After two years of litigation and extensive pretrial discovery, the Tenth Circuit held that cable company Cox Enterprises had waived its right to compel arbitration in an antitrust class action. The opinion is a cautionary tale for defendants not to delay in invoking their arbitration rights, warning against efforts by parties to “game the federal courts and abuse the judicial process” by waiting to raise the arbitration defense until after class certification and shortly before trial.
Cox began inserting arbitration clauses into customer contracts after an initial class action in 2009. When the instant case was brought in 2012, Cox moved to dismiss, opposed class certification, moved for reconsideration of the certification decision, and filed a petition for leave to appeal the certification decision—all without mentioning the arbitration clauses. Only after that appeal failed did Cox assert its right to arbitration, on the same day that it also moved for summary judgment.
The court applied circuit precedent from Peterson v. Shearson/Am. Express, Inc., 849 F.2d 464 (10th Cir. 1988) to determine whether Cox waived its right to compel arbitration. In analyzing the six Peterson factors, the court was particularly concerned with the timing of Cox’s motion to compel arbitration. The court held that Cox’s “complete failure to mention the presence of its arbitration contracts” until after the certification proceedings, “despite the obvious impact that they would have on the court’s Rule 23 analysis,” was inconsistent with an intent to arbitrate.
Furthermore, according to the court, waiting to assert arbitration rights until shortly before trial meant that the “litigation machinery had been substantially invoked,” and parties had undergone extensive pretrial preparation, including substantial discovery. It was “undisputed” that Cox knew about the arbitration clauses when it engaged in discovery, and it could have asserted those rights at any time throughout the pretrial proceedings. And although Cox argued that the motion to compel arbitration was timely because Cox could not have moved to compel arbitration as to the unnamed class members until after the certification decision, the Tenth Circuit rejected this argument “as an improper attempt to artificially narrow the scope of waiver.”
In affirming the lower court’s holding of waiver, the Tenth Circuit agreed that Cox’s delay amounted to a game of “heads I win, tails you lose,” essentially asking for a “redo” of the Rule 23 analysis it had already lost. Such a redo, the court explained, would cause the plaintiffs to suffer substantial prejudice and would waste substantial judicial resources the courts had already invested in the case. The court refused to “provide a license” for that type of manipulation of the judicial process.