Court Opinion

ID: 2977431
Source: CourtListenerOpinion
Date Created: 2015-09-22 18:08:22.411532+00
Date Added: 2024-06-11T15:39:05.852461
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                             File Name: 09a0126n.06
                             Filed: February 12, 2009

                                          No. 07-2300

                             UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT

GREGORY MANASHER and                         :
FRIDA SIROTA,                                :
                                             :
     Plaintiffs-Appellees,                   :
                                             :       ON APPEAL FROM THE
v.                                           :       UNITED STATES DISTRICT COURT
                                             :       FOR THE EASTERN DISTRICT OF
NECC TELECOM,                                :       MICHIGAN
     Defendant-Appellant.                    :

BEFORE: BOGGS, Chief Judge; CLAY, Circuit Judge; BERTELSMAN, District Judge.*

BERTELSMAN, District Judge:

       Defendant-appellant NECC Telecom (“NECC”) appeals the district court’s denial of its

motion to compel arbitration under the Federal Arbitration Act, 9 U.S.C. § 1 et seq.1 Because we

hold NECC waived any agreement to arbitrate by its delay in seeking its enforcement, and

because we hold that the amended complaint did not revive NECC’s right to compel arbitration,

       *
         The Honorable William O. Bertelsman, United States District Judge for the Eastern
District of Kentucky, sitting by designation.
       1
         The district court did not address the issue of waiver in its decision to deny NECC’s
motion to compel arbitration. Because the issue was raised before the district court and the
parties had an opportunity to brief it, we have addressed it here. See S.E. v. Grant County Bd. Of
Educ., 544 F.3d 633, 639 (6th Cir. 2008) (quoting Graoch Assocs. #33, L.P. v.
Louisville/Jefferson County Metro Human Relations Comm’n, 508 F.3d 366, 371 (6th Cir.
2007)).

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we affirm the district court.2

        NECC is an international and domestic long-distance telephone service provider. The

plaintiffs allege that NECC’s telemarketers solicited them and made promises regarding NECC’s

rates and charges for long-distance telephone services. Based upon these oral representations,

the plaintiffs selected NECC as their long-distance provider. After they began receiving invoices

for NECC’s services, the plaintiffs noticed that NECC was assessing charges that were

inconsistent with the telemarketers’ representations.

        On January 31, 2006, the plaintiffs filed their complaint in the Michigan Circuit Court for

Wayne County against NECC, asserting state law claims on behalf of a class of consumers for

improper and unlawful billing practices. On February 17, 2006, the defendant removed the

action to the United States District Court for the Eastern District of Michigan. On February 27,

2006, the defendant filed its answer, but did not assert arbitration as an affirmative defense.

Thereafter, the parties engaged in discovery and participated in motion practice, including

motions to certify the class and to amend the complaint.

        On December 8, 2006, the district court granted plaintiffs’ motion to amend their

complaint. The plaintiffs’ first amended complaint, filed December 12, 2006, was premised

upon the same facts and transactions as the original complaint, but added two new claims: 1)

violations of the Federal Communications Act of 1934 and the Federal Communications

Commission’s Truth-in-Billing Act; and 2) unjust enrichment.

        On January 30, 2007, a year after the plaintiffs filed their original complaint, the

        2
          Having held that NECC waived its arbitration rights, we need not address whether the
trial court erred in finding, as a matter of law, that the parties had not entered into an agreement
to arbitrate.

                                                  2
defendant filed a motion to compel arbitration, asserting for the first time that the claims raised

by the plaintiffs were subject to an arbitration provision incorporated by reference into their

agreement. The plaintiffs filed a response, asserting, among other reasons, that the defendant had

waived its right to arbitration.3

        This court has previously held that a party can waive its agreement to arbitrate, stating:

        “[a]n agreement to arbitrate may be waived by the actions of a party which are completely
        inconsistent with any reliance thereon.” Germany v. River Terminal Ry. Co., 477 F.2d
546, 547 (6th Cir. 1973) (per curiam). Although a waiver of the right to arbitration is
        “not to be lightly inferred,” MicroStrategy, Inc. v. Lauricia, 268 F.3d 244, 249 (4th Cir.
        2001) (internal quotation marks omitted), a party may waive the right by delaying its
        assertion to such an extent that the opposing party incurs actual prejudice. Doctor’s
        Assocs., Inc. v. Distajo, 107 F.3d 126, 131 (2d Cir. 1997) (recognizing that a party waives
        the right to arbitrate where it delays the invocation of that right to the extent that the
        opposing party incurs “unnecessary delay or expense”)(internal quotation marks omitted).

