If You Want to Arbitrate a Lawsuit, Arbitrate

Posted by Edward Sharkey on Thu, 05/10/2012 - 21:51

In a recent opinion, a California court enforced a rule that applies in most states, including Maryland: a business may waive its right to compel arbitration of a lawsuit if it does not act reasonably promptly to invoke the right.

In the case, a claimant sued a business. The business had a contractual right to force the claimant to arbitrate the claim. Instead of moving to dismiss in favor of arbitration, however, the company answered the complaint, responded to discovery requests, and filed a motion to dismiss on other grounds. Four months later, the company made a demand for arbitration.

The court rejected the demand, and the appellate court affirmed. It found that the company had waived its right to arbitrate by delaying and participating in the litigation.

There are many good reasons not to arbitrate, which we will not belabor here. But when a party does want to arbitrate rather than litigate a claim in court, it is imperative to make the demand promptly. Any delay, substantive participation in the lawsuit, or conduct inconsistent with an interest in arbitration could be grounds for a court to deny the demand.

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