Johnson Associates Corp. v. HL Operating Corp.
2012 U.S. App. LEXIS 10339
| 6th Cir. | 2012Background
- Hartmann and Johnson/T. Chantal had a Sourcing Agreement to manufacture Hartmann luggage lines.
- Plaintiffs sued Hartmann for breach of contract and unjust enrichment on December 22, 2009, and Hartmann counterclaimed.
- Throughout 2010 the court overseed discovery, settlement conferences, and scheduling discussions.
- On August 23, 2010 Hartmann gave notice of its intent to arbitrate under paragraph 13(a) of the Sourcing Agreement.
- Hartmann requested a response by August 24, 2010; discovery continued, and Hartmann moved to compel arbitration on August 25, 2010.
- The district court later held Hartmann waived its right to arbitrate based on conduct showing substantial participation in litigation and prejudice to plaintiffs.
- Hartmann appeals the district court’s waiver ruling arguing issues related to a no-waiver clause and the conduct/prejudice analysis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| No-waiver clause assessment | Hartmann argues the no-waiver clause prevents waiver analysis. | Plaintiffs contend no-waiver clause does not alter waiver analysis and does not save Hartmann. | No-waiver clause does not preclude waiver analysis. |
| Waiver by conduct | Hartmann did not act inconsistently with arbitration rights; therefore no waiver. | Hartmann’s answer, counterclaim, discovery, and settlement actions were inconsistent with arbitration. | Hartmann waived its right by conduct. |
| Prejudice element | Plaintiffs were prejudiced by eight months of litigation and discovery that could not transfer to arbitration. | Delay and pretrial activity alone do not establish prejudice; Hartmann disputes that finding. | Prejudice established due to delay and discovery, supporting waiver. |
Key Cases Cited
- Hurley v. Deutsche Bank Trust Co. Ams., 610 F.3d 334 (6th Cir. 2010) (waiver requires inconsistent conduct and possible prejudice)
- Manasher v. NECC Telecom, 310 F.App’x 804 (6th Cir. 2009) (failure to plead arbitration and extended litigation can constitute waiver)
- Gen. Star Nat'l Ins. Co. v. Administratia Asigurarilor de Stat, 289 F.3d 434 (6th Cir. 2002) (two-part test for waiver: inconsistency and prejudice)
- Tenneco Resins, Inc. v. Davy Int'l, AG, 770 F.2d 416 (5th Cir. 1985) (arbitration right not waived where only minimal discovery present)
- Hilti, Inc. v. Oldach, 392 F.2d 368 (1st Cir. 1968) (defendants may signal arbitration intent in their pleadings)
- Manasher v. NECC Telecom, 310 Fed.Appx. 804 (6th Cir. 2009) (unpublished decision cited for close alignment with facts)
- Ziegler v. Aukerman, 512 F.3d 777 (6th Cir. 2008) (delay alone is not sufficient for prejudice)