Background
Plaintiffs Douglas Mundle and Pamela Knight filed a putative class action complaint against Defendants Doxo, Inc., Steven Shivers, and Roger Parks. Defendants moved to dismiss the entire complaint under Federal Rule of Civil Procedure twelve comma B comma six and engaged in discovery and status conferences without requesting arbitration. The district court denied the motion to compel arbitration, and Defendants appealed.
The court’s reasoning
The court reviewed the case de novo and affirmed, concluding that Defendants waived the right to compel arbitration. The panel analyzed whether Defendants took an intentional action inconsistent with their right to arbitrate. The court found that Defendants repeatedly sought a judicial decision on the merits by moving to dismiss the complaint with prejudice. Additionally, Defendants met and conferred with Plaintiffs, exchanged initial disclosures, stipulated to extensions, and filed discovery plans without mentioning arbitration for ten months. The court noted that Defendants argued for dismissal on the merits in early status reports before asserting the case must be referred to arbitration after the district court denied most of their motion to dismiss. The court rejected Defendants’ arguments that they never expressly disclaimed the right, that their answer reserved the right, or that minimal discovery was insufficient, stating that the totality of circumstances indicated an intentional relinquishment of the right to arbitrate.
Seeking a decision on the merits of a key issue in a case indicates an intentional and strategic decision to take advantage of the judicial forum.
Newirth ex rel. Newirth v. Aegis Senior Cmtys., LLC, 931 F.3d 935, 941 (9th Cir. 2019)
What it means going forward
The ruling reinforces that parties cannot litigate the merits of a case for an extended period and then seek arbitration only after losing on the merits. It clarifies that express reservations in pleadings do not automatically preserve arbitration rights if the party’s conduct demonstrates a conscious decision to seek judicial judgment.