The Illinois Court of Appeals held that a law firm waived its right to arbitrate a malpractice dispute not by filing an earlier collection lawsuit but through its active use of discovery procedures in a malpractice lawsuit brought by its former clients.

In Woods v. Patterson Law Firm, P.C., No. 1-08-0066, 2008 WL 901169 (Ill. App. Ct. Mar. 31, 2008), the Patterson Law Firm (Law Firm) represented Jeffrey Woods and several others (collectively, Clients) on various matters. The representation agreement contained an arbitration clause.

Despite the arbitration clause, the Law Firm sued the Clients for unpaid legal fees. That lawsuit was eventually dismissed, but the Clients later filed a malpractice lawsuit against the Law Firm. The Law Firm filed an answer raising the arbitration agreement as an affirmative defense, but instead of immediately filing a motion to compel arbitration, the Law Firm filed motions for dismissal and submitted various discovery requests, including interrogatories, a notice of deposition, and a subpoena for documents.

Approximately a year after the lawsuit was filed, the Law Firm filed a motion to compel arbitration. The trial court denied the motion on the ground that the Law Firm waived its right to arbitrate, not by filing the collection lawsuit but through its active participation in the malpractice lawsuit.

On appeal, the Court agreed with the trial court that the Law Firm did not waive its right to arbitrate the malpractice lawsuit by filing the collection lawsuit because the two lawsuits involved separate issues. Nevertheless, the Court affirmed the trial court's finding that the Law Firm waived its right to arbitrate through its active participation in the malpractice lawsuit.

More specifically, the Court upheld the finding of wavier based primarily on the Law Firm's active participation in discovery and its use of discovery procedures that, according to the Court, "are not readily available in arbitration proceedings according the rules of the American Arbitration Association."

In upholding the finding of waiver, the Court offered the following policy rationale: "Arbitration was designed as an efficient and relatively inexpensive method of settling disputes. It is an alternate dispute resolution process. If we allow a party to file or defend a court action with the intent to obtain discovery, the entire alternative dispute resolution process loses its major objective. The costs and the time parameters for the party litigants become prohibitive."