Court Opinion

ID: 4419621
Source: CourtListenerOpinion
Date Created: 2019-07-24 17:00:31.694606+00
Date Added: 2024-06-11T14:51:02.423645
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

JUNE NEWIRTH, by and through            No. 17-17227
her Guardian ad Litem, Frederick
J. Newirth, on her own behalf              D.C. No.
and on behalf of others similarly     4:16-cv-03991-JSW
situated; ELIZABETH BARBER;
ANDREW BARDIN; THOMAS
BARDIN, as successors-in-interest         OPINION
to the Estate of Margaret Pierce;
on their own behalves and on
behalf of others similarly
situated,
              Plaintiffs-Appellees,

                v.

AEGIS SENIOR COMMUNITIES,
LLC, DBA Aegis Living,
          Defendant-Appellant.
2          NEWIRTH V. AEGIS SENIOR COMMUNITIES

         Appeal from the United States District Court
            for the Northern District of California
          Jeffrey S. White, District Judge, Presiding

              Argued and Submitted May 14, 2019
                   San Francisco, California

                         Filed July 24, 2019

    Before: J. Clifford Wallace and Sandra S. Ikuta, Circuit
       Judges, and Donald W. Molloy,* District Judge.

                      Opinion by Judge Ikuta

                            SUMMARY**

                             Arbitration

    The panel affirmed the district court’s order denying
Aegis Senior Communities, LLC’s motion to compel
arbitration in a class action alleging that Aegis engaged in a
scheme to defraud seniors.

   The panel applied a federal law standard for determining
whether the arbitration agreement was waived. Under federal
law, a party seeking to prove that the right to compel

     *
     The Honorable Donald W. Molloy, United States District Judge for
the District of Montana, sitting by designation.
    **
       This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
         NEWIRTH V. AEGIS SENIOR COMMUNITIES                   3

arbitration has been waived must carry the burden of
demonstrating: (1) knowledge of an existing right to compel
arbitration; (2) intentional acts inconsistent with that existing
right; and (3) prejudice to the person opposing arbitration
from such inconsistent acts. Fisher v. A.G. Becker Paribas
Inc., 791 F.2d 691, 694 (9th Cir. 1986).

    The panel held that because Aegis knew of its right to
compel arbitration, but made an intentional decision not to
compel arbitration in order to take advantage of the judicial
forum, and because the plaintiffs were prejudiced by
incurring costs in defending against Aegis’s motion to
dismiss plaintiffs’ complaint, the district court did not err in
concluding that Aegis waived its right to arbitrate.

                         COUNSEL

Lann G. McIntyre (argued), Lewis Brisbois Bisgaard & Smith
LLP, San Diego, California; Leona Lam Reddy, Katherine C.
Den Bleyker, and Jeffrey S. Ranen, Lewis Brisbois Bisgaard
& Smith LLP, Los Angeles, California; for Defendant-
Appellant.

Sarah Colby (argued) and Guy B. Wallace, Schneider
Wallace Cottrell Konecky Wotkyns LLP, Emeryville,
California; Christopher J. Healey, Dentons US LLP, San
Diego, California; George Kawamoto and Kathryn A.
Stebner, Stebner and Associates, San Francisco, California;
Michael D. Thamer, Law Offices of Michael D. Thamer,
Callahan, California; W. Timothy Needham, Janssen Malloy
LLP, Eureka, California; Robert S. Arns, The Arns Law Firm,
San Francisco, California; Kirsten M. Fish, Neeham Kepner
& Fish LLP, San Jose, California; for Plaintiffs-Appellees.
4         NEWIRTH V. AEGIS SENIOR COMMUNITIES

                            OPINION

IKUTA, Circuit Judge:

    Aegis Senior Communities, LLC, appeals from the
district court’s order denying its motion to compel arbitration.
Because Aegis knew of its right to compel arbitration, but
made an intentional decision not to compel arbitration in
order to take advantage of the judicial forum, and because the
plaintiffs incurred costs as a direct result, the district court did
not err in concluding that Aegis waived its right to arbitrate.
Therefore, we affirm.

