656 F.Supp.3d 447
S.D.N.Y.2023Background:
- Boustead Securities entered into an agreement with ATIF on Sept. 4, 2018 containing a JAMS arbitration clause covering disputes arising from the contract.
- Boustead sued ATIF and Leaping in May 2020 for multiple claims; after motion practice, Boustead filed a Second Amended Complaint (Dec. 28, 2021) alleging breach of contract only.
- The Court denied ATIF’s third motion to dismiss and set a discovery schedule; very little discovery occurred and ATIF had not answered.
- On Aug. 3, 2022 ATIF moved to compel arbitration and alternatively to dismiss or stay the case; Boustead did not dispute the clause’s validity but argued ATIF waived arbitration by litigating in federal court.
- The Court analyzed waiver under the FAA and Second Circuit framework (time elapsed and extent of litigation) in light of the Supreme Court’s decision in Morgan v. Sundance, and found ATIF had not waived arbitration.
- Court granted ATIF’s motion to compel arbitration and STAYED the case pending arbitration; monthly status updates required.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ATIF waived its right to arbitration | Boustead: ATIF’s multi-year delay and prior motion practice amount to waiver and forum shopping | ATIF: Delay alone is insufficient; it never answered and little-to-no discovery or substantive litigation occurred | No waiver; arbitration compelled |
| Whether the case should be dismissed or stayed pending arbitration | Boustead: no strong preference | ATIF: move to dismiss or, alternatively, stay | Court stayed the action pending arbitration (did not dismiss) |
| Whether prejudice must be considered in waiver analysis after Morgan v. Sundance | Boustead: suggests prior prejudice-focused authority undermines Rush and related cases | ATIF: argues traditional conduct-based factors control; prejudice is not required | Court applied Second Circuit conduct-focused analysis (without treating prejudice as indispensable) and relied on lack of substantial litigation to deny waiver |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (FAA renders arbitration clauses enforceable)
- Coca–Cola Bottling Co. v. Soft Drink & Brewery Workers Union Local 812, 242 F.3d 52 (2d Cir. 2001) (strong presumption in favor of arbitration; waiver not lightly inferred)
- La. Stadium & Expo. Dist. v. Merrill Lynch, Pierce, Fenner & Smith Inc., 626 F.3d 156 (2d Cir. 2010) (tests for waiver of arbitration rights: time elapsed and extent of litigation)
- Morgan v. Sundance, Inc., 142 S. Ct. 1708 (U.S. 2022) (federal courts may not impose an arbitration-specific rule requiring prejudice for waiver)
- Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114 (2d Cir. 1991) (delay alone may not constitute waiver)
- Sweater Bee by Banff, Ltd. v. Manhattan Indus., 754 F.2d 457 (2d Cir. 1985) (no waiver despite multi-year delay)
- Rush v. Oppenheimer & Co., 779 F.2d 885 (2d Cir. 1985) (pre-answer motion practice does not necessarily waive arbitration)
- Bensadoun v. Jobe–Riat, 316 F.3d 171 (2d Cir. 2003) (motion to compel arbitration evaluated under a standard similar to summary judgment)