In Cole v. Jersey City Medical Center, the New Jersey Appellate Division held that an employer is precluded from enforcing an arbitration provision in an employment contract because it waited until three days before trial to raise arbitration as a defense.  

In September 2004, plaintiff Karen Cole began full-time employment as a Certified Registered Nurse Anesthetist (“CRNA”) at the Jersey City Medical Center (“Medical Center”). Liberty Anesthesia Associates, L.L.C. (“Liberty”) had an exclusive contract to provide anesthesia services to the Medical Center. As a result, Cole’s offer of employment came from Liberty. Cole signed an Employment Agreement that contained a provision stating that all disputes arising out of or relating to her employment would be resolved through binding arbitration.

In May 2007, Cole’s supervisors asked her to undergo a drug test because they noticed discrepancies in her accounting of controlled substances. Cole refused submit to a drug test. The Medical Center suspended Cole’s CRNA privileges, which led to her immediate termination of employment from Liberty.

Cole filed a lawsuit against the Medical Center in New Jersey state court alleging retaliatory discharge in violation of the Conscientious Employee Protection Act (“CEPA”), disability discrimination in violation of the New Jersey Law Against Discrimination (“NJLAD”), as well as several common law causes of action. Plaintiff later amended her complaint to add Liberty as a defendant. Liberty failed to plead arbitration as an affirmative defense in its Answer.

Both the Medical Center and Liberty filed motions for summary judgment following the close of discovery. The Medical Center reached a settlement agreement with plaintiff while the summary judgment motions were pending. The Court granted Liberty’s motion to dismiss the common law claims, but denied the motion with respect to plaintiff’s CEPA and NJLAD claims.

On March 19, 2010, three days before trial, Liberty filed a motion in limine to compel arbitration pursuant to the arbitration provision in the Employment Agreement. Liberty argued that it waited until the eve of trial to raise the arbitration issue because “it would not have made sense to arbitrate” plaintiff’s claims in a bifurcated proceeding while her claims against the Medical Center were being tried in a court. This risk of inconsistent rulings was eliminated when plaintiff settled her claims against the Medical Center. The trial court granted Liberty’s motion to compel arbitration.

The Appellate Division reserved and remanded, holding that Liberty waived it right to compel arbitration by not raising arbitration as a defense earlier in the litigation. The court reasoned that, as a matter of litigation strategy, Liberty made a deliberate choice to wait to raise arbitration as a defense. This strategy resulted in substantial prejudice to plaintiff because she relied on Liberty’s conduct and prepared her case for trial.

This decision follows the Appellate Division’s recent decision in Helfand v. CDI Corporation, which also involved the timeliness of a defendant’s motion to compel arbitration. We previously posted about the Helfand decision, in which the Appellate Division held that the employer who waited seven months after the start of litigation to raise arbitration as a defense did not waive its right to compel arbitration. Both of these recent cases make clear that an employer who maintains an arbitration policy should plead it as an affirmative defense and file a motion to compel early in the litigation.