                                  I

    June Newirth, Margaret Pierce, and Barbara Feinberg
were residents of three different senior living communities,
all operated by Aegis Senior Communities, LLC (Aegis).1
Each of them (through a representative holding a valid power
of attorney) entered into an agreement with Aegis which
included an arbitration provision. The provision stated “that
any legal claim or civil action arising out of or relating to care
or services provided” by Aegis “will be determined by
submission to arbitration as provided in accordance with
California law.”

    Notwithstanding her arbitration agreement, Newirth filed
a class action complaint against Aegis in California state
court in April 2016, alleging that Aegis engaged in a scheme

    1
      Newirth resided at Aegis’s Corte Madera community from July 2010
through July 2014. Pierce resided at Aegis’s Moraga community from
April 2013 until January 2015. Feinberg has resided at Aegis’s Laguna
Niguel community since October 2013.
          NEWIRTH V. AEGIS SENIOR COMMUNITIES                         5

to defraud seniors by falsely representing that staffing levels
would be determined by the overall needs of the residents,
when in fact staffing was based on budget considerations.2
Aegis removed the complaint to district court in July 2016,
and filed a motion to compel arbitration as well as a motion
to dismiss a week later.

    Instead of pursuing these motions, however, Aegis and
Newirth filed a stipulated agreement a week later. Pursuant
to the stipulation, Newirth filed a second amended complaint
in August 2016, adding additional plaintiffs.3 For its part,
Aegis withdrew its motion to compel arbitration and its
motion to dismiss. In September 2016, it filed a new motion
to dismiss the second amended complaint, in which it made
no mention of arbitration or the arbitration agreements. The
following day, the parties filed an agreement stating they
were attempting mediation of their dispute.4

    Over the next 11 months, while the second motion to
dismiss was pending, the parties actively engaged in the
discovery process. The parties participated in a discovery
conference, entered into a court-approved stipulation

    2
      Newirth claimed that Aegis’s allegedly fraudulent actions violated
California’s Consumers Legal Remedies Act (CLRA), Cal. Civ. Code
§ 1750 et seq., California’s Unfair Competition Law (UCL), Cal. Bus. &
Prof. Code § 17200 et seq., and section 15610.30 of California’s Welfare
and Institutions Code (which prohibits the financial abuse of an elder).
    3
      The second amended complaint added Feinberg as a plaintiff, as
well as Elizabeth Barber, Andrew Bardin, and Thomas Bardin, as
successors-in-interest to Pierce’s estate.
    4
      The parties began the mediation process on May 29, 2018, but it
proved unsuccessful.
6          NEWIRTH V. AEGIS SENIOR COMMUNITIES

regarding the production of documents and electronic records,
and submitted a proposed joint conference report that
included a proposed schedule for discovery, class certification
briefing and hearing dates, and a date for trial. In December
2016, the parties served their initial disclosures. In the early
stages of discovery, Aegis disclosed a copy of the relevant
agreements with Newirth, Pierce, and Feinberg; each
agreement included an arbitration provision initialed by the
party’s representative.

    Feinberg and Aegis entered into a settlement agreement
later that month.5 The remaining parties continued to meet
and confer regarding moving forward with the discovery
process.

    The district court finally denied Aegis’s pending motion
to dismiss Newirth’s second amended complaint in May
2017. Aegis filed a new motion to compel arbitration two
months later, almost a year after it had withdrawn its initial
motion to compel arbitration.

    In September 2017, the district court denied Aegis’s
renewed motion to compel arbitration on the ground that
Aegis had waived its right to arbitrate. Aegis filed a timely
notice of appeal.6 See Fed. R. App. P. 4(a)(1).

    5
     Feinberg was formally removed as a class representative in October
2017, and is not a party to this appeal. Through the remainder of this
opinion, we use “Newirth” to refer collectively to plaintiffs-appellees.
    6
      The district court denied Aegis’s motion to stay the district court’s
order pending appeal. Accordingly, litigation has continued at the district
court and is ongoing. This ongoing litigation does not render this appeal
moot because effective relief remains available to Aegis. If Aegis
prevailed in its claim that it was entitled to arbitrate the dispute, “the
           NEWIRTH V. AEGIS SENIOR COMMUNITIES                         7

    We have jurisdiction under 28 U.S.C. § 1291 because a
“district court’s denial of a motion to compel arbitration” is
a final order appealable under the Federal Arbitration Act, 9
U.S.C. § 16(a)(1)(B). Cox v. Ocean View Hotel Corp.,
533 F.3d 1114, 1117 (9th Cir. 2008). We review de novo the
district court’s denial of a motion to compel arbitration,
including its determination that a party has waived the right
to arbitrate. Id. at 1119.

