Summary
This Eleventh Circuit per curiam opinion addresses an interlocutory appeal from the denial of a motion to compel arbitration under the Federal Arbitration Act. Relying on its recent decision in Bedgood v. Wyndham Vacation Resorts, Inc., the court held that the defendant credit union waived its right to arbitrate by failing to comply with American Arbitration Association policies before the plaintiffs filed suit. The court affirmed the district court’s ruling, allowing the putative class action regarding improper fees to proceed in litigation.
Topics
Practice areas
Questions Presented
- Whether the parties were contractually obligated to arbitrate despite the AAA's declination.
- Whether Space Coast was in default under 9 U.S.C. §3 of the Federal Arbitration Act.
- Whether True Touch Services' alleged futility argument excuses it from default under §3.
- Whether Space Coast was entitled to an order directing arbitration under 9 U.S.C. §4.
Holdings
- The arbitration provision does not obligate the parties to arbitrate when the designated forum (AAA) is unavailable; the clause merely provides a substitute forum, which can be a court.
- Space Coast was in default because it acted inconsistently with its arbitration right by failing to remedy its non‑compliance with AAA policies before litigation.
- True Touch may proceed in litigation because the futility argument, supported by the AAA's declination letter, satisfies the evidentiary basis for a default analysis.
- Space Coast was not entitled to an order directing arbitration because it failed to satisfy the first condition of §4 (failure, neglect, or refusal by the other party) and could not demonstrate the requisite aggrievement.
Key quotations
“By ignoring the AAA’s letter for a month and a half until after a lawsuit was filed against it, Space Coast acted inconsistently with the intention to vindicate its contractual arbitration rights; the fact that it later attempted to comply with the AAA policies doesn’t resurrect the waived contractual right to arbitrate.” (15)
Factual background
Plaintiffs entered checking accounts with Space Coast Credit Union that included a Master Services Agreement containing a mandatory arbitration clause governed by the American Arbitration Association (AAA). The AAA initially declined to administer the claim because Space Coast had not submitted its consumer dispute resolution plan or paid the required fee. Space Coast later remedied the deficiency and the AAA approved the clause. Space Coast then moved to compel arbitration, but the district court held that the delay constituted a waiver of the right to arbitrate.
Procedural history
The district court denied Space Coast Credit Union's motion to compel arbitration, finding that Space Coast had failed to comply with its arbitration clause's requirements and was therefore in default. Space Coast appealed the denial.