Law and Order - High Court

Is the right to compel arbitration waived only when the plaintiff can show prejudice from the defendant’s inconsistent actions and delay?  In Morgan v. Sundance, Inc., No. 21-328 (2022), the Supreme Court found that the Federal Arbitration Act (“FAA”) does not permit courts to create tests to favor arbitration over litigation, and that a showing of prejudice is not required for a claim of waiver.

In Morgan, the defendant, a Taco Bell franchisee, moved to compel arbitration eight months after the plaintiff, an employee alleging a nationwide collective action for violations of wage and hour laws, brought suit.  The defendant sought to compel arbitration, but not before filing a motion to dismiss the lawsuit, filing an answer and asserting affirmative defenses that did not mention the arbitration agreement, and mediating the case.  Eight months into the litigation, the defendant changed course and moved to compel arbitration of the plaintiff’s individual claims.

In opposition, the plaintiff argued that, even if there was a valid agreement to arbitrate, the defendant had waited too long, and thus waived its right to do so.  The Eighth Circuit rejected the plaintiff’s argument because she failed to show that she suffered any harm by the defendant’s delay in bringing the motion to compel arbitration.

Overturning the Court of Appeal’s decision, a unanimous Supreme Court noted that “[t]he prejudice requirement… is not a feature of federal waiver law generally,” and while the FAA prevents courts from undermining arbitration agreements, it also does not permit courts to “invent special, arbitration-preferring procedural rules” to favor arbitration.  On remand, the Court directed the Court of Appeal to review whether the defendant knowingly relinquished its right to arbitrate by “acting inconsistently with that right,” without the need to show harm.

Morgan highlights the importance of considering early on whether to move to compel arbitration in litigation, and the downsides of taking action that might be inconsistent with the right to compel

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Photo of Elizabeth N. Hall Elizabeth N. Hall

Elizabeth N. Hall is a Shareholder in the firm’s Labor and Employment practice area and serves as the Chicago office chair of the firm’s women’s affinity group, “Women at Vedder Empowering Success” (WAVES).

Ms. Hall represents a wide range of employers before state

…

Elizabeth N. Hall is a Shareholder in the firm’s Labor and Employment practice area and serves as the Chicago office chair of the firm’s women’s affinity group, “Women at Vedder Empowering Success” (WAVES).

Ms. Hall represents a wide range of employers before state and federal courts and administrative agencies, as well as in arbitral forums, defending them against various claims, including single plaintiff and class allegations of employment discrimination, failure to accommodate disabilities, sexual harassment, wrongful and retaliatory discharge, breach of contract and violations of the FMLA and wage and hour laws. Ms. Hall has successfully argued procedural and employment discrimination issues in the U.S. Court of Appeals for the Seventh Circuit and has particular expertise in managing electronic discovery teams in complex litigation.

A significant portion of Ms. Hall’s daily practice involves providing practical advice to employers regarding risk management; effective employee discipline and discharge; conducting workplace investigations; accommodating disabilities and pregnancy; workplace violence; managing leaves of absence and complying with FMLA and state leave requirements; workforce reductions; drafting and reviewing employment, recruitment and staffing agreements; policy and handbook development; wage and hour compliance; and state and federal employment laws. She frequently trains clients and employer groups on many of these topics.  Ms. Hall also has extensive experience drafting and negotiating severance, settlement and conciliation agreements on behalf of employer clients.

In 2017 and 2018, Ms. Hall was recommended by The Legal 500 United States for the Labor and Employment Disputes (including collective actions): Defense category. In 2018, she was named to the Crain’s Custom Media “Chicago Notable Women Lawyers” list. She also was selected as an Emerging Lawyer, an affiliate of Leading Lawyers, from 2015 to 2019. From 2010 to 2015, Ms. Hall was selected for inclusion as an Illinois Rising Star, and Super Lawyers named her one of the “Top Women Attorneys in Illinois” in the “Rising Star” category in 2013 and 2014.

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