                                   II

    Congress enacted the Federal Arbitration Act (FAA) in
1925 “in response to a perception that courts were unduly
hostile to arbitration.” Epic Sys. Corp. v. Lewis, 138 S. Ct.
1612, 1621 (2018). The Act provides that arbitration
agreements “shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2. The Supreme
Court has “described this provision as reflecting both a
‘liberal federal policy favoring arbitration,’ and the
‘fundamental principle that arbitration is a matter of
contract.’” AT&T Mobility LLC v. Concepcion, 563 U.S. 333,
339 (2011) (first quoting Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24 (1983); then quoting
Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 67
(2010)). In light of the FAA’s savings clause and the
fundamental principle that contract rules apply to arbitration
agreements, the Supreme Court has concluded that “[a] court
may invalidate an arbitration agreement based on ‘generally
applicable contract defenses,”’ but “any state rule

district court judgment would be vacated and the parties could proceed to
arbitration.” Britton v. Co-op Banking Grp., 916 F.2d 1405, 1410 & n.6
(9th Cir. 1990).
8          NEWIRTH V. AEGIS SENIOR COMMUNITIES

discriminating on its face against arbitration” or “that
covertly accomplishes the same objective” is preempted.
Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421,
1426 (2017) (quoting Concepcion, 563 U.S. at 339).

    Although arbitration agreements are subject to general
contract principles such as waiver, a “[w]aiver of a
contractual right to arbitration is not favored,” and “any party
arguing waiver of arbitration bears a heavy burden of proof.”7
Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th
Cir. 1986) (internal quotation marks omitted). Moreover,
where the waiver of the right to compel arbitration implicates
questions of arbitrability that “affect the allocation of power”
between a court and arbitrator, we have applied a federal law
standard for determining whether an arbitration agreement
has been waived. Sovak v. Chugai Pharm. Co., 280 F.3d
1266, 1270 (9th Cir. 2002) (internal quotation marks
omitted); compare id. with Cox, 533 F.3d at 1124–25 & n. 7
(applying California waiver law in lieu of the federal
standard). The parties do not dispute that the federal standard
applies here.8

    7
      Because Newirth does not rely on California’s longstanding rule that
a party may waive a contract right, see Roesch v. De Mota, 24 Cal. 2d 563,
572 (1944), or assert that this rule precludes enforcement of the arbitration
agreement, we do not reach the question whether this rule would be
preempted by the FAA under the “equal-treatment principle” recognized
in Kindred Nursing Centers. 137 S. Ct. at 1426.
    8
      The parties also do not dispute that a court, rather than an arbitrator,
should determine whether Aegis waived the right to arbitration. If parties
to a contract want an arbitrator to decide the question of waiver, “they
must place clear and unmistakable language to that effect in the
agreement.” Martin v. Yasuda, 829 F.3d 1118, 1124 (9th Cir. 2016).
Here, the parties’ contract does not clearly and unmistakably provide that
the arbitrator will decide the question of waiver.
         NEWIRTH V. AEGIS SENIOR COMMUNITIES                   9

    Under federal law, waiver is “the intentional
relinquishment or abandonment of a known right.” Hamer v.
Neighborhood Hous. Servs. of Chi., 138 S. Ct. 13, 17 n.1
(2017) (internal quotation marks omitted). A party seeking
to prove that the right to compel arbitration has been waived
must carry the heavy burden of demonstrating: (1) knowledge
of an existing right to compel arbitration; (2) intentional acts
inconsistent with that existing right; and (3) prejudice to the
person opposing arbitration from such inconsistent acts.
Fisher, 791 F.2d at 694.

   Aegis does not dispute that it knew it had a right to
compel arbitration with Newirth. Therefore, we consider
only the second and third elements of waiver.

                               A

    We first consider Newirth’s argument that Aegis
intentionally took actions inconsistent with the right to
compel arbitration of Newirth’s claims.

