was in federal court, invoking the power of that court under the Federal Rules of
Civil Procedure. That conduct, we held in Johnson Associates, suggests an intent not to enforce
its arbitration clause. See 680 F.3d at 719.

       To be sure, this case is missing some conduct present in Johnson Associates. UWM
argues that the “[m]ost notabl[e]” distinction between this case and Johnson Associates is that
the defendant in Johnson Associates filed a counterclaim, whereas UWM did not. Appellant Br.
 Nos. 23-1507/1551         Schwebke v. United Wholesale Mortg. LLC                           Page 7

at 20. That difference matters, in UWM’s view, because UWM sees the “hallmark of implied
waivers [a]s at least some request for affirmative relief,” and UWM characterizes the filing of a
counterclaim as such an affirmative request. Id. at 25–28. UWM is right that in most of our
cases finding arbitration waiver, there has been an affirmative request for relief, such as the filing
of a dispositive motion. See, e.g., Solo v. United Parcel Serv. Co., 947 F.3d 968, 975 (6th Cir.
2020); Gunn v. NPC Int’l, Inc., 625 F. App’x 261, 265 (6th Cir. 2015); Hurley, 610 F.3d at 339.
But Johnson Associates makes clear that the waiver analysis rests on the totality of the
circumstances—not on any bright-line rule. See 680 F.3d at 719. And, in any event, there are
meaningful differences between dispositive motions and counterclaims. A dispositive motion
affirmatively asks the district court to exercise power and decide an issue. A counterclaim, while
adding a claim into existing litigation, affirmatively requests relief only in the broadest sense.
Moreover, the extent to which asserting a counterclaim is inconsistent with arbitration depends,
in part, on whether the counterclaim is permissive or compulsory. In the case of a permissive
counterclaim, the party is willfully expanding the scope of litigation. In the case of a compulsory
counterclaim, the party is required to respond to the litigation or waive the right to bring that
claim. In Johnson Associates, the counterclaim was compulsory. See R. 1, Complaint, PageID
2–5, 2010 WL 4942788; Fed. R. Civ. P. 13(a). As discussed above, responsive conduct is less
relevant to the analysis than affirmative conduct.        See Germany, 477 F.2d at 547.          The
compulsory counterclaim’s presence in Johnson Associates does not meaningfully distinguish
that case from this one.

       UWM also notes that the defendant in Johnson Associates, unlike UWM, participated in
settlement discussions facilitated by a magistrate judge. 680 F.3d at 715. That conduct was not
one of the factors emphasized in Johnson Associates, see id. at 719, and we have been reluctant
to infer waiver based on settlement-related activities, cf. Borror Prop. Mgmt., 979 F.3d at 496
(applying this principle to pre-litigation settlement correspondence). Nor does participation in
magistrate-judge-facilitated settlement discussions involve the district court acting as a district
court, which would be more relevant to the waiver analysis. Cf. Solo, 947 F.3d at 975. The
absence of settlement discussions facilitated by a magistrate judge does little to distinguish this
case from Johnson Associates.
 Nos. 23-1507/1551        Schwebke v. United Wholesale Mortg. LLC                          Page 8

        Finally, UWM suggests that its conduct does not constitute waiver because its failure to
raise arbitration earlier was a mistake. UWM failed to raise the arbitration clause earlier because
its counsel was unaware of the clause. But UWM concedes that it had “imputed knowledge” of
the employment agreement, Reply Br. at 20, which it produced in its first set of discovery
documents. While UWM’s conduct does not suggest an attempt to secure a “tactical advantage,”
which would further support a finding of waiver, neither can counsel’s failure to read the
employment agreement be attributed to an “otherwise excusable purpose.” Gunn, 625 F. App’x
at 265. UWM’s mistake does not prevent us from finding waiver.

        UWM participated in extensive discovery—producing tens of thousands of pages of
documents, taking and defending depositions, and issuing third-party subpoenas—without ever
mentioning arbitration. That discovery was nearly complete when, seven months into the case,
UWM moved to compel arbitration. Under our precedent, UWM implicitly waived its right to
compel arbitration because its conduct was completely inconsistent with reliance on its
arbitration right.

                                              ***

        We AFFIRM.