Melba Polk-King v. Discover Bank, 120 N.E.3d 1051

Background

Discover filed a small‑claims action against Melba Polk‑King in June 2014 for an unpaid credit‑card balance; Polk‑King moved to compel arbitration in 2015 and the court stayed the case for arbitration.
JAMS closed the first arbitration in November 2015 after Discover failed to pay the initial case management fee; Discover took no meaningful action in court for nearly a year.
In March 2017 the trial court dismissed the action without prejudice under Ind. Trial Rule 41(E) for Discover’s failure to prosecute, citing prejudice to Polk‑King (credit reporting).
In May 2017 Discover moved to vacate the dismissal and stay the case pending arbitration (citing the FAA and statute‑of‑limitations concerns); the court granted the motion and the case was reinstated.
Discover reinitiated arbitration in mid‑2017, obtained an arbitration award in October 2017, and the trial court confirmed the award in December 2017. Polk‑King moved to vacate and dismiss with prejudice; the trial court denied relief.
On appeal the Indiana Court of Appeals reversed, holding the trial court abused its discretion in reinstating the case and directing dismissal with prejudice and vacatur of the confirmation.

Issues

Issue	Plaintiff's Argument (Discover)	Defendant's Argument (Polk‑King)	Held
Whether trial court could set aside a T.R. 41(E) dismissal under T.R. 41(F) after long delay	Reinstatement was permitted for “good cause” and the FAA requires staying proceedings to allow arbitration; statute‑of‑limitations might bar refiling otherwise	Dismissal was proper for failure to prosecute; reinstatement was inequitable and barred by the statute of limitations so case should be dismissed with prejudice	Court abused discretion in granting reinstatement; dismissal should have remained and case dismissed with prejudice
Effect of Discover’s default in first arbitration on right to compel/reinitiate arbitration	Parties’ arbitration agreement and FAA support stay/compelling arbitration; Discover entitled to restart arbitration	Discover defaulted by failing to pay fees; default waived right to compel arbitration and precluded court‑ordered stay under FAA §3	Default in arbitration meant Discover was not entitled to demand a stay or to reinitiate arbitration in court; trial court erred in allowing reinstatement and subsequent arbitration enforcement
Whether confirmation of arbitration award should be set aside because arbitration was improper	Arbitration award final and non‑appealable under JAMS rules; trial court properly confirmed	Second arbitration was improper (result of improper reinstatement); award and confirmation must be vacated	Confirmation vacated on remand because underlying reinstatement and arbitration were improper
Whether statute of limitations barred refiling after dismissal without prejudice	Reinstatement avoided statute‑of‑limitations bar and preserved Discover’s claim	Dismissal without prejudice became effectively with prejudice due to SOL; reinstatement was inequitable and lacked good cause	Court found SOL concerns alone did not supply good cause; equities favored Polk‑King and dismissal with prejudice was directed on remand

Key Cases Cited

Niksich v. Cotton, 810 N.E.2d 1003 (Ind. 2004) (Small Claims Rules govern small claims and Trial Rules apply where not in conflict)
Lee v. Pugh, 811 N.E.2d 881 (Ind. Ct. App. 2004) (lengthy inactivity can justify dismissal for failure to prosecute)
E&S Mems., L.L.C. v. Eagen, 795 N.E.2d 508 (Ind. Ct. App. 2003) (T.R. 41(F) procedure for reinstating dismissed actions)
Estate of Mills‑McGoffney v. Modesitt, 78 N.E.3d 700 (Ind. Ct. App. 2017) (reinstatement via T.R. 41(F) is extraordinary relief reviewed for abuse of discretion)
Sink v. Aden Enterprises, Inc., 352 F.3d 1197 (9th Cir. 2003) (party in default on arbitration fees may be denied a judicial stay and order to arbitrate under FAA §3)
Pre‑Paid Legal Servs., Inc. v. Cahill, 786 F.3d 1287 (10th Cir. 2015) (failure to pay arbitration fees can constitute default under FAA §3)