    “There is no concrete test to determine whether a party
has engaged in acts that are inconsistent with its right to
arbitrate,” Martin v. Yasuda, 829 F.3d 1118, 1125 (9th Cir.
2016); rather, we consider the totality of the parties’ actions,
see id. at 1126. Applying this holistic approach, we have
generally asked whether a party’s actions “indicate a
conscious decision . . . to seek judicial judgment on the merits
of [the] arbitrable claims, which would be inconsistent with
a right to arbitrate.” Id. at 1125 (internal quotation marks
omitted) (second alteration in original). That is, a party acts
inconsistently with exercising the right to arbitrate when it
(1) makes an intentional decision not to move to compel
arbitration and (2) actively litigates the merits of a case for a
10         NEWIRTH V. AEGIS SENIOR COMMUNITIES

prolonged period of time in order to take advantage of being
in court.

    Seeking a decision on the merits of a key issue in a case
indicates an intentional and strategic decision to take
advantage of the judicial forum. Id. at 1126. For example, in
Van Ness Townhouses v. Mar Industries Corp., we concluded
that the defendant acted inconsistently with its known
arbitration right when it made an intentional decision to
refrain from filing a motion to compel arbitration (because it
did not want to sever the arbitrable claims from the
nonarbitrable claims), and litigated the arbitrable claims for
two years in federal court, including filing a motion to
dismiss for failure to state a claim. 862 F.2d 754, 756, 759
(9th Cir. 1988). Similarly, in Martin v. Yasuda, we
concluded that the defendants acted inconsistently with
pursuing arbitration when they spent seventeen months
actively litigating their case in federal court, including filing
a motion to dismiss “on a key merits issue.” 829 F.3d at
1126. Again, the record established that the defendants in
Martin intentionally refrained from filing a motion to compel
arbitration: when the district court asked defendants’ counsel
directly whether he intended to move to compel arbitration,
counsel responded: “[W]e haven’t made a decision about
that. And frankly . . . I think our view of it is we are probably
better off just being here in the court with the procedures of
Rule 23 and discovery and federal practice than handling it in
arbitration.” Id. at 1122 (alterations in original). 9

     9
       In a slightly different context, we have held that when a defendant
with a non-mandatory arbitration agreement litigated its claims to a verdict
in trial court, it acted inconsistently with its known right to timely demand
arbitration. See Gutierrez v. Wells Fargo Bank, NA, 704 F.3d 712, 721–22
(9th Cir. 2012).
          NEWIRTH V. AEGIS SENIOR COMMUNITIES                       11

     Conversely, parties do not act inconsistently with a right
to compel arbitration when they engage in litigation activities
that do not evince a decision to take advantage of the judicial
forum. Thus Britton v. Co-op Banking Group held that a
defendant who resisted discovery requests, pursued a court-
appointed attorney, and applied for in forma pauperis status,
did not act inconsistently with his right to arbitrate. 916 F.2d
1405, 1413 (9th Cir. 1990). Such actions reflected only a
“determination to avoid or frustrate the litigation” rather than
a strategic decision to “active[ly] litigat[e],” i.e., to forgo the
right to compel arbitration and take advantage of a judicial
forum. Id. Even “filing a motion to dismiss that does not
address the merits of the case is not sufficient to constitute an
inconsistent act.” Martin, 829 F.3d at 1125;10 see also In re
Mirant Corp., 613 F.3d 584, 589 (5th Cir. 2010) (concluding
that a party did not waive its right to compel arbitration
unless that party “at the very least” had engaged “in some
overt act in court that evinces a desire to resolve the arbitrable
dispute through litigation rather than arbitration”). Likewise,
where it would have been “futile [at the time] to file a motion
to compel arbitration” under then-existing law, even a
defendant’s active litigation for three and a half years is not
inconsistent with a known right to compel arbitration. Fisher,
791 F.2d at 695; accord Letizia v. Prudential Bache Secs.,
Inc., 802 F.2d 1185, 1187 & n.3 (9th Cir. 1986). Conversely,
when a defendant successfully opposed a plaintiff’s initial
demand for arbitration, the plaintiff’s subsequent pursuit of
a remedy in federal court was not inconsistent with its known

    10
      Thus, moving to dismiss a complaint without prejudice or moving
to dismiss an action on jurisdictional or res judicata grounds is not
inconsistent with a known right to compel arbitration because such
motions do not seek a judicial determination on the merits. See Martin,
829 F.3d at 1125–1126 & n.4.
12       NEWIRTH V. AEGIS SENIOR COMMUNITIES

right to arbitrate, and the plaintiff could therefore pursue a
renewed arbitration demand at a later date. See United States
v. Park Place Assocs., Ltd., 563 F.3d 907, 921 (9th Cir.
2009). In context, such actions do not evince an intentional
decision to forgo arbitration in favor of a judicial forum.

