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Citing public policy concerns and the Federal Arbitration Act, a federal court in Ohio held that the court, and not the arbitrator, should decide whether a party has waived the right to arbitrate.
In Reidy v. Cyberonics, Inc., No. 1:06-CV-249, 2007 WL 496679 (S.D. Ohio Feb. 8, 2007), Reidy brought sex discrimination claims against her former employer Cyberonics following her termination. When Cyberonics asked the comurt to compel arbitration pursuant to an arbitration clause in an agreement signed by the parties, Reidy argued that Cyberonics had waived its right to arbitrate.
The Court first determined whether it or arbitration is the proper forum to resolve the waiver issue. Since the Sixth Circuit has yet to definitively decide this issue, the Court looked to the First Circuit's decision in Marie v. Allied Home Mortgage Co., 402 F.3d 1 (1st Cir. 2005).
In Marie, the First Circuit held that judge should decide the waiver issue. The Marie court noted that the Federal Arbitration Act allows a court to stay an action pending arbitration only when "the applicant for the stay is not in default in proceeding with such arbitration," 9 U.S.C. § 3, and that the waiver issue must be decided to determine if a party is in default. Marie, 402 F.3d at 11-15.
Additionally, the Marie court cited policy concerns that support the proposition that a court should decide waiver issues, including the fact that "[j]udges are well-trained to recognize abusive forum shopping" and that "sending waiver claims to the arbitrator would be exceptionally inefficient." Id. at 13.
The Court then held that Cyberonics had not waived its right to arbitrate. Cyberonics had not substantially participated in litigation; trial was still over eight months away; and Reidy initiated the majority of the discovery that had taken place. Additionally, Reidy would not be substantially prejudiced by arbitrating her claims because most of the discovery that had been conducted could be used in litigation, and "pretrial expense and delay are insufficient to demonstrate prejudice."
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