Teresa Armstrong v. Michaels Stores, Inc.
59 F.4th 1011
9th Cir.2023Background
- Armstrong signed an employment agreement with Michaels that included an arbitration clause covering employment disputes.
- Armstrong filed a putative class action in California state court (Oct 2017) alleging wage-and-hour violations and later added a PAGA claim; Michaels removed under CAFA and answered asserting arbitration as an affirmative defense.
- Michaels repeatedly told the court and in case-management statements it intended to move to compel arbitration after limited discovery; it served modest discovery (five interrogatories, 28 pages of documents) largely related to the PAGA claim.
- After the Supreme Court decided Epic Systems, Michaels asked Armstrong to voluntarily dismiss non-PAGA claims; Armstrong refused, and Michaels moved to compel arbitration in August 2018.
- The district court compelled arbitration, the arbitrator awarded summary judgment for Michaels, and the district court dismissed the PAGA claim; Armstrong appealed arguing Michaels waived the right to arbitrate by litigating in federal court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Michaels waived its contractual right to arbitrate | Michaels waited too long and litigated in federal court, so it intentionally relinquished arbitration | Michaels consistently reserved the right, announced intent to move to compel, sought minimal discovery, and moved to compel promptly after Epic Systems | No waiver; Michaels did not intentionally relinquish the right to arbitrate; district court affirmed |
| Applicable waiver standard after Morgan v. Sundance | (implicit) Ninth Circuit’s prior "heavy burden" and prejudice requirement should apply | Morgan requires treating arbitration like other contracts; waiver needs knowledge and intentional inconsistent acts, no prejudice requirement | Morgan displaced the arbitration-favoring special rule and prejudice requirement; waiver requires knowledge + intentional acts inconsistent with right |
Key Cases Cited
- Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018) (held arbitration agreements requiring individual arbitration are enforceable)
- Morgan v. Sundance, Inc., 142 S. Ct. 1708 (2022) (held courts may not create arbitration-favoring procedural rules; treat arbitration like other contracts)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967) (describes FAA policy to make arbitration agreements as enforceable as other contracts)
- Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691 (9th Cir. 1986) (earlier Ninth Circuit decision articulating a disfavored-waiver, heavy-burden approach)
- Newirth v. Aegis Senior Cmtys., LLC, 931 F.3d 935 (9th Cir. 2019) (set out factors for finding waiver based on litigation conduct)
- Martin v. Yasuda, 829 F.3d 1118 (9th Cir. 2016) (held extended litigation and seeking merits rulings can show waiver)
- Richards v. Ernst & Young, LLP, 744 F.3d 1072 (9th Cir. 2013) (waiver review is de novo on undisputed facts)
- Van Ness Townhouses v. Mar Indus. Corp., 862 F.2d 754 (9th Cir. 1988) (prolonged litigation before seeking arbitration can constitute waiver)