June Newirth v. Aegis Senior Communities, LLC, 931 F.3d 935

Background

Three residents (Newirth, Pierce, Feinberg) signed Aegis admission agreements containing arbitration clauses; Newirth filed a class action in California state court alleging staffing-related consumer/fraud claims.
Aegis removed the case to federal court, promptly moved to compel arbitration, then withdrew that motion and later filed a motion to dismiss on the merits without pressing arbitration for about a year.
The parties engaged in substantial litigation activity during the delay: discovery, scheduling, disclosures (including production of the arbitration agreements), and mediation efforts; Feinberg settled and was later removed as class representative.
After the district court denied Aegis’s merits motion, Aegis refiled a motion to compel arbitration; the district court denied it as waived, finding Aegis knowingly delayed to seek a judicial merits ruling and plaintiffs incurred costs.
Aegis appealed; the Ninth Circuit reviewed de novo and affirmed, applying the federal waiver standard (knowledge, intentional relinquishment, prejudice).

Issues

Issue	Newirth's Argument	Aegis's Argument	Held
Whether Aegis waived its right to compel arbitration	Aegis knowingly withdrew its initial motion, litigated merits for a year, and thereby intentionally relinquished arbitration rights; plaintiffs incurred prejudice defending merits motion	Aegis contends it did not waive because it never expressly waived, its litigation activity was minimal/required by rules, it initially sought arbitration, and delay was due to doubts about Feinberg’s agreement	Held: Waiver. Aegis intentionally delayed to pursue judicial remedies and plaintiffs were prejudiced by costs defending Aegis’s merits motion, so arbitration was waived
Applicable legal standard for waiver	Federal standard: intentional relinquishment of known right plus prejudice	Aegis did not dispute standard; argued its conduct did not meet it	Held: Federal standard applies; Aegis met the second and third elements (intentional acts and prejudice)
Whether participation in discovery/scheduling alone proves waiver	Newirth: those actions plus withdrawing arbitration and moving to dismiss on merits demonstrate conscious choice of court forum	Aegis: such participation was merely compliance with court obligations and did not show intent to litigate merits in court	Held: Mere discovery/scheduling not always waiver, but here Aegis’s withdrawal of arbitration and merits motion show an intentional decision inconsistent with arbitration
Whether plaintiffs were prejudiced by Aegis’s conduct	Newirth: incurred costs contesting Aegis’s merits motion and would need to relitigate issues in arbitration	Aegis: plaintiffs not prejudiced because extra costs were self-inflicted or Aegis won’t reassert same merits defenses in arbitration	Held: Prejudice shown. Costs of defending the merits motion were directly traceable to Aegis’s inconsistent acts and satisfy the prejudice requirement

Key Cases Cited

Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (Sup. Ct.) (FAA reflects federal policy favoring arbitration)
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (Sup. Ct.) (arbitration agreements are enforceable absent generally applicable contract defenses)
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (Sup. Ct.) (federal policy supporting arbitration)
Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (Sup. Ct.) (arbitrability questions governed by contract and FAA)
Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421 (Sup. Ct.) (state rules disfavoring arbitration may be preempted if discriminatorily applied)
Hamer v. Neighborhood Hous. Servs. of Chi., 138 S. Ct. 13 (Sup. Ct.) (waiver defined as intentional relinquishment of a known right)
Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691 (9th Cir.) (party asserting waiver bears heavy burden: knowledge, inconsistent acts, prejudice)
Van Ness Townhouses v. Mar Indus. Corp., 862 F.2d 754 (9th Cir.) (withholding arbitration and litigating merits supports waiver)
Martin v. Yasuda, 829 F.3d 1118 (9th Cir.) (holistic test for waiver; litigating merits motions indicates intent to use court forum)
Britton v. Co-op Banking Grp., 916 F.2d 1405 (9th Cir.) (resisting discovery alone does not demonstrate waiver)
Gutierrez v. Wells Fargo Bank, N.A., 704 F.3d 712 (9th Cir.) (litigating to judgment in court can demonstrate waiver)