Set Reset – Fifth Circuit Joins the Eleventh – Arbitration Rights Can Revive

Butler Snow LLP

Butler Snow LLP

In every jurisdiction in the country, the general rule is that a party to litigation waives arbitration rights by “substantially invok[ing] the judicial process to the detriment or prejudice of the other party.”  Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 328 (5th Cir. 1999).

Despite this general rule, in 2016, the Eleventh Circuit found that a defendant “did not waive the right to arbitrate the state law claims raised in the second amended complaint because those claims were not in the case when it waived by litigation the right to arbitrate the [federal] claim.”  Collado v. J & G Transport, 820 F.3d 1256, 160-61 (11th Cir. 2016).  In other words, when a plaintiff amends her complaint to add distinctly new claims, a new right to compel arbitration of the new claims may accrue.

Last month, the Fifth Circuit adopted the same rule.  In Forby v. One Technologies, L.P., __ F.3d __, 2021 WL 4167262 (5th Cir. Sept. 14, 2021), defendant One Technologies had previously waived its right to compel arbitration of Forby’s state law claims by substantially invoking the judicial process to prejudice of Forby.

Later in the case, Forby amended her complaint to add a federal law claim and One Technologies filed a second motion to compel arbitration.  In essence, One Technologies argued that a waived arbitration right may be revived if an amended complaint changes the scope or theory of a plaintiff’s claims.  The district court denied One Technologies’ second motion to compel arbitration and One Technologies appealed.

On appeal, the Fifth Circuit reversed the district court and adopted the reasoning of the Eleventh Circuit in Collado.  The Fifth Circuit held that “[f]or waiver purposes, ‘a party only invokes the judicial process to the extent it litigates a specific claim it subsequently seeks to arbitrate.’”  Forby, 2021 WL 4167262, at *3 (quoting Subway, 169 F.3d at 328).  The Fifth Circuit further found “that waiver of arbitral rights is claim specific….”  Thus, a plaintiff wishing to remain in a judicial forum after waiver of arbitration rights by a defendant, had best not amend her complaint to add new claims or causes of action.  After Forby, doing so will trigger a new arbitration right for the defendant.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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