No Waiver of Arbitration Right and Arbitrability Determination for Arbitrator
Many courts have noted the liberal policy in favor of arbitration over litigation. However, even where both parties concede that there is a valid arbitration agreement, the right to compel arbitration can be waived. Absent waiver, there remains the question of whether the dispute at issue falls within the scope of the agreement, an inquiry that can be delegated to the arbitrator in the first instance.
These were the issues recently presented in In Jacksen v. Chapman Scottsdale Autoplex, LLC, 2021 U.S. Dist. LEXIS 136043, United States District Court for the District of Arizona, Case No. CV-21-00087-PHX-DGC, July 21, 2021. Mr. Jacksen bought a car from Chapman Scottsdale Autoplex (CSA) in February 2015, signing a “Waiver of Purchaser’s Right To Sue/Arbitration Agreement” with a broadly worded arbitration clause. In October of 2015, Chapman began making marketing calls to Jacksen’s cell phone, even though the number was registered on the National Do Not Call Registry. Jacksen asked Chapman to stop calling. Then, in September of 2020 – 5 years after Jacksen’s automotive purchase – Chapman started anew – making marketing calls and a text to determine Jacksen’s interest in purchasing a new vehicle.
Jacksen brought a class action TCPA lawsuit in January 2021 and amended her complaint in March, naming in both – oops!! – the wrong Chapman auto seller, Chapman’s Automotive Group, LLC (CAG). Thereafter, CAG answered and there was some discovery identifying CSA as the right party and a second amendment corrected the error at the end of April 2021. Two weeks later CSA moved to compel arbitration.
Jacksen argued that CSA had waived its right to seek arbitration by waiting to file the motion until “almost four months after she filed the initial complaint” against CAG. Jacksen also complained that she was “prejudiced by the time and expense spent attending discovery and case management conferences, drafting a joint case management report and engaging in initial discovery.” In addition, the Court noted that CSA was aware of its right to compel arbitration; it was “signatory to the [arbitration] Agreement and represented by the same counsel” as CAG.
Still, faced with the “‘liberal federal policy favoring arbitration’”, the Court could not conclude that CSA had “acted inconsistently with its right to arbitrate.” Once it was formally added as a party, it “promptly moved to compel arbitration. Plus the initial case management and discovery matters “undertaken by CAG” before CSA was made a party “do not constitute ‘active litigation’ aimed at taking advantage of being in federal court.” Moreover, Jacksen also “failed to establish prejudice.” The initial expenses were limited and the Court concluded that Jacksen “likely will benefit from the strategic thinking and information learned in that process, even in arbitration.” So Jacksen “has not shown waiver.”
Next question – “whether the arbitration covers the dispute in this case” – was itself disputed by the parties. But the Agreement provided that “any claim or dispute, ‘including the …arbitrability of any issue’ shall “be resolved by neutral, binding arbitration and not by court action.’” After dispensing with Jacksen’s assertions that the Agreement was internally inconsistent on the subject, the Court was unequivocal – “The Agreement clearly and unmistakably delegates gateway issues to the arbitrator. It states without equivocation that ‘the interpretation and scope of this clause and the arbitrability of any issue’ are the province of the arbitrator… As a result, the parties must litigate their disagreement about the scope of the arbitration provision before the arbitrator.” Upholding the terms of the Agreement “comports with the strong federal policy favoring the resolution of disputes through arbitration.”
Message here: if you want to take advantage of this policy, promptly exercise arbitration rights to avoid arguments that you waived them and carefully draw the responsibilities of the arbitrator in determining arbitrability.