12 F.4th 853
8th Cir.2021Background
- Scott and Rhonda Burnett signed a listing agreement containing a binding-arbitration clause with Reece & Nichols; HomeServices of America is the parent company of Reece & Nichols.
- The Burnetts and other homeowners filed a putative class action in federal court alleging anticompetitive practices against HomeServices and other defendants.
- For about a year HomeServices actively litigated: it joined motions to transfer and to dismiss, negotiated and participated in scheduling, answered the complaint, and responded to written discovery.
- Only 305 days after the suit was filed did HomeServices move to compel arbitration.
- The district court denied the motion primarily because HomeServices was not a signatory to the Burnetts’ listing agreement and questioned whether HomeServices had waived arbitration by litigating for almost a year; the Eighth Circuit affirmed on waiver grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides whether a party waived arbitration by substantially invoking litigation machinery? | Courts should decide default-based waiver questions. | The arbitrator should decide arbitration-related gateway questions. | Courts decide default-based waiver (active participation); arbitrators decide laches/estoppel/time-limit issues. |
| Did HomeServices waive its right to arbitrate by litigating for ~1 year? | Burnett: HomeServices knew of arbitration, litigated extensively, and prejudiced plaintiffs. | HomeServices: delay did not constitute waiver; arbitration remains appropriate. | Waiver found: knowledge, inconsistent acts, and prejudice met. |
| Should the court compel arbitration? | Deny; plaintiffs oppose compelling arbitration after extensive litigation. | Compel arbitration now. | Denied: case remains in federal court; affirmation of district court judgment. |
Key Cases Cited
- N&D Fashions, Inc. v. DHJ Indus., Inc., 548 F.2d 722 (8th Cir. 1976) (distinguishes court-decided default waiver from arbitrator-decided laches/estoppel issues)
- Messina v. N. Cent. Distrib., Inc., 821 F.3d 1047 (8th Cir. 2016) (waiver can result from substantial participation in litigation)
- Lewallen v. Green Tree Servicing, L.L.C., 487 F.3d 1085 (8th Cir. 2007) (party must promptly seek arbitration or risk waiver for invoking litigation machinery)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (arbitrators presumptively decide questions involving time limits, notice, laches, estoppel)
- Pro Tech Indus., Inc. v. URS Corp., 377 F.3d 868 (8th Cir. 2004) (clarifies when arbitrator vs. court decides arbitration-related defenses)
- Ritzel Commc’ns, Inc. v. Mid-Am. Cellular Tel. Co., 989 F.2d 966 (8th Cir. 1993) (elements for waiver: knowledge, inconsistent acts, prejudice)
- Hooper v. Advance Am., Cash Advance Ctrs. of Mo., Inc., 589 F.3d 917 (8th Cir. 2009) (litigating the merits before seeking arbitration supports waiver)
- Nat’l Am. Ins. Co. v. Transamerica Occidental Life Ins. Co., 328 F.3d 462 (8th Cir. 2003) (discusses waiver questions and has been ambiguously read regarding who decides waiver)
- Mader v. United States, 654 F.3d 794 (8th Cir. 2011) (first-in-time rule reaffirming earlier controlling precedent)