After more than five years of litigation, and more than a year after the district court certified a class in a TCPA consumer class action, Club Exploria, a timeshare company, moved to compel arbitration. The district court denied the motion, finding a waiver of the right to arbitrate. It then granted summary judgment to the class.
Exploria appealed. In resolving the appeal today, the Seventh Circuit recognized that its case law was divided as to the relevant standard of review as to the district court’s finding of waiver. The court adopted a rule that ” so long as the decision does not announce a new legal rule, waiver decisions should be reviewed for clear error,” and overruled its decisions that had suggested otherwise (relying on the Seventh Circuit’s unique ‘en banc by footnote’ procedure)
Moving onto the merits, the Court rejected Exploria’s argument that it was not required to move for arbitration until after the class certified, since it could not compel arbitration of absent class members’ claims until after the class was formally certified. It explained:
Arbitration agreements with putative class members should be produced during class-related discovery and in opposition to class certification. The number and variety of such agreements impact the district court’s Rule 23 analysis. By not raising arbitration at that stage—especially if the agreements preclude joinder of claims or class actions—the defendant implies it intends to litigate class claims in court.
Moreover, if a diligent defendant intends to compel arbitration after class certification, it cannot do so promptly if those agreements have not been produced. Asking to reopen discovery shows a lack of diligence. It is also inefficient and costly to the parties and the court, which undercuts the rationale for arbitration in the first place. Therefore, we hold that a party’s pre-certification conduct may support an inference that it waived its right to compel arbitration of putative class members’ claims.
(citations omitted).
As applied to Exploria, the court found that both its pre- and post-certification conduct served as evidence of waiver. In its answer and in opposing class certification, Exploria had raised an affirmative defense focused “on the consent of the ‘putative class members,’ without mentioning arbitration.” Post-certification, it amended its answer to add additional defenses–but not arbitration. And it then attempted to reopen discovery to obtain testimony from class members–on merits questions only.
