A consumer plaintiff notched a rare Supreme Court win in a Federal Arbitration Act decision this morning, Morgan v. Sundance Inc.
The first three paragraphs of Justice Kagan's unanimous opinion sum things up nicely:
When a party who has agreed to arbitrate a dispute instead brings a lawsuit, the Federal Arbitration Act (FAA) entitles the defendant to file an application to stay the litigation. See 9 U. S. C. §3. But defendants do not always seek that relief right away. Sometimes, they engage in months, or even years, of litigation—filing motions to dismiss, answering complaints, and discussing settlement—before deciding they would fare better in arbitration. When that happens, the court faces a question: Has the defendant’s request to switch to arbitration come too late?
Most Courts of Appeals have answered that question by applying a rule of waiver specific to the arbitration context. Usually, a federal court deciding whether a litigant has waived a right does not ask if its actions caused harm. But when the right concerns arbitration, courts have held, a finding of harm is essential: A party can waive its arbitration right by litigating only when its conduct has prejudiced the other side. That special rule, the courts say, derives from the FAA’s “policy favoring arbitration.”
We granted certiorari to decide whether the FAA authorizes federal courts to create such an arbitration-specific procedural rule. We hold it does not.
Congrats to Public Justice lawyer Karla Gilbride, the lead lawyer for the winning plaintiff.