A contract agreement to arbitrate can be enforced by either party, and can also be waived by either party. Most arbitration waiver cases are fact-specific. The New Jersey Supreme Court has recently confirmed a waiver, overruling a trial court prepared to stay the case pending arbitration on the eve of trial. The case arose in a three-party setting, where only two of those parties (employer-employee) had an arbitration agreement. The NJ decision noted that courts should evaluate the totality of the circumstances in deciding the issue of waiver. The case, available here, is Cole v. Jersey City Medical Center, 215 N.J. 265, 72 A.3d 224 (N.J., August 14, 2013).
The employer provided anesthesia services to a medical center. The employer terminated the employee after the medical center revoked the employee’s privileges. She sued both parties. Extensive discovery was conducted over a span of 21 months, and the defendants both filed motions for summary judgment. The employee then settled with the medical center on February 19, about one month before the trial date. The employer continued with its pretrial filings, including a trial information exchange on March 11. Then, on Friday March 19, the employer moved the stay the trial scheduled to start on Monday, March 22. The trial court granted the motion to stay, but the NJ Supreme Court ultimately overruled that decision.
The high court noted:
“Among other factors, courts should evaluate: (1) the delay in making the arbitration request; (2) the filing of any motions, particularly dispositive motions, and their outcomes; (3) whether the delay in seeking arbitration was part of the party's litigation strategy; (4) the extent of discovery conducted; (5) whether the party raised the arbitration issue in its pleadings, particularly as an affirmative defense, or provided other notification of its intent to seek arbitration; (6) the proximity of the date on which the party sought arbitration to the date of trial; and (7) the resulting prejudice suffered by the other party, if any.”
The court concluded: “No one factor is dispositive.” For those keeping score, six of the seven factors probably weighed against the employer making the last-minute request. While the employer argued that the presence of the third party (who was not subject to arbitration) was a complicating factor, it had failed to alert the court to any arbitration rights, by way of affirmative defense, motion in limine, or in its pre-trial submission. Thus, by taking no steps at all to preserve its arbitration rights for almost two years, and then only seeking to do so on the Friday before a Monday trial, the employer had waived its right to compel arbitration.