Kingery Constr. Co. v. 6135 O St. Car Wash
979 N.W.2d 762
Neb.2022Background
- Kingery Construction and 6135 O Street Car Wash, LLC contracted (2017 AIA form) with an AAA-administered construction-industry arbitration clause and a provision that the Federal Arbitration Act (FAA) would govern arbitration.
- Kingery sued OSCW (breach of contract and Prompt Payment Act relief) in district court on April 16, 2021, then filed an AAA demand and moved to stay the court case for arbitration within about two months.
- OSCW moved to dismiss, arguing Kingery had waived the contractual time-limits (§21.3) and—relying on this court’s LaRue Distributing precedent—that Kingery waived its FAA §3 right to a stay by litigating (knowledge, inconsistent acts, and prejudice required under the three-part test).
- The district court ultimately granted Kingery’s motion to stay the district-court proceedings; OSCW appealed. While the appeal was pending, the U.S. Supreme Court decided Morgan v. Sundance, eliminating a prejudice requirement for waiver based on litigation conduct.
- The Nebraska Supreme Court held Morgan required overruling the portion of LaRue that imposed a prejudice requirement, concluded the stay order was final and appealable, reversed the district court’s ruling under the now-invalidated test, and remanded for the trial court to apply ordinary waiver standards to the facts.
Issues
| Issue | Kingery (Plaintiff) Argument | OSCW (Defendant) Argument | Held |
|---|---|---|---|
| Whether prejudice is required to show waiver of the right to stay proceedings for arbitration under FAA §3 | LaRue’s three-part test (including prejudice) was controlling; here, any litigation was minimal and not prejudicial | Prejudice must be shown under LaRue; Kingery’s filing and brief litigation caused expense and delay | Prejudice is not required. Morgan v. Sundance rejects an arbitration-specific prejudice requirement; LaRue’s prejudice language is overruled |
| Whether Kingery waived its arbitration right by filing suit and brief pre-arbitration litigation | Filing suit and moving for arbitration within ~2 months shows no intentional relinquishment; minimal litigation occurred | Filing suit and litigating inconsistent with the arbitration right and caused OSCW to expend resources | Court did not decide on the facts; remanded for district court to apply ordinary waiver/default/forfeiture standards and make factual findings |
| Is an order staying a state-court action pending arbitration final and appealable? | (implied) Stay ends ability to litigate in court and thus is appealable | (implied) Same | Stay orders are final, appealable orders because they affect a substantial right and are in a special proceeding |
| Do FAA §§3 and 4 and federal waiver principles apply in this state-court dispute? | The parties’ contract invoked the FAA; state courts should apply FAA procedures in this context | OSCW questioned whether §§3/4 apply in state court but acknowledged FAA governs under the contract | Court assumed FAA governs here under the parties’ agreement, applied federal waiver framework but left open broader FAA/state-court scope questions; state contract/waiver principles still control formation/enforceability |
Key Cases Cited
- Morgan v. Sundance, Inc., 142 S. Ct. 1708 (U.S. 2022) (U.S. Supreme Court held prejudice is not required to find waiver from litigation conduct and interpreted §6 procedural treatment for FAA applications)
- Good Samaritan Coffee Co. v. LaRue Distributing, 275 Neb. 674 (Neb. 2008) (previous Nebraska adoption of Eighth Circuit three-part waiver test including prejudice—overruled here to the extent it required prejudice)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (U.S. 1967) (state law governs validity/enforceability of arbitration agreements under FAA §2)
- Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (U.S. 1985) (Congress enacted the FAA to place arbitration agreements on the same footing as other contracts)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (U.S. 2010) (distinction between substantive FAA §2 issues and procedural §§3–4 enforcement mechanisms)