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Reversing a trial court's order denying a motion to compel arbitration, a Louisiana appellate court held that an arbitrator rather than a trial court should decide whether a party waived its right to arbitration by initiating judicial proceedings.
In Arkel Constructors, Inc. v. Duplantier & Meric, Architects, LLC., No. 2006 CA 1950, 2006 CA 1951, 2007 WL 2120226 (La. Ct. App. July 25, 2007), PCS sued Arkel to recover money allegedly owed by Arkel. PCS later filed a motion to compel arbitration pursuant to a contract containing an arbitration agreement. Arkel opposed the motion without challenging the existence of an arbitration agreement or its applicability.
The trial court held that PCS was in "default" for filing suit without asserting its right to arbitrate. Additionally, the court held that a court rather than an arbitrator should determine whether PCS had waived its right to arbitrate. The trial court ruled PCS had waived its right to arbitrate. PCS appealed arguing the waiver issue was for the arbitrator to determine.
Exercising its supervisory powers, the Court of Appeals awarded an appeal despite the absence of a statutory provision providing for appeal. Requiring PCS to litigate the entire dispute before it had an opportunity to appeal the decision to deny arbitration was not in the interest of judicial economy as a successful appeal would render the litigation's outcome moot.
Additionally, the Court held that the arbitrator should decide waiver issues rather than the trial court. LSA-R.S. 9:4203 provides that a trial court may only address whether there is a dispute as to the making of the agreement and whether a party had failed to comply with the agreement. Here, Arkel did not deny the existence of an arbitration agreement nor that the disputed issues were not subject to arbitration. Thus the trial court lacked authority to adjudicate the dispute.
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