The Sixth Circuit upheld the lower court’s holding that a contract dispute should be referred to arbitration despite the fact that the parties had engaged in litigation for several months.
Crossville Medical Oncology, P.C. (Crossville) entered into a written agreement with Glenwood Systems, Inc. (Glenwood Inc.) to provide medical billing services. Glenwood Inc.’s sole shareholder was also the owner of Glenwood LLC, a medical billing services company. Crossville brought an action against Glenwood LLC d/b/a/ Glenwood Inc. for breach of contract. Crossville’s suit was dismissed because its agreement with Glenwood Inc. contained a mandatory arbitration clause.
On appeal, Crossville argued that Glenwood LLC waived its right to arbitrate by engaging in litigation for eight months before seeking to arbitrate. The Court held that Glenwood LLC’s actions were “not inconsistent” with its right to arbitrate, and Crossville was not prejudiced by Glenwood LLC’s delay in asserting its right. The Court noted that neither party had served discovery requests, exchanged any documents nor deposed any witnesses, and that Glenwood LLC asserted the arbitration clause as an affirmative defense in its answer to Crossville’s complaint. The Court also rejected Crossville’s argument that Glenwood LLC could not enforce the arbitration clause because it was not a party to the agreement at issue, finding that Glenwood Inc. was an “alter ego” and a “mere instrumentality” of Glenwood LLC. (Crossville Medical Oncology, P.C. v. Glenwood Systems, LLC, 2009 WL 383680 (6th Cir. Feb. 17, 2009))