Supreme Court to determine whether prejudice impacts a determination of waiver of arbitrability

There is currently a circuit split in the United States as to whether courts should consider prejudice when determining if a party has waived its right to arbitrate. In this case the plaintiff had filed suit on behalf of herself and a proposed putative class alleging that Sundance had failed to pay employees for overtime hours in violation of the Fair Labor Standards Act. After initial motion practice and an unsuccessful mediation, Sundance moved to compel arbitration.

Although no discovery had taken place and the Court had not even conducted an initial scheduling conference, the Court denied the request, finding the delay had prejudiced the plaintiff. On appeal, the Eighth Circuit reversed, finding that the totality of the circumstances did not lead to a conclusion that the plaintiff had been prejudiced as, during that time, the parties were waiting on a court decision on the motion to dismiss rather than litigating the merits of the claim.

The Plaintiff has asked the Court to determine whether requiring the proponent of a contractual waiver defense to prove prejudice violates the Court’s prior caselaw instructing that courts must “place arbitration agreements on an equal footing with other contracts”. A determination by the Court will potentially resolve the circuit split and provide clarity on what has to be proven in order to sustain a waiver argument.

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