Morgan v. Sundance, Inc.
Overview
Overview
An employee who sued her employer in court for wage claims faced a motion to compel arbitration; the employer had participated in litigation for months before seeking arbitration. The Supreme Court held 8-1 that a party waives its right to arbitration if it acts inconsistently with that right, but courts must assess waiver based solely on prejudice to the opposing party, not a requirement of prejudice as additional element.
The Facts
Facts
Robyn Morgan sued Sundance, Inc. for wage theft. Sundance, which had an arbitration agreement, participated in court litigation for eight months before moving to compel arbitration. The Eighth Circuit denied the motion, holding Sundance had waived arbitration by its dilatory conduct, but applied a prejudice requirement as part of the waiver test. The Supreme Court granted certiorari to address the standard.
The Issue
Issue
Whether a court applying the federal arbitration waiver standard must find prejudice to the party opposing arbitration in addition to finding that the party seeking arbitration acted inconsistently with the arbitration right.
The Rules
Rule
Courts must apply ordinary contract law principles to waiver of arbitration rights, without adding a special prejudice requirement. The Federal Arbitration Act's policy favoring arbitration does not justify a more demanding standard for finding arbitration waiver than applies to waiver of other contractual rights. Courts determine waiver by examining whether the party knowingly relinquished the arbitration right through its conduct.
The Application
Analysis
Sundance's eight-month participation in court proceedings. Filing responses, engaging in discovery, and pursuing claims on the merits. Represents conduct inconsistent with asserting an arbitration right, thereby satisfying the waiver standard established here. The company's active engagement in the litigation demonstrates a knowing relinquishment of its arbitration clause under ordinary contract principles; the extended timeline between initiating court proceedings and later seeking to compel arbitration makes this inconsistency evident. Applying the Court's approach, no additional finding of prejudice to Morgan is necessary; Sundance's conduct alone establishes waiver.
The Conclusion
Conclusion
Morgan v. Sundance eliminated the special prejudice requirement that some courts had imposed for finding waiver of arbitration, aligning the arbitration waiver standard with ordinary contract waiver principles. The ruling makes it easier for parties who have been subjected to prolonged litigation before a belated arbitration demand to show the opponent waived its right to arbitrate.
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