Legal Memorandum: Waiver of a Contractual Right to Arbitrate

Issue: Under the law of the Virgin Islands, what is the applicable standard for determining whether a party waives its contractual right to arbitrate by its litigation conduct?

Area of Law: Uncategorized
Keywords: Right to arbitrate; Waiver; Litigation conduct
Jurisdiction: Federal, Virgin Islands
Cited Cases: None
Cited Statutes: 9 U.S.C. § 4
Date: 10/01/2008

Under applicable law, it is clear that a party waives any contractual right it may otherwise have to have claims heard by an arbitrator by its active participation in the litigation before the court for a significant period of time.  Under the analysis initially outlined in Hoxworth  v. Blinder, Robinson & Co., 980 F.2d 912 (3d Cir. 1992), as more recently re-affirmed in Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207 (3d Cir. 2007), “prejudice” to the nonmoving party is the “touchstone for determining whether the right to arbitrate has been waived by litigation conduct.”  Ehleiter, 482 F.3d at 222 (quoting Hoxworth, 980 F.2d at 925).  The requisite “prejudice” is determined by application of a six-factor test and may consist of “unnecessary delay or expense that results when an opponent delays invocation of its contractual right to arbitrate.”  Id. at 225 (emphasis in original). 

In motions brought under the 9 U.S.C. § 4 of the Federal Arbitration Act (“FAA”), federal, not state or territorial law, governs whether there has been a waiver of the right to compel arbitration.  Sovak v. Chugai Pharmaceutical Co., 280 F.3d 1266, 1270 (9th Cir. 2002). Although it is frequently said that arbitration should be favored, “not every motion to compel arbitration must be granted.  One of the accepted defenses to such a motion is that the party has waived its right to compel arbitration.”  Zimmer v. Cooperneff Advisors, Inc., 523 F.3d 224, 231 (3d Cir. 2008).  Waiver of the contractual right will be […]

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