The Absence Of A Uniform Arbitration Waiver Test In The Second Circuit Poses Litigation Challenges

Summary

Defendants considering whether to seek dismissal of a complaint or to compel arbitration have to consider when failing to compel arbitration waives their right to arbitration. Since the Supreme Court's 2022 decision in Morgan v. Sundance, Inc., 596 U.S. 411, defendants litigating in the Second Circuit face an additional challenge, namely, the differing arbitration waiver rules district courts are applying.

Background

Before Morgan, federal appellate courts disagreed about when a party waived its arbitration rights and, correspondingly, whether a party opposing a motion to compel and arguing waiver had to show prejudice by the delay. In the Second Circuit, this prejudice requirement was quite favorable to defendants who waited to move to compel arbitration.