• December 8, 2009

Federal courts favor enforcing arbitration clauses as a general matter; they are just following the dictates of the Federal Arbitration Act.

On the other hand, litigants cannot bury their “arbitration card” and play it after first trying their luck in the federal court — a “get out of court free card.”

In case there was any doubt, the U.S. Court of Appeals for the Eighth Circuit just ruled against a litigant who appears to have done just that (suit filed 6/07, and arbitration clause invoked for the first time in response to the second amended complaint in 7/08, motion to compel arbitration in 9/08).  The litigant (“American Eagle Design Build Studios LLC” or AEBDS) argued it had not waived its right to arbitrate.  Rather, according to AEDBS, it did not move to compel arbitration earlier because, in its view, established Arkansas law precluded arbitration.  Only when it discovered that Arkansas law did not, did AEDBS feel it could move to compel arbitration.  There are quite a few problems with AEDBS’ arguments, as set out by the Court, but the lesson is clear – if you want to arbitrate, don’t litigate.

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