565 F. App'x 144
3rd Cir.2014Background
- SuperMedia sued Affordable Electric, Inc. (AEI) for breach of contract (failure to pay for advertising); Morley signed the contract and was later sued individually in a second action for warranty/fraud-type claims; the cases were consolidated.
- AEI answered and contested Morley’s authority to bind the company but did not invoke the contract’s arbitration clause in its answer or initial motion practice.
- Morley moved to dismiss the consolidated actions and, in that motion, sought to compel arbitration (AEI joined in a footnote); AEI filed nothing separately to assert arbitration earlier.
- The district court denied Morley’s motion to compel arbitration, finding that AEI and Morley had waived the right to arbitrate through litigation conduct and participation in discovery and pretrial matters.
- On appeal, the Third Circuit reviewed waiver under the Hoxworth factors and applied plenary review to the district court’s waiver determination.
Issues
| Issue | Plaintiff's Argument (SuperMedia) | Defendant's Argument (Morley/AEI) | Held |
|---|---|---|---|
| Did appellants waive the right to compel arbitration by litigation conduct? | Appellee: Yes — defendants litigated the case, engaged in discovery, and failed to timely invoke arbitration. | Appellants: No — arbitration was timely invoked (Morley) and available under the contract; waiver should not be lightly inferred. | Waiver found; arbitration denied. |
| Was the motion to compel timely and did the parties give adequate notice of intent to arbitrate? | SuperMedia: No — notice was lacking and motion came after significant litigation activity. | Morley/AEI: Motion was timely (Morley filed ~2 months after complaint) and AEI later joined. | Timeliness insufficient given litigation conduct and change of positions; notice inadequate. |
| Did appellants contest the merits inconsistent with intent to arbitrate? | SuperMedia: Yes — appellants litigated merits (motions, third-party complaint, discovery). | Appellants: Disputed; claimed limited discovery or prompt motion (Morley). | Court held appellants did contest merits; this weighed toward waiver. |
| Are other defenses (e.g., nonparty status, collection-claim exemption) relevant? | SuperMedia: Also argued Morley wasn’t a contract party and collection claims exempt. | Appellants: Sought arbitration under clause. | Court did not reach these substantive defenses because it disposed of the case on waiver grounds. |
Key Cases Cited
- Nino v. Jewelry Exch., Inc., 609 F.3d 191 (3d Cir. 2010) (waiver of arbitration not lightly inferred; plenary review of waiver finding)
- PaineWebber Inc. v. Faragalli, 61 F.3d 1063 (3d Cir. 1995) (extensive discovery and late demand factors relevant to waiver)
- Hoxworth v. Blinder, Robinson, & Co., 980 F.2d 912 (3d Cir. 1992) (sets non-exclusive factors for analyzing arbitration-waiver and prejudice)
- Gray Holdco, Inc. v. Cassady, 654 F.3d 444 (3d Cir. 2011) (participation in pretrial orders inconsistent with intent to arbitrate)
- E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187 (3d Cir. 2001) (limits on pendent appellate jurisdiction for unappealable orders)