     Applying this framework, Newirth carried her burden of
showing that Aegis took actions inconsistent with its known
right to arbitrate. Although Aegis promptly filed a motion to
compel arbitration, Aegis intentionally withdrew the motion
and proceeded to take advantage of the federal forum by
filing a motion to dismiss Newirth’s arbitrable claims, with
prejudice, for failure to state a claim. As we have explained,
“[w]hen defendants move for dismissal with prejudice on a
key merits issue that would preclude relief as to one or more
of plaintiffs’ claims . . . they are seeking a ruling on the
merits.” Martin, 829 F.3d at 1126 n.4. Only after receiving
an adverse ruling on this motion did Aegis refile the motion
to compel arbitration that it had withdrawn a year earlier.
Under the totality of these circumstances, we conclude that
Aegis knowingly decided to defer its right to compel
arbitration to avail itself of the benefits of the federal court
forum, an intentional action inconsistent with its known right
to compel arbitration.

    Aegis makes several arguments to avoid this conclusion.
First, it argues that it never expressly waived its right to
compel arbitration. But parties to a contract can impliedly
waive a right, so long as the parties’ actions amount to a
knowing relinquishment of that right. See Van Ness,
862 F.2d at 759. Second, Aegis argues that its initial filing of
a motion to compel arbitration is evidence that it did not
intend to waive the right. But again, Aegis’s withdrawal of
the motion to compel arbitration and failure to renew it for a
         NEWIRTH V. AEGIS SENIOR COMMUNITIES                   13

year while it sought a determination on the merits provides
strong support for Newirth’s argument that Aegis
intentionally waived its right to compel arbitration.

     Third, Aegis argues that it “engaged in only the minimum
amount of litigation activity required . . . to comply with its
obligations under the applicable court rules and orders, and
therefore did not act inconsistently with its right to arbitrate.”
This argument also fails. Aegis could have filed a renewed
motion to compel arbitration at any time after withdrawing its
initial motion, but waited a year to do so. In the meantime,
Aegis sought a judgment on the merits from the district court.
Nor did Aegis avail itself of local rules that would have
allowed it to seek relief from case management and discovery
obligations. See N.D. Cal. Civil L.R. 16-2(d).

    Finally, Aegis argues that the one-year delay in filing its
second motion to dismiss was not inconsistent with its
arbitration right because the lengthy delay was due to its
mistaken belief that Feinberg had not signed an arbitration
agreement, and could pursue her claims in court. Rather than
defend against the same claims in court and in arbitration
proceedings, Aegis asserts, it decided to proceed in court until
Feinberg withdrew as a class representative. The record does
not support this argument. Aegis provided the plaintiffs with
a copy of Feinberg’s signed and initialed arbitration
agreement in December 2016, more than seven months before
renewing its motion to compel arbitration. Moreover,
Feinberg settled with Aegis on December 19, 2016, again,
more than seven months before Aegis renewed its motion to
compel arbitration, and Aegis’s renewed motion was filed
nearly three months before Feinberg was removed as a class
representative. In any event, a decision “to avoid severance
of the arbitrable and non-arbitrable claims” by proceeding
14         NEWIRTH V. AEGIS SENIOR COMMUNITIES

with litigation on all claims may be “inconsistent with the
agreement to arbitrate [the arbitrable] claims” in some
circumstances. Van Ness, 862 F.2d at 759.11 Accordingly,
Newirth carried her burden of showing that Aegis took
actions inconsistent with its known right to compel
arbitration.

