Commercial Litigation and Arbitration

Arbitration: Motion for Summary Judgment Waives Arbitration Right Even If, in the Alternative, It Seeks to Compel Arbitration

From Khan v. Parsons Global Servs., Ltd., 2008 U.S. App. LEXIS 7756 (D.C. Cir. April 11, 2008):

The court has not previously held that a motion for summary judgment, standing alone, suffices to constitute a waiver of colorably arbitrable claims.... Other circuit courts of appeals have been more direct in assessing the relationship between summary judgment and waiver of the right to compel arbitration. The Second Circuit has stated that any motion for summary judgment would constitute waiver of the right to compel arbitration. Sweater Bee by Banff, Ltd. v. Manhattan Indus., Inc., 754 F.2d 457, 465 (2d Cir. 1985) (dictum). The Seventh Circuit has similarly stated that a motion to dismiss or in the alternative for summary judgment is an "[e]specially telling" factor in assessing whether a party waived a right to arbitration. St. Mary's Med. Ctr. of Evansville, Inc. v. Disco Aluminum Prods. Co., 969 F.2d 585, 589 (7th Cir. 1992).... Even circuits requiring evidence of prejudice before finding waiver of a right to compel arbitration have observed that a motion for summary judgment, in view of the time and expense associated with such litigation activity, "could not have caused anything but substantial prejudice to the [plaintiffs]." Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1162 (5th Cir. 1986) (citation omitted); accord Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 224 (3d Cir. 2007). ***

It is true that Parsons submitted its motion for summary judgment as an alternative to dismissal or compelled arbitration. *** Admittedly a motion to dismiss may not be inconsistent with the intent to arbitrate, as where a party seeks the dismissal of a frivolous claim.... But where, as here, a party moves for summary judgment through a motion including or referring to "matters outside the pleading[]," see FED. R. CIV. P. 12(d) (2008); see also FED. R. CIV. P. 12(b)(6) (2008), that party has made a decision to take advantage of the judicial system and should not be able thereafter to seek compelled arbitration. ***

We hold that, irrespective of other indicators of involvement in litigation, filing a motion for summary judgment based on matters outside of the pleadings is inconsistent with preserving the right to compel arbitration; if the motion is accompanied by a motion to compel arbitration in the alternative, the movant takes the risk that the district court will choose to rule on the motion for summary judgment, thereby preventing the movant from subsequently seeking arbitration.

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