Summary
The First District Appellate Court of Illinois affirmed the circuit court's denial of Westlake Services LLC's motion to compel arbitration of Erica Williams' counterclaims. The court determined that Westlake waived its right to arbitrate by initiating litigation and delaying the assertion of the arbitration agreement for eleven months, which prejudiced the defendant. Furthermore, the court concluded that the class action waiver provision was limited to the arbitration context and did not bar class claims in litigation.
Topics
Practice areas
Questions Presented
- Whether Westlake waived its contractual right to compel arbitration by filing and maintaining a related collection action in court, delaying its motion to compel, and failing to disclose the arbitration agreement.
- Whether the arbitration agreement's class-action waiver barred Williams from pursuing class-action counterclaims in litigation as well as in arbitration.
Holdings
- Westlake waived its right to compel arbitration because it acted inconsistently with the arbitration agreement by initiating and maintaining a court action involving the same contract, facts, and issues as Williams's counterclaims, delaying its invocation of arbitration, and causing prejudice to Williams.
- The class-action waiver applied only within the context of arbitration and did not bar Williams's class-action counterclaims in the circuit court.
Key quotations
“However, a court will find waiver if a party has acted inconsistently with claiming that right and shows an intention to abandon that right.” (¶ 18)
“We find Westlake’s complaint and the counterclaims involve the same installment contract, facts, and issues; thus, they are related to the collections action.” (¶ 26)
“Here, the waiver was in the arbitration agreement and was not an independent installment contract; thus, the class action waiver is limited to arbitration.” (¶ 32)
Factual background
Williams entered a retail installment contract to purchase a used 2013 Hyundai Sonata and signed an arbitration agreement containing a class-action waiver. After Westlake acquired the contract, it repossessed and sold the vehicle, then sued Williams for the remaining deficiency. Williams asserted affirmative defenses and putative class-action counterclaims alleging that Westlake improperly allocated payments to so-called pay-to-pay fees and violated several Illinois statutes. Westlake waited approximately eleven months after filing suit, and nearly three months after Williams filed her counterclaims, before moving to compel arbitration, while failing to attach or disclose the arbitration agreement in its initial pleadings.
Procedural history
Westlake sued Williams in the Circuit Court of Cook County to collect a deficiency following repossession and sale of a vehicle. Williams answered, asserted affirmative defenses, and filed putative class-action counterclaims alleging statutory violations. After litigating for approximately eleven months and disclosing the arbitration agreement only shortly before a scheduled court appearance, Westlake moved to compel arbitration. The circuit court denied the motion, finding waiver, prejudice, and that the class-action waiver applied only to arbitration. The Appellate Court of Illinois affirmed.