Eleventh Circuit Affirms District Court Order that Defendants Waived Arbitration
Plaintiffs, three families living in the Lake View area, filed three separate actions against defendants J. Michael White, Eco-Preservation Services LLC, Serma Holdings LLC, Aeta Management Group, Knobloch Inc., and others. The plaintiffs asserted numerous violations of federal and state law related to the provision of sewer services to the plaintiffs’ homes. The defendants filed motions to dismiss for failure to state a claim upon which relief could be granted and opposed the plaintiffs’ implied motions to amend the complaints as futile. The defendants further filed motions to strike the plaintiffs’ deposition notices and to stay discovery pending the resolution of their motions to dismiss. The district court granted the plaintiffs’ implied motions to amend and concluded that the complaints stated plausible claims to relief. The defendants appealed the district court’s order. This district court dismissed the appeals and the defendants moved for reconsideration. The plaintiffs moved for default judgment against the defendants for failure to answer the complaints.
Thereafter, the defendants filed motions to compel arbitration pursuant to arbitration provisions in the purchase agreements entered into by the plaintiffs. The district court denied the motions to compel arbitration, and the U.S. Court of Appeals for the Eleventh Circuit affirmed on the grounds that the defendants waived their right to arbitrate. The court explained that waiver occurs when, under the totality of the circumstances, “both: (1) the party seeking arbitration substantially participates in litigation to a point inconsistent with an intent to arbitrate; and (2) this participation results in prejudice to the opposing party.” The court expressed that the party arguing for waiver bears the heavy burden of proving waiver. Here, the court concluded that the defendants did not act consistently with their right to arbitration because the defendants engaged in the litigation activities previously discussed and only invoked arbitration when it became clear that the three lawsuits would not be dismissed. Moreover, the court concluded that the plaintiffs were prejudiced because the defendants’ conduct “slowed the process and magnified its costs.” As such, the court agreed with the district court that the defendants waived their right to arbitration.
Davis v. White, No. 19-11760 (11th Cir. Jan. 7, 2020).