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A Missouri Federal District Court held that a party who filed suit was unaware of a valid arbitration agreement until their opponent successfully argued a motion to compel arbitration, and that the litigation activity did not sufficiently prejudice the opposing party to constitute waiver of the right to arbitrate.
In Wilbers v. Moneta Group Investment Advisors, Inc., No. 4:06 CV 00005ERW, 2006 WL 2850542 (E.D. Mo. Oct. 03, 2006), Wilbers, the trustee of an employee profit sharing plan, sued Moneta Group Investment Advisors, Inc. (“Moneta”) for breach of fiduciary duty. He also filed a separate suit in his personal capacity in state court.
Moneta filed a successful motion to stay the state court proceeding pending arbitration. Wilbers then move to stay the federal court action “in order to have all claims against [Moneta] heard in arbitration.” Moneta moved to enjoin the arbitration proceedings, arguing that Wilbers had waived the right to arbitrate by filing suit and contesting their motion to compel arbitration.
The Court found that Wilbers incorrectly assumed that the dispute was governed by an agreement that did not contain arbitration language, and that Wilbers only learned of his right to arbitrate once Moneta filed its state court motion to compel arbitration based upon a different agreement. Under these facts, the Court concluded that Wilbers did not act inconsistently with a known right to arbitrate when he filed suit.
The Court also held that the fact that Wilbers contested the motion to compel arbitration did not sufficiently prejudice Moneta as to constitute waiver of the right to arbitrate. Moneta contended it was prejudiced by its development of “strategy specific to litigation,” by Wilbers’ use of discovery techniques not available in arbitration, and by the “potential for confusion” if all claims are joined in a single action.
The Court disagreed on all counts. The Court found the litigation-specific strategy argument to be overbroad; noting that all parties in litigation could potentially assert it to avoid arbitration. The discovery argument failed because the Court concluded that the case involved no testimony which would have been unavailable in arbitration. Lastly, Moneta’s contention that a single arbitration covering all issues would be confusing failed because “there [was] no reason to believe that there [was] any greater potential for confusion in arbitration than in litigation.”
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