A Pennsylvania state appellate court has held that a party waives its right to compel arbitration by filing a complaint, seeking an injunction, and filing amended complaints, if that party does not promptly move to compel arbitration after the allegedly arbitrable claims are first raised by the adverse party.

In Stanley-Laman Group, Ltd. v. Hyldahl, No. 288 EDA 2007, 2007 WL 4357625 (Pa. Super. Ct. Dec. 14, 2007), Stanley-Laman Group (SLG) hired Hyldahl as a portfolio manager, and the parties executed a non-solicitation and confidentiality agreement.

Hyldahl's duties also included work for a related company, SLGS, a member of the National Association of Securities Dealers (NASD). Because of his responsibilities to SLGS, Hyldahl was required to complete NASD's Form U-4, which contains an agreement to arbitrate claims between Hyldahl and SLGS.

Hyldahl's employment was later terminated for cause and willful misconduct. SLGS informed the NASD that Hyldahl was terminated because he misappropriated trade secrets.

SLG then filed a complaint against Hyldahl for breaching the employment agreement with SLG. After a series of amended complaints and answers, Hyldahl added SLGS as a defendant in his counterclaim. As to the counterclaims against SLGS, SLG moved to compel arbitration of those claims. Hyldahl opposed the motion, claiming, in part, that SLG had waived its right to compel arbitration as a "certain other" as allowed under the NASD Code.

After first finding that SLG was in fact a "certain other" that could compel arbitration of claims under the NASD Code, the Court held that SLG had waived its right to compel because of extensive participation in the judicial process prior to its motion.

According to the Court, SLG's failure to raise the issue of arbitration until after filing the initial complaint, seeking an injunction, and filing an amended complaint was enough to find waiver of the right to compel arbitration. In response to these judicial maneuvers, Hyldahl had filed multiple answers and had engaged in discovery.

To the Court, allowing SLG "to take advantage of the judicial process and then take the case to arbitration would be exceedingly unfair to Hyldahl," particularly because SLG "could have compelled arbitration for any damages related to the alleged misappropriation of confidential information… after filing its initial complaint."