Gray Holdco, Inc. v. Cassady
654 F.3d 444
| 3rd Cir. | 2011Background
- Gray Holdco, Inc. filed suit in District Court on November 13, 2009 against Cassady and RWLS, LLC for breach of contract and tortious interference, seeking injunctive relief and damages.
- Gray later demanded arbitration against Cassady on September 17, 2010 under the arbitration clause in the 2006 New Hire Stock Option Plan.
- District Court denied Gray's motion to stay proceedings pending arbitration and enjoined arbitration, finding Gray waived its arbitration rights.
- Gray challenged the waiver ruling on appeal, arguing the contract’s no-waiver clause shielded its conduct; Cassady argued Gray waived by litigation conduct.
- District Court found four of six Hoxworth factors weighed toward waiver, leading to denial of stay and enforcement of the injunction against Delaware arbitration.
- The Third Circuit held Gray waived its right to arbitrate based on the Hoxworth analysis and prejudice to Cassady; affirmed the district court’s orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Gray waived its arbitration right under FAA. | Gray; delay and litigation conduct should be analyzed under Hoxworth. | Cassady; Gray’s litigation delay and discovery prejudiced arbitration. | Yes, Gray waived arbitration rights. |
| Effect of the 'no waiver' clause on the waiver analysis. | Gray argues no-waiver clause precludes considering injunction conduct. | Cassady argues clause does not bar prejudice analysis. | No; no-waiver clause does not bar waiver analysis. |
| Which Hoxworth factors weigh in favor of waiver. | Gray contends factors weigh against waiver. | Cassady contends several factors weigh in favor of waiver. | Four factors favor waiver, one neutral, one against. |
| Whether Gray’s late notice of arbitration affected prejudice. | Gray claims notice was timely enough, no prejudice shown. | Cassady demonstrates substantial prejudice from delay. | Late notice weighed in favor of finding waiver. |
| Whether Gray’s pre-trial acquiescence supports waiver. | Gray argues acquiescence to orders should not imply waiver. | Acquiescence weighed heavily toward waiver. | Yes, acquiescence supports waiver. |
Key Cases Cited
- Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912 (3d Cir.1992) (six non-exclusive factors guiding prejudice inquiry in arbitration waiver)
- Nino v. Jewelry Exch., Inc., 609 F.3d 191 (3d Cir.2010) (case-specific waiver analysis; considering litigation conduct and prejudice)
- Palcko v. Airborne Express, Inc., 372 F.3d 588 (3d Cir.2004) (delay and prejudice considerations in waiver analysis)
- Ortho Pharmaceutical Corp. v. Amgen, Inc., 882 F.2d 806 (3d Cir.1989) (injunctive relief in arbitrable disputes compatible with FAA; not dispositive on waiver by itself)
- Latona Trucking, Inc. v. S & R Co. of Kingston, 159 F.3d 80 (2d Cir.1998) (no-waiver clause does not bar ordinary waiver analysis when pursuing provisional relief)
- Faragalli v. PaineWebber Inc., 61 F.3d 1063 (3d Cir.1995) (waiver analysis informed by delay and prejudice factors)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. Supreme Court, 1983) (federal policy favoring arbitration)