952 F.3d 887
7th Cir.2020Background
- Brickstructures and Coaster Dynamix entered a joint-venture agreement to make a LEGO‑compatible roller coaster; the agreement included a (blank‑form) arbitration clause.
- The parties released one product but fell out when a successor product failed to materialize; Brickstructures sued for breach, fiduciary duty, and Lanham Act violations.
- Coaster Dynamix moved to dismiss the amended complaint raising multiple defenses, including that the agreement required arbitration (exclusive forum) and lack of personal jurisdiction.
- After Brickstructures’s counsel sent a letter calling the arbitration and jurisdiction defenses frivolous and threatening sanctions, Coaster Dynamix withdrew those portions of its motion and proceeded on other defenses.
- Roughly a month later Coaster Dynamix moved to compel arbitration (invoking the FAA §4); the district court denied the motion as an express waiver based on the earlier withdrawal and refusal to rescind.
- The Seventh Circuit affirmed, holding that Coaster Dynamix knowingly and voluntarily abandoned its contractual right to arbitrate and that the waiver was not rescindable under the circumstances.
Issues
| Issue | Brickstructures' Argument | Coaster Dynamix' Argument | Held |
|---|---|---|---|
| Jurisdiction to hear interlocutory appeal | Motion to compel was labeled Rule 12(b)(3) (venue), so no FAA §4 appeal | Substance controls; motion was in substance a §4 FAA petition so appealable | Court has jurisdiction because substance, not label, determines FAA §4 appealability |
| Whether arbitration right was waived by withdrawal | Withdrawal of arbitration argument was an express, voluntary abandonment of the right to arbitrate | Withdrawal was coerced by threat of sanctions and therefore not a voluntary waiver | Withdrawal was intentional and voluntary; constitutes waiver of the contractual arbitration right |
| Standard of review for waiver finding | Apply clear‑error to district court’s factual finding and application | Mixed question: legal aspects reviewed de novo, factual findings for clear error | Applied clear‑error standard to factual findings and affirmed (mixed question reviewed with deference) |
| Rescission of waiver due to alleged coercion | No rescission; party may not rescind absent abnormal circumstances | Waiver should be rescindable because withdrawal was prompted by opposing counsel’s sanctions threat | Court exercised discretion and refused rescission; no abnormal circumstances justified reversal |
Key Cases Cited
- Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018) (federal policy favors enforcement of arbitration agreements)
- Kawasaki Heavy Indus., Ltd. v. Bombardier Recreational Prod., Inc., 660 F.3d 988 (7th Cir. 2011) (arbitration rights can be waived; waiver may be express or implied)
- Welborn Clinic v. MedQuist, Inc., 301 F.3d 634 (7th Cir. 2002) (waiver inquiry asks whether party acted inconsistently with the right to arbitrate)
- Lauro Lines s.r.l. v. Chasser, 490 U.S. 495 (1989) (no interlocutory appeal from district court denial of venue challenge absent FAA §4 petition)
- Obriecht v. Raemisch, 517 F.3d 489 (7th Cir. 2008) (substance of a motion controls over its label)
- Iowa Grain Co. v. Brown, 171 F.3d 504 (7th Cir. 1999) (waiver is a mixed question of fact and law; appellate review affords deference to factual findings)
- Cabinetree of Wisconsin, Inc. v. Kraft‑maid Cabinetry, Inc., 50 F.3d 388 (7th Cir. 1995) (rescission of arbitration waiver reserved for abnormal circumstances)
- St. Mary's Med. Ctr. v. Disco Aluminum Prods. Co., 969 F.2d 585 (7th Cir. 1992) (clear‑error review applies to district court factual determinations)