The Third Circuit recently held that title insurers did not waive their ability to compel individual arbitration when attempting to do so earlier would have been futile under then-existing law. In Chassen, et al. v. Fidelity National Financial, Inc., et al., (Sept. 8, 2016), plaintiffs sought to recover hundreds of millions of dollars in claimed damages on behalf of the alleged class from the title insurance companies that issued title insurance coverage for those transactions.
At the time plaintiffs filed their complaint, arbitration provisions that did not permit class arbitration were deemed unconscionable and unenforceable under New Jersey law. Thus, for two and a half years, the parties engaged in broad litigation, including extensive class discovery and dispositive motion practice.
After the decision of the United States Supreme Court, in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), defendants in Chassen demanded that the Plaintiffs individually arbitrate their claims pursuant to the arbitration clauses contained in the title policies. The District Court held that the defendants had not waived their right to seek individual arbitration during the two and a half years of litigation because it would have been futile for the Defendants to have sought to exercise that right prior to Concepcion.
On appeal, the Third Circuit affirmed the district court’s order compelling individual (and not class) arbitration under the title insurance policies. After finding that it would have been futile under then-existing law for the defendants to have sought to compel individual arbitration prior to decision in Concepcion, the court broke from its traditional waiver analysis and determined that the factors concerning delay and resulting prejudice applied differently in a futility context. The court found that the defendants could not be penalized for failing to pursue a right that did not exist under New Jersey law. Because defendants sought individual arbitration shortly after Concepcion, no prejudice had resulted, the defendants had not waived their right to compel individual arbitration. The Third Circuit recognized the material distinction between arbitrating claims individually versus arbitrating a putative class action, holding that “the right to individual arbitration is a distinct right separate from the right to class arbitration” and that “each can be independently waived, thereby requiring that each receive a separate futility analysis.”
