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According to a Nevada federal court, requesting preliminary injunctions while arbitration is pending does not constitute an act inconsistent with the right to compel arbitration and is therefore insufficient to establish a waiver of the right to arbitrate.
In Convergys Corp. v. Freedom Wireless, Inc., No. 2:06-CV-0644-LRH(GWF), 2006 WL 2927841 (D. Nev. Oct. 12, 2006), Convergys filed a complaint with the court requesting injunctive relief while its arbitration with Freedom was pending. Freedom counterclaimed seeking declaratory judgment of the same issues.
Convergys moved to dismiss the counterclaims or, in the alternative, to reserve the counterclaims for arbitration. In response, Freedom argued that Convergys waived its right to compel arbitration of the counterclaims and alleged that the arbitration agreement had been fraudulently induced.
The Court focused its analysis of waiver on the issue of whether Convergys had, by filing the action for injunctive relief, acted inconsistently with its right to compel arbitration. Prior to the court action, Convergys had initiated arbitration with Freedom. However, an arbitrator had not yet been assigned to resolve the dispute.
The Court held that “preliminary injunction requests in arbitrable disputes are not inconsistent with the right to compel arbitration of claims.” Therefore, Convergys had not acted inconsistently with its right to arbitrate and did not waive its right to compel arbitration of the counterclaims.
Accordingly, the Court granted Convergys’ motion to stay the counterclaims pending arbitration.
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