                                    B

    Finally, we consider whether appellees were prejudiced
by the inconsistent actions taken by Aegis. A party is not
prejudiced by self-inflicted wounds “incurred as a direct
result of suing in federal court contrary to the provisions of an
arbitration agreement.” Martin, 829 F.3d at 1126; see also
Fisher, 791 F.2d at 698. When a party agrees to arbitrate
disputes, and then breaches that agreement by filing a lawsuit,
“[a]ny extra expense incurred as a result of the [plaintiffs’]
deliberate choice of an improper forum, in contravention of
their contract, cannot be charged to [the defendant].” Fisher,
791 F.2d at 698. Accordingly, a plaintiff that has breached its
arbitration agreement is not prejudiced by costs incurred in
preparing the complaint, serving notice, and litigating non-
merits issues (such as jurisdiction or venue). See id. Nor is
such a plaintiff prejudiced by costs incurred due to substantial
discovery in federal court, even though such discovery
“would be rendered nugatory by a direction that arbitration
now be had.” Britton, 916 F.2d at 1413; see also Lake
Commc’ns, Inc. v. ICC Corp., 738 F.2d 1473, 1477 (9th Cir.
1984) (holding discovery costs resulting from plaintiff’s

     11
        Aegis also argues that it “regularly referenced arbitration in its
filings and in its correspondence with opposing counsel, and therefore
continuously reiterated its intention to compel arbitration of this matter.”
Aegis points to nothing in the record that supports this argument.
         NEWIRTH V. AEGIS SENIOR COMMUNITIES                  15

decision to sue in federal court were insufficient to show
prejudice). Finally, a plaintiff is not prejudiced by “the
possibility that there may be some duplication from . . .
parallel proceedings” in litigation and arbitration. Fisher,
791 F.2d at 698.

     A breaching plaintiff may nevertheless show prejudice
when the defendant has engaged in acts that are inconsistent
with its right to arbitrate (as explained above), and the
plaintiff has incurred costs due to such inconsistent acts. This
prejudice requirement is satisfied when plaintiffs would be
forced to “relitigate an issue on the merits on which they have
already prevailed in court,” or when defendants have sought
and “received an advantage from litigating in federal court
that they would not have received in arbitration.” Martin,
829 F.3d at 1126, 1128 (prejudice found where plaintiff
incurred costs “contesting the defendants’ motion to dismiss
on the merits”); see also Van Ness, 862 F.2d at 759. A
plaintiff may also show it was prejudiced by expenses of
litigation when it attempts to arbitrate a dispute, but is forced
by the defendant to pursue its remedies in court. See Brown
v. Dillard’s, Inc., 430 F.3d 1004, 1012–13 (9th Cir. 2005).
Conversely, a defendant may show prejudice due to the
expenses of litigation when a plaintiff pursues its claims in
state court (pursuant to an agreement with the defendant to
waive its arbitration rights), and then demands arbitration of
a related claim. See Hoffman Constr. Co. of Or. v. Active
Erectors & Installers, Inc., 969 F.2d 796, 799 (9th Cir. 1992).

    Applying these principles, Newirth was not prejudiced
by Aegis’s participation in discovery and scheduling
conferences, development of a proposed order regarding
electronic records, and conferring about alternative dispute
resolution. She was prejudiced, however, by the costs
16       NEWIRTH V. AEGIS SENIOR COMMUNITIES

incurred in defending against Aegis’s motion to dismiss her
complaint on the merits. Aegis attempted to take advantage
of the judicial forum to prevail on the merits of Newirth’s
arbitrable claims, and did not file a motion to compel
arbitration until after receiving an adverse ruling. If the court
had granted the motion to compel arbitration, Newirth would
have been forced “to relitigate a key legal issue [on the
merits] on which the district court has ruled in [her] favor.”
Martin, 829 F.3d at 1128. The costs of rearguing this ruling
are directly traceable to Aegis’s acts that were inconsistent
with its known right to compel arbitration. See id. at 1126.

    Aegis argues that despite the fact its motion to dismiss on
the merits directly caused Newirth to incur costs contesting
that motion, Newirth was not prejudiced because Aegis does
not intend to make the same challenges in arbitration. This
argument fails. It ignores that Newirth already expended
costs “contesting the defendants’ motion to dismiss on the
merits,” id. at 1128; costs directly traceable to Aegis’s acts
inconsistent with its known right to compel arbitration. That
Aegis intends not to revive its rejected merits arguments once
sent to arbitration does not alleviate this prejudice.

    Accordingly, Newirth has carried her heavy burden of
showing prejudice.

     AFFIRMED.