Right to Arbitrate Can Be Waived
posted by Michael R. Fortney | Dec 30, 2014 12:16 PM in Arbitration and Mediation
Two recent Ohio cases further clarify the right to arbitration in Ohio. A lien claimant wishing to preserve his rights under R.C. 1311 by filing a Complaint as required by the statute does not waive his rights to arbitration if the Complainant expressly states an intention not to waive arbitration rights. To the contrary, a respondent to a complaint who does not move for a stay pending arbitration waives his rights to arbitration.
In Craver v. Tomsic, a home construction contractor filed a mechanic’s lien against the owner of the property. The owner subsequently filed a Notice to Commence Suit under R.C. 1311.11. A lien claimant is required to file a complaint within 60 days of receiving a Notice to Commence Suit. The contractor proceeded to file a complaint, and in it he alleged that he was aware of his rights to arbitration and expressly refused to waive those rights.
In order to establish waiver of a arbitration agreement, a party must prove that the other party was aware of a right to arbitrate and acted inconsistently with that right. Normally filing a complaint is an inconsistent act that waives any arbitration rights, as is any use of Court proceedings, such as propounding discovery, or filing a motion. Here the only inconsistent act was the filing of the complaint, an act required to preserve lien rights. However, the contractor expressly preserved his rights, and the contractor filed a petition for arbitration only 6 months later. The Court held that these acts were not inconsistent with the right to arbitrate.
A different result was reached in Rettig v. Focht, the defendants to a complaint alleging unjust enrichment and fraud related to a contract between the parties waived their rights to arbitration when they did not respond to the complaint with a motion to stay proceedings pending arbitration and also acted inconsistently with the right to arbitrate in other ways.
The original complaint was filed September 22, 2011. The defendants did not respond until February 17, 2012, after filing motions for extensions of time. Neither answer mentioned a right to arbitration. Defendants then propounded discovery, responded to interrogatories and requests for production, and deposed plaintiffs.
Based on the totality of the inconsistent acts, the Court held that defendants waived their right to arbitration.
Parties should make certain to read and understand all contract terms, especially arbitration terms, and assert any rights they have at the proper time. Failure to do so can be costly.
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