992 F.3d 711
8th Cir.2021Background
- Plaintiff Robyn Morgan sued Sundance, Inc. (Sept. 2018) alleging FLSA overtime violations by Sundance employees.
- Sundance moved to dismiss under the federal “first-to-file” rule in Nov. 2018; the district court denied that motion in Mar. 2019.
- Sundance answered the complaint without invoking the employment agreement’s arbitration clause and participated in mediation tied to a related Michigan action.
- In May 2019 (about eight months after the complaint), Sundance moved to compel arbitration; the district court denied the motion, finding Sundance had waived arbitration.
- The Eighth Circuit reversed: it held Sundance had not waived arbitration because, although Sundance acted inconsistently with the right, Morgan suffered no material prejudice; the case was remanded for proceedings consistent with arbitration.
- Judge Colloton dissented, arguing Sundance’s strategic delay, answer, and mediation amounted to waiver and that Morgan was prejudiced.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Sundance waive its contractual right to arbitrate by participating in litigation? | Sundance substantially invoked litigation machinery (delay, motion to dismiss, answer, mediation) and thus waived arbitration. | Delay was caused largely by motion-to-dismiss being under advisement and mediation; little active litigation on merits, so no waiver. | Reversed district court: no waiver—Sundance’s conduct did not materially prejudice Morgan. |
| Is prejudice required to find waiver and was it present here? | Morgan: prejudice existed (responding to motion, wasted time/money in mediation, potential duplication). | Sundance: delay alone is not prejudice; no discovery or merits litigation occurred, so no prejudice. | Court applied the circuit’s prejudice inquiry and found the low-threshold prejudice requirement unmet. |
Key Cases Cited
- Messina v. N. Cent. Distrib., Inc., 821 F.3d 1047 (8th Cir. 2016) (articulates three-part waiver test and prejudice analysis)
- Lewallen v. Green Tree Servicing, 487 F.3d 1085 (8th Cir. 2007) (factors for invoking litigation machinery and timeliness of arbitration assertion)
- Stifel, Nicolaus & Co. v. Freeman, 924 F.2d 157 (8th Cir. 1991) (prejudice examples and case-by-case prejudice inquiry)
- Cabinetree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388 (7th Cir. 1995) (discusses waiver principles and ordinary contract-law waiver)
- Kelly v. Golden, 352 F.3d 344 (8th Cir. 2003) (delay plus litigation expense can establish prejudice)
- Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019) (class arbitration and ambiguity principles cited by defendant)
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) (limits on compelling classwide arbitration absent agreement)
- Erdman Co. v. Phx. Land & Acq., LLC, 650 F.3d 1115 (8th Cir. 2011) (discusses circuit’s approach to prejudice standard)
- Johnson Assocs. Corp. v. HL Operating Co., 680 F.3d 713 (6th Cir. 2012) (answer as vehicle to notify plaintiff of arbitration intent)