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The right to compel arbitration can be waived by engaging in extensive discovery unavailable during arbitration that prejudices others through high litigation costs, according to the North Carolina Court of Appeals.
In Capps v. Virrey, No. COA06-655, 2007 WL 1743901 (N.C. Ct. App. June 19, 2007), Capps appealed an order denying a motion to compel arbitration with Nationwide Insurance pursuant to an uninsured motorist policy. Nationwide opposed Capps's motion, claiming that he had waived his right to compel arbitration by "imposing substantial litigation costs on Nationwide," and "by participating in discovery not available during arbitration." Capps had subjected Nationwide to three sets of interrogatories and requests for production of documents before attempting to compel arbitration.
The Court held that Capps's extensive discovery requests were sufficient to constitute waiver of his right to compel arbitration. The agreement between the parties stated that arbitration would "be subject to the usual rules of procedure and evidence in such county and state," which the Court concluded "clearly refer[red] to the rules and procedures set forth in the Uniform Arbitration Act (UAA), not the usual rules of civil procedure and evidence." Since the UAA contained its own more restrictive provisions regarding discovery, and left matters of discovery to "the discretion of the arbitrator," the Court held that Capps's "discovery requests exceeded the scope allowed by the [UAA]" and he had "waived his right to compel arbitration."
The Court noted that "[a]rbitration is a process to privately adjudicate a final and binding settlement of disputed matters quickly and efficiently, without the costs and delays inherent to litigation" and that "[p]arties agree to arbitrate in order to avoid the costs and delays inherently incurred in civil discovery." The Court explained that "[a]pplying the Rules of Civil Procedure and Evidence to arbitration negates the very purpose for agreeing to arbitrate."
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