Summary
The Eighth Circuit held that HomeServices waived its contractual right to arbitrate by actively litigating a putative class action in federal court for nearly a year before moving to compel arbitration. The court concluded that courts, rather than arbitrators, decide waiver based on default through litigation, and found that HomeServices knew of the arbitration right, acted inconsistently with it, and prejudiced the plaintiffs. The court affirmed the district court's denial of the motion to compel arbitration.
Topics
Practice areas
Questions Presented
- Whether a court or an arbitrator decides whether a party waived arbitration by actively participating in litigation.
- Whether HomeServices waived its contractual right to arbitrate by substantially participating in the federal litigation before moving to compel arbitration.
- Whether the district court's denial of HomeServices' motion to strike was properly before the court on appeal.
Holdings
- When waiver is based on default through active participation in litigation or other conduct inconsistent with arbitration, the court decides the waiver issue; an arbitrator generally decides waiver based on laches, estoppel, time limits, notice, or other conditions arising during or applicable to arbitration.
- HomeServices waived its right to arbitrate by knowingly and inconsistently participating in federal litigation for nearly a year and thereby prejudicing the Burnetts.
- The court would not consider HomeServices' challenge to the denial of its motion to strike because the opening brief merely mentioned the alleged error without meaningfully arguing it.
Key quotations
“Arbitration is a waivable contractual right.” (at 1)
“To summarize, HomeServices cannot compel the Burnetts to arbitrate a case that it has already litigated for nearly a year in federal court.” (at 8)
“Having followed this course, it must now live with the consequences.” (at 8)
Factual background
Scott and Rhonda Burnett signed a home-listing agreement with Reece & Nichols Realtors, Inc. containing a binding arbitration provision. They later joined other homeowners in a putative class action alleging anticompetitive practices by various real-estate entities, including HomeServices of America, the parent company of Reece & Nichols. HomeServices participated actively in federal litigation for nearly a year before seeking to compel arbitration, including filing or joining motions, answering the complaint, negotiating scheduling matters, and responding to discovery.
Procedural history
The plaintiffs filed a putative class action in the United States District Court for the Western District of Missouri. HomeServices participated in the litigation for 305 days, including joining motions to dismiss and transfer venue, negotiating a scheduling order, answering the complaint, and responding to written discovery, before moving to compel arbitration. The district court denied the motion, primarily because HomeServices was not a party to the Burnetts' listing agreement, and the Eighth Circuit affirmed on the alternative ground that HomeServices waived arbitration.