U.S. Supreme Court Rejects Prejudice Element for a Claim of Waiver
Is the right to compel arbitration waived only when the plaintiff can show prejudice from the defendant’s inconsistent actions and delay? In Morgan v. Sundance, Inc., No. 21-328 (2022), the Supreme Court found that the Federal Arbitration Act (“FAA”) does not permit courts to create tests to favor arbitration over litigation, and that a showing of prejudice is not required for a claim of waiver.
In Morgan, the defendant, a Taco Bell franchisee, moved to compel arbitration eight months after the plaintiff, an employee alleging a nationwide collective action for violations of wage and hour laws, brought suit. The defendant sought to compel arbitration, but not before filing a motion to dismiss the lawsuit, filing an answer and asserting affirmative defenses that did not mention the arbitration agreement, and mediating the case. Eight months into the litigation, the defendant changed course and moved to compel arbitration of the plaintiff’s individual claims.
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