916 F. Supp. 2d 799
E.D. Ky.2013Background
- KenAmerican filed suit against Potter in Fayette Circuit Court before removal, seeking relief unrelated to arbitration.
- The Lease arbitration clause, dated July 21, 1997, remains valid and operative.
- Potter argues KenAmerican waived its right to arbitrate by initiating suit in state court.
- The court applies federal law to determine waiver of the arbitration right.
- KenAmerican moved to stay proceedings and compel arbitration; Potter opposed.
- The court finds KenAmerican’s forum choice and delay prejudicial, constituting waiver and controlling the outcome.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did KenAmerican waive arbitration by filing in state court? | KenAmerican did not rely on arbitration; forum selection should not waive rights | Filing suit contradicts arbitration rights, constituting waiver | Yes, waiver found; arbitration not enforced |
| Was KenAmerican prejudiced by delay in enforcing arbitration? | Delay was not prejudicial to Potter | Delay caused unnecessary delay/expense and tactical disadvantage | Yes, prejudice shown; further inquiry unnecessary |
| Should the court compel arbitration despite waiver? | Arbitration should be compelled upon waiver | Waiver defeats right to compel arbitration | No; waiver forecloses arbitration and dismissal/continued litigation proceeds |
Key Cases Cited
- O.J. Distributing, Inc. v. Hornell Brewing Co., Inc., 340 F.3d 345 (6th Cir. 2003) (strong presumption in favor of arbitration; waiver not lightly inferred)
- Gen’l Star Nat’l Ins. Co. v. Administratia Asigurarilor de Stat, 289 F.3d 434 (6th Cir. 2002) (waiver by actions inconsistent with reliance on arbitration)
- Hurley v. Deutsche Bank Trust Co. Americas, 610 F.3d 334 (6th Cir. 2010) (prejudice may be shown by delay in invoking arbitration)
- Zimmer v. CooperNeff Advisors, Inc., 523 F.3d 224 (3d Cir. 2008) (context on waiver and arbitration timing)
- Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d 218 (2d Cir. 2001) (considerations of waiver in arbitration context)