In a May 23, 2022 unanimous decision, the United States Supreme Court ruled a showing that the other side has been prejudiced by a delay is not required for a party that has proceeded with litigation to waive its contractual right to arbitrate. The opinion, penned by Justice Elena Kagan, eliminates a circuit split where nine circuits — including the First, Second, Third, Fourth, Fifth, Sixth, Eighth, Ninth, and Eleventh Circuits — required a showing of prejudice, while two circuits — including the D.C. and Seventh Circuits — did not.
The case — Morgan v. Sundance, Inc., No. 21-328 — involves Robyn Morgan, an hourly employee who signed an agreement to arbitrate employment disputes when she applied for a job at a Taco Bell franchise owned by Sundance. Morgan filed a collective action lawsuit against Sundance for alleged violations of the Fair Labor Standards Act in the Southern District of Iowa. Despite the parties’ agreement containing an arbitration provision, Sundance defended the suit without invoking its right to arbitrate, including by filing a motion to dismiss that the court subsequently denied, filing an answer with 14 affirmative defenses (none of which referenced a right to arbitrate) and pursuing an unsuccessful mediation.
After eight months of litigation, Sundance moved to compel arbitration under the Federal Arbitration Act (FAA). The district court and Eighth Circuit applied their arbitration-specific rule providing that a party waives its contractual right...
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