The highest state court in West Virginia just found that a credit card company did not waive its right to arbitrate, despite initially choosing a court forum and waiting almost five years to raise its right to arbitrate. That is a somewhat surprising decision from a court that has been repeatedly willing to buck SCOTUS precedent in order to let parties avoid arbitration.
It was the right decision under current precedent though. The parties in Citibank, N.A. v. Perry, __ S.E.2d __, 2016 WL 6677944 (W. Va. Nov. 10, 2016), had an arbitration provision that could be enforced at any time. It said a party who starts a court proceeding “may elect arbitration with respect to any Claim advanced in that proceeding by any other party.” It also stated that “[a]t any time you or we may ask an appropriate court to compel arbitration of Claims…unless a trial has begun or a final judgment has been entered.” And finally, the arbitration provision had a class action waiver and said it could not be waived without a written agreement.
The case started in 2010 with Citibank filing a debt collection action against the credit cardholder. The consumer appeared to acknowledge the debt, and Citibank filed a motion for judgment on the pleadings. But the trial court never ruled. In December of 2014, Citibank served discovery and got a scheduling order in place. In May of 2015, the consumer filed a class counterclaim. In response, Citibank asked the court to compel individual arbitration of the claims. The district court found Citibank had waived its right to arbitration.
On appeal, Citibank argued that under the plain terms of its arbitration agreement, it could compel arbitration at any time before trial or judgment, unless the opposing party could show actual prejudice. The court was not willing to base its decision on the language of the agreement, however, citing federal cases that refuse to allow “no waiver” clauses to alter the usual waiver analysis. Instead, it focused on whether Citibank’s conduct demonstrated that it had intentionally relinquished its right to arbitrate. Critically, the court turned the tables and said that in a situation where the consumer waited 4.5 years to assert a counterclaim, “we will not attribute the lengthy duration of activity…solely to Citibank.” The court noted that the counterclaim changed the character of the case, and after that happened, Citibank timely filed a motion to compel arbitration.
In the “Don’t get too cute” category… An exotic dancer just won her right to keep her wage-and-hour claims in court, despite an arbitration agreement in her contract. Why? Because the club styled her contract as a landlord/tenant arrangement in which she leased the stage. Because the arbitration clause applied only to disputes arising out of the agreement, and the agreement purported to be a lease, the court refused to find its scope broad enough to cover her FLSA claims. Herzfeld v. 1416 Chancellor, Inc., 2016 WL 6574075 (3d Cir. Nov. 7, 2016).