The Filing of a Motion to Dismiss in Court Does not Waive the Right to Arbitrate

A party that files a 12(b)(6) motion before a motion to compel arbitration does not waive the right to arbitrate, as it does not result in substantial prejudice to the opposing party, according to the Southern District Court of New York.

In Jung v. Skadden, Arps, Slate, Meagher & Flom, LLP, No. 05 CIV.4286(MBM), 2006 WL 1516027 (S.D.N.Y. May 31, 2006), an employment discrimination dispute arose over the firing of Jung from the Skadden firm. All Skadden employees signed a broad and comprehensive arbitration agreement upon commencing employment.

Jung did not contest the validity of the arbitration agreement, but rather claimed that Skadden waived its right to arbitrate by participating in the litigation. Specifically, Skadden waited to move to compel arbitration until after the disposition of its 12(b)(6) motion.

The Court found that no substantial prejudice arose from the motion, and that the motion to compel arbitration did not result in relitigation. Sufficient prejudice would result when a party takes advantage of discovery not available in arbitration, and that was not the case here. See PPG Indus., Inc. v. Webster Auto Parts, Inc., 128 F.3d 103, 109 (2d Cir. 1997). The 12(b)(6) motion actually helped Jung, as it alerted him to deficiencies in his complaint, which could then be corrected.

The Court also found that the motion did not result in an excessive cost and time delay. Skadden waited six and half months before filing the motion to compel arbitration, yet courts have consistently held that delay, without more, does not support a finding of waiver. See, e.g., Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20, 26 (2d Cir. 1995).

“Although an immediate motion by Skadden to compel arbitration might have saved Jung some time and money, prejudice sufficient to overcome the FAA’s preference for arbitration is not established so easily.”