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March 17, 2005
Court, not arbitrator, decides waiver issue
Q: Is a claim that one party waived its right to arbitrate to be decided by a court or by an arbitrator?
A: Court.
Q: Is a claim that arbitration is barred by a contractual limitation period to be decided by a court or by an arbitrator?
A: Arbitrator.
In Marie v. Allied Home Mortgage Corp (1st Cir 03/16/2005), Marie sued under Title VII claiming sex discrimination, and the employer moved to compel arbitration. Conceding that the claims were arbitrable, Marie argued that (1) the employer waived its right to arbitrate by not filing for arbitration while the case was pending at the EEOC level, and (2) failed to comply with the 60-days filing period specified in the arbitration agreement.
Waiver of right to arbitrate
Who decides this issue? Court or arbitrator? It may well depend on what the conduct was that allegedly constituted the waiver. If the conduct was litigation-related and was within the same litigation in which one party attempts to compel arbitration, then the trial court has the power to control the course of proceedings before it. Also, there is the argument that judges are better able to "recognize abusive forum-shopping." Finally, there is the inefficiency argument: Let's not have the case bounce back-and-forth, as it would if the arbitrator did find there was a waiver. Bottom line here: the court should decide the waiver issue.
But wait. Let's read the arbitration agreement. It specifically said that the parties agreed to arbitrate "all disputes" regarding their agreement, "including the arbitrability of any such controversy or claim." The court interpreted the word "arbitrability" as having its focus on "substantive issues," which does not include waiver by conduct.
So the court interpreted the contract to decide that waiver was not for the arbitrator to decide, even though the contract provided that the arbitrator would interpret the contract. Go figure.
(On the merits of waiver, the court held - properly I believe - that the employer's failure to attempt to move the case to arbitration during the EEOC investigation was not a waiver of its right to compel arbitration, assuming a timely motion in the trial court.)
Contractual limitation period
In Howsam v. Dean Witter Reynolds, 537 US 79 (2002), the US Supreme Court dealt with a time limit provision contained in the arbitration rules the parties had agreed to. The Supreme Court held this to be an issue to be decided by the arbitrator rather than by the court. Here, it made no difference that the 60-filing period was included in the arbitration agreement. Same result. This is work for the arbitrator, not the court. This is what the Howsam Court called one of those "procedural questions which grow out of the dispute and bear on its final disposition."
That sounds right to me.
Posted by Ross Runkel, Editor at LawMemo, publisher of Employment Law Memo. Try it.
