{"id":895612,"date":"2019-03-12T12:37:18","date_gmt":"2019-03-12T18:37:18","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=895612"},"modified":"2019-03-12T12:37:24","modified_gmt":"2019-03-12T18:37:24","slug":"another-way-to-waive-right-to-arbitrate","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/another-way-to-waive-right-to-arbitrate\/","title":{"rendered":"\u201cJust What Was Needed\u201d: Another Way to Waive a Right to Arbitrate"},"content":{"rendered":"\n

Gilbert A. Samberg | Mintz<\/a> | February 25, 2019<\/p>\n\n\n\n

Want to give up a contractual right to arbitrate? Easy. Don\u2019t seek to enforce it. For example, just litigate for awhile and don\u2019t mention your arbitration clause. The court has no obligation sua sponte<\/em> to raise or enforce your contractual right if you choose not to. Or do nothing at all. At least two New York State trial courts tell us that your unexcused default in responding to a summons and complaint can be deemed a waiver of a contractual right to arbitrate. See<\/em>, Crowdpay US Inc. v. Midnight Gaming Corp. (a\/k\/a McGraw Inc.)<\/em>, 2019 N.Y. Misc. LEXIS 389 (Sup. Ct. N.Y. Co. Jan. 23, 2019); Charming Shoppes, Inc. v. Oberling Constr. Inc.<\/em>, 186 Misc.2d 293, 297, 717 N.Y.S.2d 860, 2000 N.Y. Misc. LEXIS 471 (Sup. Ct. Monroe Co. 2000). Those courts granted default judgments on contract claims in such circumstances notwithstanding that the contracts in question contained arbitration clauses.[1]<\/a><\/p>\n\n\n\n

An agreement to arbitrate can be enforced in a court by, e.g., a motion to compel arbitration or to stay litigation. But what if a contracting party fails to appear to seek that enforcement?<\/p>\n\n\n\n

In Crowdpay<\/em>, the plaintiff brought suit for a breach of a license agreement. The defendant failed to respond to the complaint and the plaintiff sought a default judgment under N.Y. CPLR \u00a73215 (\u201cdefault judgment\u201d).<\/p>\n\n\n\n

The court noted that the contract in question \u201ccontained a provision requiring that disputes arising under the contract \u2018shall\u2019 be arbitrated,\u201d 2019 N.Y. Misc. LEXIS 389 at *1-*2, and that plaintiff had argued that the defendant \u201cwaived\u201d any right to arbitration due to its default, albeit without citing any supporting authority. The court, however, later found such authority in the Charming Shoppes<\/em> decision. There, the court had held that \u201cthe Defendant effectively waived its right to enforce the arbitration clause when it failed to answer in response to the summons and complaint under circumstances where there was no reasonable excuse for such default.\u201d 2000 N.Y. Misc. LEXIS 471 at *7-*8.<\/p>\n\n\n\n

In Crowdpay<\/em>, the court granted the plaintiff\u2019s motion for a default judgment but deferred ruling on whether the defendant had waived its right to arbitrate \u201cunless and until defendant makes a motion to vacate the default judgment and asserts a right to arbitrate the dispute.\u201d 2019 N.Y. Misc. LEXIS 389 *2-*3. (The court allowed that the defendant might successfully seek vacatur<\/em> of the default judgement if he could satisfy the relevant requirements of N.Y. CPLR \u00a7 5015 or some other relevant law. (Id.<\/em> at *3.))<\/p>\n\n\n\n

The Charming Shoppes<\/em> decision presented a more complex situation and a less satisfying analysis. There, the plaintiff brought suit for breach of contract, seeking specific performance, and sought a default judgment when the defendant failed to answer the summons and complaint. Weeks after that, defendant\u2019s counsel contacted plaintiff\u2019s counsel, and continuances were eventually granted to allow the parties to try to negotiate a settlement. Those negotiations failed after several months, and defendant then filed a \u201ccross-motion\u201d seeking to compel arbitration among other things. The court granted plaintiff\u2019s motion and denied defendant\u2019s cross-motion, holding that the defendant had waived any right to compel arbitration by failing to answer the complaint, by delaying the progress of the suit, and by participating in settlement conferences and negotiations.<\/p>\n\n\n\n

The court opined that in general \u201ca defendant may waive any right to submit issues to arbitration by his actions.\u201d 2000 N.Y. Misc. LEXIS 471 at *8 (\u201ca defendant may \u2018waive[] any right to stay the action [based on an arbitration clause] by its affirmative use of the judicial proceedings\u2019\u201d), citing DeSapio v. Kohlmeyer<\/em>, 35 N.Y.2d 402, 405 (1974). It also opined that<\/p>\n\n\n\n

\u201c[t]hough arbitration clauses are generally enforceable, they cannot be used to bypass the statutory provisions requiring that pleadings be answered or to thwart a proper motion for a default judgment.\u201d Id.<\/em> at *7.<\/p>\n\n\n\n

The Charming Shoppes<\/em> court too allowed that such a waiver could be \u201cset aside\u201d if the defendant demonstrated that a default judgment was not warranted. Id.<\/em> at *8. However, the court found that the defendant there had failed to demonstrate a basis for denying a default judgment.<\/p>\n\n\n\n

The Charming Shoppes<\/em> court also opined that the defendant\u2019s participation in a lawsuit could manifest an \u201caffirmative acceptance of the judicial forum,\u201d which would be inconsistent with a later claim that only the arbitral forum is satisfactory. Id.<\/em> at *9. A bit less satisfyingly, however, the court found such \u201cparticipation\u201d in defendant\u2019s (i) failure to answer the summons and complaint, id.<\/em> at *9 n.2; (ii) participation in settlement conferences and its agreement to a settlement in principle, id.<\/em> at *12; (iii) requests for adjournment of the default judgment motion, id.<\/em>; (iv) eliciting of relevant information concerning the issues in the case from the plaintiff during settlement discussions, id.<\/em>; and (v) delay of a default judgment for approximately three months, id.<\/em> at *12. This justification seems questionable.<\/p>\n\n\n\n

But it illustrates the perils of failing to make a timely response to the commencement of suit by an adversary, even if that initiation of litigation was contrary to an applicable arbitration agreement.<\/p>\n","protected":false},"excerpt":{"rendered":"

Gilbert A. Samberg | Mintz | February 25, 2019 Want to give up a contractual right to arbitrate? Easy. Don\u2019t seek to enforce it. For example, just litigate for awhile and don\u2019t mention your arbitration clause. The court has no obligation sua sponte to raise or enforce your contractual right if you choose not to. Or do… Continue reading \u201cJust What Was Needed\u201d: Another Way to Waive a Right to Arbitrate<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[41],"tags":[9895,42],"class_list":["post-895612","post","type-post","status-publish","format-standard","hentry","category-arbitration","tag-advise-consult","tag-arbitration-2","entry"],"jetpack_publicize_connections":[],"yoast_head":"\n\u201cJust What Was Needed\u201d: Another Way to Waive a Right to Arbitrate - Advise & Consult, Inc.<\/title>\n<meta name=\"description\" content=\"The court has no obligation sua sponte to raise or enforce your contractual right for arbitration if you choose not to. 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