In Citibank, N.A. v. Stok & Associates, P.A., No. 09-13556 (11th Cir. July 20, 2010), the United States Court of Appeals for the Eleventh Circuit ruled that a party did not waive its right to compel arbitration even though it initially participated in the court proceeding.

Stok & Associates, P.A. (“Stok”) filed suit in Florida state court against Citibank, N.A. (“Citibank”) alleging several causes of action. A few weeks after filing its answer, Citibank wrote to Stok demanding arbitration, which Stok opposed. Citibank then filed a petition in federal court to compel arbitration and stay the state court proceeding pursuant to an arbitration agreement in the contract between the parties, which provided that either party “may elect to require any dispute between [them] … be resolved by binding arbitration.” The district court denied the motion, finding Citibank “had participated in the state court action in a manner that prejudiced Stok, thereby waiving its right to compel arbitration.”

The Eleventh Circuit reversed the district court’s decision, finding that Stok could not establish that Citibank’s participation in litigation caused it to suffer prejudice, focusing specifically on the length of delay in demanding arbitration and the expenses incurred by Stok (both if which it found minimal). As such, the court held that Stok did not meet its burden of demonstrating prejudice sufficient to warrant a finding of waiver.

Click here to review a copy of the court’s decision.