Forby v. One Technologies LP, 3:16-cv-00856

Background

Forby sued One Technologies and related entities claiming the companies’ website misled consumers into enrolling in a $29.95/month credit-monitoring service, alleging violations of the Illinois Consumer Fraud Act and unjust enrichment.
The case was removed to federal court, transferred from the Southern District of Illinois to the Northern District of Texas, and defendants moved to dismiss under Rule 12(b)(6) arguing arbitration applied.
The court dismissed the unjust enrichment claim but preserved the ICFA claim; defendants did not move to compel arbitration immediately after transfer and waited ~13 months to do so.
Defendants later moved to compel arbitration and dismiss the case; plaintiff argued defendants waived arbitration by substantially invoking the judicial process and causing prejudice.
The court found a valid arbitration agreement existed (plaintiff conceded assent); the central dispute was whether defendants waived arbitration by litigating first and causing prejudice.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether there is a valid, enforceable arbitration clause covering the dispute	Forby did not contest assent to Terms; no separate argument on enforceability	Defendants argued arbitration clause governs and (initially) that arbitrability could be for arbitrator	Valid arbitration clause exists and governs the ICFA claim (plaintiff conceded assent)
Whether defendants waived the right to arbitrate by invoking the judicial process	Forby: defendants filed substantive Rule 12(b)(6) motion, sought dismissal with prejudice, then waited to compel arbitration—this is substantial invocation	Defs: their motion to dismiss was defensive/perfunctory; delay did not prejudice Forby; she was on notice of arbitration defense earlier	Court: defendants substantially invoked the judicial process (substantive motion, sought dismissal with prejudice, long delay)
Whether Forby suffered prejudice sufficient to constitute waiver	Forby: delay, litigation expense, and exposure of legal strategy caused prejudice	Defs: little/no discovery occurred, costs are speculative, plaintiff caused some delay; delay alone insufficient	Court: plaintiff showed delay but not the additional prejudice (expense or legal-position harm) required under Fifth Circuit precedent; delay alone insufficient
Remedy once arbitration compelled	Forby: opposed arbitration and sought to proceed in court	Defs: compel arbitration and dismiss the case with prejudice	Court: granted motion to compel arbitration and dismissed the action with prejudice; ICFA claim must be arbitrated

Key Cases Cited

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (FAA embodies national policy favoring arbitration)
In re Mirant Corp., 613 F.3d 584 (5th Cir. 2010) (substantial invocation + delay can show waiver; dismissal with prejudice indicates seeking merits decision)
Walker v. J.C. Bradford & Co., 938 F.2d 575 (5th Cir. 1991) (delay alone insufficient to establish waiver; delay bears on prejudice inquiry)
Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341 (5th Cir. 2004) (standards for invoking judicial process and prejudice for waiver)
Al Rushaid v. Nat’l Oilwell Varco, Inc., 757 F.3d 416 (5th Cir. 2014) (presumption against finding waiver; party claiming waiver bears heavy burden)
Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161 (5th Cir. 1992) (dismissal with prejudice appropriate when arbitration compelled)