Commercial Litigation and Arbitration

Arbitration — Waiver by Participating in Litigation — Issue for Court or Arbitrator? — Circuit Split

Smith v. Adams & Assocs., 2015 U.S. Dist. LEXIS 138670 (N.D. Ill. Oct. 9, 2015):

Smith concedes that the employment agreement that she signed "contains a provision requiring that employment issues, including claims of discrimination, be arbitrated." (Pl.'s Resp., Dkt. 42, at 1.) Nevertheless, she contends that Adams & Associates waived its right to arbitrate by choosing to proceed in this federal forum and defend against Smith's claims.


A. Waiver - A Question for the Arbitrator or the Court?

Generally, courts resolve disputes about arbitrability, such as whether an arbitration clause is binding, and arbitrators "decide disputes about the meaning and application of particular procedural preconditions for the use of arbitration," such as waiver, notice, laches, and estoppel. Martinez v. Utilimap Corp., No. 3:14-CV-310-JPG-DGW, 2015 WL 3932151, at *8 (S.D. Ill. June 25, 2015) [*8]  (citing BG Group, PLC v. Republic of Arg., 134 S.Ct. 1198 (2014)). "The proper course of action, however, is not so clear when the issue is waiver by participation in litigation activity." Id. The circuits are split on whether courts or arbitrators determine whether waiver has occurred, and guidance from the Seventh Circuit on this issue is inconsistent. Id. (collecting cases).

In its reply addressing Smith's waiver by participation argument, Adams & Associates does not contend that an arbitrator should determine if it waived its right to enforce the arbitration clause. Thus, Adams & Associates has waived any argument that waiver must be determined by the arbitrator. Id. The court will determine this issue.

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