Right to Compel Arbitration Not Available to Party Who Earlier Refused to Participate

According to the District of Hawaii, if a party refuses to participate in properly initiated arbitration proceeding, the party foregoes its right to compel arbitration.

In Cox v. Ocean View Hotel Corp., No. 05-00765, 2006 WL 897581 (D. Haw. April 3, 2006), Cox worked for the Hotel pursuant to an agreement providing for mandatory arbitration. However, when Cox sent a letter to the Hotel demanding arbitration of his claims of discrimination, harassment, and retaliation, the Hotel refused to arbitrate.

Cox sued, and the Hotel moved to compel arbitration. Cox argued that the Hotel could not enforce the arbitration agreement after its previous refusal to arbitrate. In response, the Hotel argued that (1) Cox did not properly initiate arbitration and (2) the demand for arbitration was premature because he could not claim wrongful termination while still employed by the Hotel.

In rejecting the Hotel’s argument that Cox did not properly initiate arbitration, the Court found that the arbitration agreement was vague because it did not give Cox specific information on how to file a request for arbitration. Moreover, the Court found that the Hotel was estopped from arguing that Cox did not properly initiate arbitration because in its response to the letter demanding arbitration, the Hotel nowhere mentioned Cox’s failure to file a proper demand for arbitration.

Regarding the Hotel’s argument that Cox’s demand for arbitration was premature because his employment had not yet been terminated, the Court noted that “an employee need not wait until her or his employment is terminated before bringing suit under Title VII.” However, the Court acknowledged that “there may be cases in which an employee’s complaint does not give rise to a cognizable arbitrable claim.”

Following the reasoning of the Ninth Circuit in Brown v. Dillard’s, Inc., 430 F.3d 1004 (9th Cir. 2005), the Court held that the Hotel’s refusal to arbitrate constituted a breach of the arbitration agreement and that this material breach deprived the Hotel of its right to enforce the arbitration agreement. Accordingly, the Court denied the Hotel’s motion to compel arbitration.