Arbitration is meant to be an alternate to litigation. Yet arbitration is itself the subject of much litigation over who must arbitrate, what must be arbitrated, whether and how the arbitration should proceed, and the deference courts must show to arbitration awards. This blog is intended to be a resource for litigators, in-house counsel, arbitrators and anyone else who wants to stay on top of the many thorny issues that arise under the Federal Arbitration Act. Our Bloggers →

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Proving A Waiver of Arbitration Rights Is Now Easier In Construction Cases (8th Cir.)

A party with an arbitration agreement can waive its right to arbitrate by acting inconsistently with that right, usually by “invoking the litigation machinery” before demanding arbitration.  However, the federal circuits are split over whether a party asserting a waiver of arbitration must also show it was prejudiced by the other party’s use of that litigation machinery.  The Eighth Circuit generally sides with the circuits that require a showing of prejudice, but carved out an exception for the construction industry in a new case, Erdman Co. v. Phoenix Land & Acquisition, ___ F.3d ___, 2011 WL 3568929 (8th Cir. Aug. 16, 2011).

Reasoning that construction contracts tend to be standardized and “efficient resolution is of great importance” to parties in construction disputes, the court found “it makes little sense to litigate endlessly over the details of prejudice.”  Instead, it held, the “federal policy favoring arbitration does not require a showing of prejudice in this situation, unlike many others.” 

Arguments may now proceed about whether this lower bar for proving waiver should apply:

  • only to the specific facts of this case–where the same party who drafted the contract with the arbitration agreement was the one who chose to file its complaint in court, then made a subsequent motion and participated in a Rule 26(f) conference without ever mentioning a right to arbitration; or
  • to all construction cases; or
  • to all industries where contracts are standardized and efficient resolution is important, which could be almost every industry. 

 

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