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Vol. 2008-3 March, 2008

Arbitration; Waiver of Right

Arbitration agreements, for the enforcement of private disputes are favored by public policy. However, this preference is not absolute, as Ohio Courts have consistently held. Among the most important of grounds upon which Courts may refuse to enforce arbitration agreements, is the waiver of the right to arbitrate. Waiver can be either express or inferred, when the party seeking arbitration acts inconsistently with its right to proceed with arbitration.

In order to demonstrate that a party has waived its right to arbitrate, the party must have known of the right to arbitration and acted inconsistently with that right. The essential question for determination is, whether, based on the totality of the circumstances, the party seeking arbitration has acted inconsistently with the right to arbitrate.

When a dispute is subject to arbitration under Ohio Revised Code Section 2711.02, it is incumbent upon the party seeking arbitration to immediately move for a stay of the proceedings, pending the arbitration.

Courts have used certain circumstances, as a test, to consider whether a party has acted inconsistently with its right to arbitrate. These include:
  1. any delay in the requesting party's demand to arbitrate via a motion to stay the judicial proceeding and an order compelling arbitration;
  2. the extent of the requesting party's participation in the litigation prior to its filing a motion to stay the judicial proceeding, including a determination of the status of discovery, dispositive motions, and the trial date;
  3. whether the requesting party invoked the jurisdiction of the court by filing a counterclaim or third-party complaint without asking for a stay of the proceedings; and
  4. whether the non-requesting party has been prejudiced by the requesting party's inconsistent acts.
Where a contract contains specific requisites for resolution of claims or disputes by arbitration, that method is normally enforced, unless the parties, by their acts or inaction, waive the right to arbitration.

In an even more recent decision, the Court denied Arbitration by reason of the acts and conduct of a party:

{80} "The essential question is whether, based on the totality of the circumstances, the party seeking arbitration has acted inconsistently with the right to arbitrate."
Harsco Corp. v. Crane Carrier Co. (1997), 122 Ohio App.3d 406, 410, 701 N.E.2d 1040. To determine whether a defendant acted inconsistently with arbitration, the court should consider:
  1. any delay in the requesting party's demand to arbitrate via a motion to stay judicial proceedings and an order compelling arbitration;
  2. the extent of the requesting party's participation in the litigation prior to its filing a motion to stay the judicial proceeding, including a determination of the status of discovery, dispositive motions, and the trial date;
  3. whether the requesting party invoked the jurisdiction of the court by filing a counterclaim or third-party complaint without asking for a stay of the proceedings; and
  4. whether the non-requesting party has been prejudiced by the requesting party's inconsistent acts.
Id. quoting Phillips v. Lee Homes, Inc. (Feb. 17, 1994), Cuyahoga App. No. 64353, and citing Rock v. Merrill, Lynch, Pierce, Fenner & Smith, Inc. (1992), 79 Ohio App.3d 126, 606 N.E.2d 1054; Brumm v. McDonald & Co. Securities, Inc. (1992), 78 Ohio App.3d 96, 603 N.E.2d 1141.

{81} In Mauk, supra, this Court found that the appellant had waived its right to arbitration by filing a motion to dismiss, engaging in discovery, obtaining a protective order and waiting over seven months to formally request arbitration. The Court found the appellant's argument in Mauk that it was not aware of the arbitration provision pertaining to appellees to be spurious. Church v. Fleishour Homes, Inc., 2007-Ohio-1806.

Clearly, protection of a parties' rights and remedies should be guided by experienced legal counsel.

"We don't like their sound, and guitar music is on the way out."

Decca Recording Company of London rejecting the Beatles, 1962.

AUTHOR / EDITOR: J. NORMAN STARK is an Attorney-at-Law, a Registered Architect, (AIA, NCARB) Registered Landscape Architect, Interior Designer, Planner and Senior Appraiser (ASA), admitted to practice law before the Bar of Ohio, the US District Courts, Ohio and Illinois (Central Dist.), the US Court of Appeals, and the United States Supreme Court. He is a Mediator, Arbitrator and Litigator with experience in Business, Construction Law, and Public Works, and with additional experience in Real Estate, Construction Attorney (Legal Project and Crisis Management), and as an Expert Witness (Forensic Architect). His office is in Cleveland, Ohio.

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