Case On Point
In this month's case, the United States Supreme Court considers whether a party waived its right to arbitrate.
Morgan v. Sundance, Inc.
(U.S. S. Ct. 2022)
Plaintiff was employed by defendant in a Taco Bell franchise. Ignoring the arbitration clause in her employment agreement, plaintiff filed suit claiming defendant failed to pay overtime in accordance with requirements of the Fair Labor Standards Act. Although defendant could have immediately moved to stay the federal court action and compel arbitration, it participated in the litigation for eight months, moving to dismiss, filing an answer and participating in a mediation, before doing so. Plaintiff claimed defendant waived its right to arbitrate. Defendant disagreed, asserting that plaintiff had to show prejudice caused by the delay. The Court of Appeals agreed with defendant.
The Supreme Court reversed. It observed that waiver is the "intentional relinquishment of a known right." There is ordinarily no requirement that the party asserting a waiver show it has been prejudiced, and the federal policy favoring arbitration agreements set forth in the Federal Arbitration Act does not justify imposing such a requirement that would otherwise not apply.