Gen. Star Nat’l Ins. Co. v. Administratia Asigurarilor de Stat, 289 F.3d 434, 438 (6th Cir. 2002)

(alterations in Gen. Star Nat’l Ins. Co.). See also O.J. Distrib., Inc. v. Hornell Brewing Co., Inc.,

340 F.3d 345, 356 (6th Cir. 2003) (following Gen. Star Nat’l Ins. Co.).

        We hold, under the facts of this case, that NECC waived whatever right to arbitrate it may

have had by failing to plead arbitration as an affirmative defense and by actively participating in

litigation for almost a year without asserting that it had a right to arbitration. NECC’s conduct

was “completely inconsistent with its reliance thereon” and caused the plaintiffs to suffer

prejudice through unnecessary delay and expense. Gen. Star Nat’l Ins., 289 F.3d at 438.

        The defendant argues that the amended complaint sufficiently changed the facts and

        3
         We note that Federal Rule of Civil Procedure 8(c) requires a defendant to plead
arbitration as an affirmative defense in its answer or it will generally be deemed waived. Fed. R.
Civ. P. 8(c). See Seals v. General Motors Corp., 546 F.3d 766, 770 (6th Cir. 2008); Moore,
Owen, Thomas & Co. v. Coffey, 992 F.2d 1439, 1445 (6th Cir. 1993).

                                                  3
claims asserted by the plaintiffs in their original complaint such that it revived its right to compel

arbitration. We disagree.

       The amended complaint, in the case at bar, did not substantially alter the scope or theory

of the case such that it created new and different issues.4 Instead, in the amended complaint, the

plaintiffs continued to assert that the defendant charged, billed and collected improper fees for

long-distance services, and more specifically spelled out the factual basis for their claims. In the

amended complaint, the plaintiffs asserted two new claims: 1) a state law claim for unjust

enrichment; and 2) a federal claim under the Federal Communications Act of 1934 and the

Federal Communications Commission’s Truth-in-Billing Act. The two new claims, however, are

still directed toward plaintiffs’ challenge to NECC’s billing practices. The Communications Act

and Truth-in-Billing Act provide a claim against a telephone service provider for “unjust and

unreasonable” practices and “set[] standards for bills for telecommunications service.” 47 U.S.C.

§§ 201(b), 206 and 207; 47 C.F.R. § 64.2401. Thus, these new claims did not substantially

change the theory or scope of the plaintiffs’ claims.

       Accordingly, we hold that the additional claims contained in the amended complaint did

not substantially alter the scope or theory of this matter in such a way as to revive the defendant’s

right to compel arbitration, which we hold the defendant waived by its prejudicial conduct of

       4
         The cases cited by the defendant are distinguishable from the case at bar. See Sovak v.
Chugai Pharm. Co., 280 F.3d 1266, 1269-70 (9th Cir. 2002) (court found no waiver of right to
arbitration of new claims asserted in third amended complaint by defendant’s successful move to
have second amended complaint dismissed for failure to state a claim); Britton v. Co-op Banking
Group, 916 F.2d 1405, 1412 (9th Cir. 1990) (no evidence that defendant knew he had right to
compel arbitration and pre-trial conduct not inconsistent with pursuit of arbitration); Brown v.
E.F. Hutton & Co., Inc., 610 F. Supp. 76, 78 (S.D. Fla. 1985) ( no waiver of second complaint
because it greatly expanded factual allegations in case).

                                                  4
waiting one year before it sought to compel arbitration and also by its inconsistent conduct of

actively litigating this matter in the district court.

        For the reasons discussed above, the district court’s denial of the defendant’s motion to

compel arbitration is AFFIRMED.

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