83 F.4th 1113
8th Cir.2023Background
- Breadeaux and Main Street Pizza were parties to a 2006 franchise agreement with a 15‑year term and a non‑compete; the agreement expired May 2021 and Breadeaux sent a cease‑and‑desist for continued pizza sales at the same location.
- The Agreement permits the franchisor to seek injunctive/equitable relief in court and separately contains mediation and arbitration provisions with express carve‑outs allowing the franchisor to pursue equitable relief judicially.
- Breadeaux sued in district court (Dec. 2021) seeking injunctive and declaratory relief for breach of the non‑compete; Main Street Pizza counterclaimed and sought a declaration the non‑compete was unenforceable; the court compelled arbitration of Main Street Pizza’s counterclaims.
- Breadeaux moved for a preliminary injunction; the court denied the motion and overruled Breadeaux’s objections to discovery directed at damages and enforceability; Breadeaux then filed an arbitration demand seeking to relitigate injunctions and refused to produce discovery pending arbitration.
- The district court denied Breadeaux’s motion to stay proceedings under 9 U.S.C. § 3 (but stayed the case pending Breadeaux’s interlocutory appeal); the Eighth Circuit affirmed, finding Breadeaux’s claims not referable to arbitration or, alternatively, that Breadeaux waived its arbitration right by litigating in court and delaying pursuit of arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court erred by denying Breadeaux’s motion to stay proceedings under FAA § 3 | Breadeaux argued the arbitration clause required arbitration of the dispute and § 3 mandates a stay | Main Street Pizza argued Breadeaux had elected judicial relief and § 3 typically protects defendants seeking a stay; Breadeaux was not entitled to a stay | Denied — Breadeaux’s motion to stay was properly denied because it had elected court enforcement and its claims were not referable; § 3 ordinarily benefits defendants |
| Whether Breadeaux waived or defaulted its right to arbitrate | Breadeaux said it complied with mediation prerequisites and did not waive arbitration | Main Street Pizza said Breadeaux litigated the case, sought injunctions, participated in discovery, and waited to demand arbitration until after adverse rulings | Held that Breadeaux waived/defaulted — its conduct was inconsistent with promptly invoking arbitration and thus it could not obtain a stay under § 3 |
| Whether the district court could decide arbitration‑related discovery disputes (or whether they must go to an arbitrator under Henry Schein) | Breadeaux contended the court lacked authority to rule on arbitrable issues and discovery should be deferred to arbitrator | Main Street Pizza argued Breadeaux invited the court to consider arbitrable issues by filing suit and litigating them | Court may decide — district court did not err; Breadeaux invited the court to "peek" at arbitrable issues, and arbitration is a waivable right |
| Whether the arbitration clause required arbitration of the franchisor’s equitable claims despite carve‑outs for injunctive relief | Breadeaux argued the arbitration clause covered all disputes except when franchisor affirmatively sought equitable relief | Main Street Pizza argued the Agreement expressly carved out equitable relief for the franchisor and Breadeaux elected that path | Held that the Agreement’s language and Breadeaux’s election of judicial process meant the franchisor’s equitable claims were not referable to arbitration |
Key Cases Cited
- Morgan v. Sundance, Inc., 142 S. Ct. 1708 (2022) (FAA § 3 generally protects defendants; courts may not craft arbitration‑specific procedural rules like a prejudice requirement)
- Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (rejects the "wholly groundless" exception to delegation clauses; narrow question whether courts may refuse to enforce delegation)
- Barker v. Golf U.S.A., Inc., 154 F.3d 788 (8th Cir. 1998) (sets out prior three‑part waiver test focusing on knowledge, inconsistent acts, and prejudice)
- McCoy v. Walmart, Inc., 13 F.4th 702 (8th Cir. 2021) (arbitration may be waived by substantially invoking litigation machinery)
- H&T Fair Hills, Ltd. v. All. Pipeline L.P., 76 F.4th 1093 (8th Cir. 2023) (after Morgan, waiver inquiry focuses on the party that held the arbitration right)
- Sommerfeld v. Adesta, LLC, 2 F.4th 758 (8th Cir. 2021) (party that invites court to consider merits cannot later complain the court erred by "peeking" at arbitrable issues)
- Express Scripts, Inc. v. Aegon Direct Mktg. Servs., Inc., 516 F.3d 695 (8th Cir. 2008) (de novo review standard for denial of stay pending arbitration)