937 F.3d 692
6th Cir.2019Background:
- Goodrich (later PolyOne) and Westlake settled allocation of CERCLA cleanup costs in a 2007 Agreement: PolyOne agreed to reimburse 100% of future “allocable costs,” with an arbitration mechanism available every five years to modify allocations.
- The Agreement’s §6.3 ("judicial-relief provision") permits either party, within 90 days after an arbitration award, to file a federal-court complaint for a de novo judicial determination; filing renders the arbitration award null and void and bars admission of the award as evidence.
- PolyOne invoked arbitration in 2010 and again in 2017; after the 2017 demand, Westlake cross-noticed and PolyOne filed suit seeking to declare §6.3 invalid and to enjoin the 2017 arbitration.
- The district court denied PolyOne’s motion for injunctive relief and dismissed its complaint, concluding PolyOne waived its challenge to the arbitration provisions by having demanded arbitration.
- The Sixth Circuit affirmed: although PolyOne’s Hall Street–based argument against §6.3 had force, PolyOne waived the right to obtain declaratory and injunctive relief for the 2017 arbitration; the injunction claim was also moot because arbitration concluded.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of §6.3 under the FAA (Hall Street) | §6.3 improperly expands judicial review beyond FAA’s narrow vacatur/modification grounds and is therefore invalid | Arbitration provision valid or challenge waived | Court acknowledged PolyOne’s strong Hall Street argument but did not reach merits for 2017 arbitration due to waiver |
| Waiver by demanding arbitration | PolyOne could not know viability of broader challenge until Potawatomi; therefore no waiver | PolyOne knowingly initiated arbitration and thereby waived objection to arbitrability and to the judicial-relief provision | Waiver found as to the 2017 arbitration: PolyOne’s conduct constituted intentional relinquishment of the right to seek declaratory/injunctive relief for that arbitration |
| Exception to waiver—should court decide merits anyway (Morris) | Extraordinary circumstances/avoid miscarriage of justice justify reaching merits | No exceptional circumstances; PolyOne voluntarily pursued arbitration | Court declined to entertain merits under Morris; no miscarriage of justice shown |
| Preliminary injunction to enjoin 2017 arbitration | Injunction needed because §6.3 is unlawful | Arbitration should proceed; later moot | Request for injunction moot because arbitration concluded while appeal was pending |
Key Cases Cited
- Hall Street Associates, LLC v. Mattel, Inc., 552 U.S. 576 (2008) (FAA supplies exclusive statutory grounds to vacate, modify, or correct arbitration awards)
- Citizen Potawatomi Nation v. Oklahoma, 881 F.3d 1226 (10th Cir. 2018) (held an invalid judicial-review clause could render the arbitration agreement unenforceable)
- Nghiem v. NEC Elec., Inc., 25 F.3d 1437 (9th Cir. 1994) (party who demands arbitration may waive objections to arbitrator authority)
- Piggly Wiggly Operators’ Warehouse v. Piggly Wiggly Operators’ Warehouse Indep. Truck Drivers Union, 611 F.2d 580 (5th Cir. 1980) (submission to arbitration can waive challenges to arbitrability)
- United States v. Olano, 507 U.S. 725 (1993) (defines waiver as intentional relinquishment of a known right)
- Wiepking v. Prudential-Bache Sec., 940 F.2d 996 (6th Cir. 1991) (distinguishes compelled arbitration under court order from voluntary submission for waiver analysis)
- Ackerberg v. Johnson, 892 F.2d 1328 (8th Cir. 1989) (delay based on uncertain or unfavorable law may excuse waiver)
- In re Morris, 260 F.3d 654 (6th Cir. 2001) (appellate courts may consider issues not passed on below in exceptional circumstances)