Share this e-Alert:

Polsinelli - Class Action Litigation Polsinelli - Class Action Litigation Polsinelli - Class Action Litigation Polsinelli - Class Action Litigation Polsinelli - Class Action Litigation Polsinelli - Class Action Litigation Polsinelli - Class Action Litigation
         

  

October 2016

  

Gone For Good: Federal Court Denies Arbitration Opportunity

  

  

 
 

  

     

  

 
 

For more information about this e-Alert, please contact:

  

Mark A. Olthoff

816.395.0620

Email | Bio

  

To learn more about our Class Action Litigation practice, to contact one of our Class Action Litigation attorneys, or for more Class Action Litigation Intelligence, click here.

  


LinkedIn Facebook Facebook Share View Polsinelli documents on JD Supra  

SUBSCRIBE

 
LinkedIn Twitter Facebook Polsinelli Podcast Connect with us on LinkedIn. Connection with us on Twitter. Connect with us on Facebook.
   

A recent decision from the United States District Court for the Southern District of Florida is a reminder that if a litigant intends to enforce its contractual arbitration provision, the issue must be raised at an early opportunity. Otherwise, the risk remains that the provision will not be enforced and the right to compel arbitration may be lost.

In the case, In re Checking Account Overdraft Litigation, 09-MD-02036-JLK, the court held that the defendant bank could not force unnamed class members' claims into arbitration. The court concluded that the bank had litigated the matters for several years, resulting in the expenditure of substantial court resources and the parties' time and money. Thus, ordering the classes to arbitrate would be prejudicial.

The lawsuits were filed in 2008 and 2009. At the time, the bank argued for multidistrict litigation and that it would promote judicial efficiency and prevent the possibility of conflicting rulings. Later, the court entered an order directing the defendants to file motions to compel arbitration or to dismiss. The bank, however, did not invoke arbitration or notify the court or parties it intended to move to compel arbitration later. Instead, it joined an omnibus motion to dismiss, which the court largely denied. Thereafter, the court provided the parties a second opportunity to demand arbitration. In response, the defendant specifically informed the court it would not pursue arbitration of the matters. When it then filed its answer and affirmative defenses, the bank did not assert arbitration as an affirmative avoidance of the litigation.

Following the pleadings phase, the bank engaged in substantial discovery, including the nature and scope of the class action and the merits of the claims. Nearly a year later, the bank moved to compel arbitration of the named plaintiffs' claims for the first time. Again, this was well after the deadline set by the court to file any arbitration motion and after the parties had engaged in significant discovery extending substantial time and money. The court rejected the bank's argument and denied the motion to compel arbitration, finding that any right to compel arbitration had been waived and the motion was untimely. After an unsuccessful appeal, the bank again invoked the court's litigation machinery for several more months. While simultaneously opposing the named plaintiffs' class certification motion, the bank filed a "conditional motion" to compel arbitration as to unnamed class members pending a determination of the class certification motion. That conditional motion was denied and the case was certified. Once the court granted certification, the bank filed another motion to compel arbitration for the claims of the unnamed class members.  

Just as it had done before, the court determined that the bank had waived any rights that it may have had to demand arbitration on the unnamed class members' claims. According to the court, the bank had acted inconsistently with its arbitration rights in several respects, including engaging in substantial discovery and motion practice. This caused the court to expend enormous amounts of time and resources, and requiring significant expense by all parties: "The bank's conduct reflects a deliberate strategy on its part to try to earn through litigation a complete victory affecting the rights, not only of the few named plaintiffs, but of the entire class." The court also noted that the bank twice had declined previously to pursue arbitration by the clear deadlines set by the court. 

While the unnamed class members did not obtain official "party" status until the court entered its certification order, the bank knew the case was a putative class action lawsuit from the beginning and that the class claims were driving the cases since the time they were filed. The bulk of the litigation activity would not have occurred if only the modest claims of the plaintiffs were at stake. The bank's activities were geared toward defeating both the claims of the named plaintiffs and the unnamed class members. The court stated: "Under the circumstances, it would be unfair, and fundamentally at odds with the principles underlying the Federal Arbitration Act, to permit [the bank] to effectively 'wait in the weeds' and invoke arbitration, years after litigation, now that the alternate path the bank chose did not turn out as it had hoped." If successful, the bank's strategy would render the extensive resources spent a complete waste, resulting in gross inefficiency and conflicting with one of the fundamental tenets underlying class action practice. The court would not allow the bank to simply reverse course after failing to achieve in litigation the sweeping victory it had hoped to achieve. Its decision and corresponding conduct over the years contradicted an intent to arbitrate against either the named plaintiffs or the unnamed members of the class.

The court plainly believed that the bank had rested on its rights. Whether the bank desired to pursue arbitration with the named plaintiffs in the cases, it still had an opportunity to preserve its ability to pursue arbitration with unnamed class members, had it acted early enough. Having sat on its rights, however, the court determined that it was simply too late in the action to raise arbitration with the unnamed class members after so much time and money had been expended. The case presents a stark reminder that arbitration provisions are a contractual right that must be asserted early (and often) or the value placed on arbitration may be lost.

For More Information

For questions regarding this information, please contact the author, a member of Polsinelli’s Class Action Litigation practice, or your Polsinelli attorney.

  

 
 

  

     

  

 
         

 

 

 

  

     

  

 
 

Atlanta  Boston  Chattanooga  Chicago  Dallas  Denver  Houston  Kansas City  Los Angeles  Nashville  New York
Overland Park  Phoenix  Raleigh  San Francisco  Silicon Valley  St. Joseph  St. Louis  Washington, D.C.  Wilmington
polsinelli.com

 
 

  

     

  

 
 

  

ABOUT POLSINELLI

real challenges. real answers.SM  
Polsinelli is an Am Law 100 firm with more than 800 attorneys in 20 offices, serving corporations, institutions, and entrepreneurs nationally. Ranked in the top five percent of law firms for client service*, the firm has risen more than 50 spots over the past five years in the Am Law 100 annual law firm ranking. Polsinelli attorneys provide practical legal counsel infused with business insight, and focus on health care, financial services, real estate, intellectual property, mid-market corporate, and business litigation. Polsinelli attorneys have depth of experience in 100 service areas and 70 industries. The firm can be found online at www.polsinelli.com. Polsinelli PC. In California, Polsinelli LLP.

* 2016 BTI Client Service A-Team Report

  

 
 

  

     

  

 
 

Polsinelli provides this material for informational purposes only. The material provided herein is general and is not intended to be legal advice. Polsinelli is very proud of the results we obtain for our clients, but you should know that past results do not guarantee future results; that every case is different and must be judged on its own merits; and that the choice of a lawyer is an important decision and should not be based solely upon advertisements.

Copyright © 2016 Polsinelli PC.

 
             
Connect with us on LinkedIn. Connection with us on Twitter. Connect with us on Facebook. Polsinelli Class Action Litigation Health Care