Supreme Court Rejects Prejudice Element Of Waiver Analysis When Enforcing Agreements To Arbitrate

• Published date: 25 May 2022
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Seyfarth Shaw LLP
• Author: Mr James R. Newland, Jr.,

The Supreme Court on May 23, 2022, in its decision in Morgan v. Sundance, Inc., rejected the "arbitration specific waiver rule demanding a showing of prejudice" to the party opposing the petition to enforce the arbitration agreement. That rule had been followed for decades by nine Circuits.¹ Post Morgan, the analysis reverts to the standard contract waiver analysis "focus[ing] on the actions of the person who held the right; ... [rather than] the effects of those actions on the opposing party."² Although the case is an employment matter, the new rule applies whenever a party seeks to stay litigation and send the matter to arbitration under Sections 3 and 4 of the Federal Arbitration Act in essentially all commercial litigation contexts.

Plaintiff/Petitioner Robyn Morgan sued in federal district court on a collective action against Sundance-the owner of the fast food franchise where she worked. Sundance litigated in the court for eight months and its actions included moving to dismiss (it lost), and participating in mediation. Sundance later moved the court for an order staying the litigation and sending the matter to arbitration relying in its...