Eighth Circuit Holds Company Waived Right to Arbitration When Litigation for Almost a Year | Carlton Fields
The Eighth Circuit Court of Appeals recently ruled that a parent company of a lender could not force owners to arbitrate a case it had already argued for nearly a year in federal court in Missouri.
In Sitzer v. National Association of Real Estate Agents, several owners have filed a putative class action lawsuit against various real estate entities, including HomeServices of America Inc., the lender’s parent company, alleging that the real estate entities were engaging in anti-competitive practices.
Although it actively argued the case in federal court for 305 days, HomeServices sought arbitration under a registration agreement between landlords and real estate entities, which required “”[a]any controversy or claim between the parties to this Agreement, its interpretation, execution or violation[,] … [to] be settled by binding arbitration. The Missouri District Court dismissed the petition because HomeServices itself was not a party to the listing agreement. HomeServices called on the Eighth Circuit.
On appeal, the circuit judge first addressed the preliminary issue of whether the court or arbitrators could decide the issues of default waiver (that is, whether a party has waived its right to arbitration on the basis of active participation in legal action or other action incompatible with the right to arbitration). Building on 40 years of precedent in the Eighth Circuit as well as other jurisdictions, the circuit judge ruled that it was for the court, not an arbitrator, to decide issues of default waiver.
The circuit judge then addressed the issue of the waiver and ruled that HomeServices had waived its right to arbitrate by aggressively arguing the case in federal court for nearly a year, having joined in the motions of other defendants to dismiss and transfer the case to another judicial district, negotiated a draft scheduling order, attended a scheduling hearing, filed a response to the complaint and responded to discovery in writing. “A party cannot keep a contractual right to arbitration in its back pocket and only take it out when it is ready for a ‘remake’,” said the circuit judge. After actively arguing the case in court for 305 days, the company had to “live with the consequences”.
Sitzer v. Nat’l Ass’n of Realtors, n ° 20-1779 (8th Cir. 10 Sep 2021).