Opinion
Civil Action No. 02-80, 02-801, 02-802, Section "A"(1)
August 29, 2002
ORDER AND REASONS
Before the Court is Discover's Motion to Compel Arbitration Stay Plaintiff's Actions Pending Completion of Arbitration (Rec. Doc. 19). Plaintiff, Ross David Shales ("Shales") opposes the motion. The motion was set for hearing on August 28, 2002, at which time the Court heard oral argument and took the matter under advisement. The Court having now considered the applicable law, evidence of record, and arguments presented by able counsel is ready to rule.
Shales concedes that a valid arbitration agreement exists between the parties and that the agreement covers the claims raised in his three petitions. Shales seeks :o avoid arbitration by asserting that Discover waived its right to compel arbitration by substantially invoking judicial process to his detriment. At oral argument, Shales raised an argument not made in his memorandum, i.e., that pursuant to the express language of the arbitration agreement Discover has no right to demand arbitration of Shales's claims.
The Court is persuaded that Shales's position on the waiver issue is untenable in light of clear Fifth Circuit jurisprudence. Although the Fifth Circuit recognizes that the right to compel arbitration is waivable, waiver of arbitration is no: a favored finding, and there is a presumption against it. Williams v. Cigna Financial Advisors, Inc., 56 F.3d 656, 661 (5th Cir. 1995) (citing Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494 (5th Cir. 1986)). The party claiming waiver has a heavy burden but waiver will be found where the party seeking arbitration substantially invokes the judicial process to the detriment of the other party. Frye v. Paine, Webber, Jackson Curtis, Inc., 877 F.2d 396, 398 (5th Cir. 1989) (citing Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156 (5th Cir. 1986)).
In the instant case, Discover's only invocation of the judicial process was removing Shales's suits to this Court, and filing its answers. No discovery has taken place, no motions for summary judgment have been filed, and no trial date has been set. Clearly minimal activity has taken place since the cases were removed, and Discover s delay in seeking arbitration was not excessive. This minimal judicial activity falls far short of the level of activity present in other cases in which the Fifth Circuit refused to find waiver. See, e.g., Tenneco Resins, Inc. v. Davy International, 770 F.2d 416 (5th Cir. 1985) (finding no waiver where defendant delayed eight months and participated in discovery). In contrast, in cases where waiver is found the facts are far more egregious. See, e.g., Frye, 877 F.2d at 397 (finding waiver where defendant waited two and a half years to seek arbitration participated in extensive discovery, and participated in a trial).
Although Shales argues that Discover only moved to arbitrate after he enrolled counsel and asserted class-based claims, the Court has seen no authority to suggest that Discover's motives are relevant at this juncture. So strong is the presumption against waiver and in favor of arbitration that the equitable arguments raised by Shales at oral argument are legally without force. In sum, the Court concludes that Discover has not substantially invoked judicial process and therefore finds no waiver.
The Court recognizes that in an egregious forum shopping case, motive can factor into the waiver issue. See Cabinetree v. Kraftmaid Cabinetry, Inc., 50 F.3d 388 (7th Cir. 1985).
Shales's reliance on the Seventh Circuit's Cabinetree decision is unpersuasive. Although the Cabinetree court found waiver, the Seventh Circuit declined to require any showing of prejudice, and in doing so expressly noted its disagreement with the Fifth Circuit on this issue. 50 F.3d at 390.
While the Court is persuaded that no waiver occurred, Shales's argument that the express language of the arbitration agreement gives Discover no right to demand arbitration presents a more challenging question. The agreement states that "[Discover] will not invoke [its] right to arbitrate an individual claim [brought] in small claims court or [the] state's equivalent court . . . so long as the claim is pending only in that court and does not exceed $5,000." Exhibit B. It is undisputed that Shales's claims were brought in small claims court and were removed to this Court solely at Discover's election. Shales argues that the agreement should not be read to allow Discover to circumvent the small claims court restriction by removing the case to federal court.
On this point, the Court attributes no significance to the fact that the arbitration agreement gives either party the right to "elect" arbitration as opposed to mandating arbitration.
Shales's argument, while a good one, must fail for two reasons. First of all, arbitration agreements are given such a broad and liberal construction in the Fifth Circuit that the Court is convinced that the agreement cannot be interpreted, absent express language, so as to deprive Discover of its right to remove the case to federal court lest it waive its right to elect arbitration. Contrary to Shales's assertion, allowing Discover to remove the case and subsequently elect arbitration does not eviscerate Discover's promise (contained in the agreement) not to seek arbitration if the case remains in small claims court. Only the small percentage of cases that specifically invoke federal law will be removable in the first place which means that in most cases Discover will not have the option of removing to federal court as a means of avoiding arbitration. The Fifth Circuit is resoundingly clear that all doubts concerning arbitrability are resolved in favor of arbitration, so strong is the presumption in favor of it. Investment Partners v. Glamour Shots, 298 F.3d 314, (5th Cir. 2002) (citing Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)).
The Court assumes that the federal jurisdictional amount will rarely if ever be met in a case pending in small claims court. Thus, such cases will not be removable to federal court, and as long as the claim does not exceed $5000, the express language of the agreement would preclude Discover from electing to arbitrate the claim.
Second, and perhaps most fatal to Shales's argument, is that his total claims exceed $5000 notwithstanding that he split the claims among three complaints. Thus, under the literal language of the agreement, Discover had the right to compel arbitration notwithstanding that the claims were brought in small claims court.
Finally, although not addressed at oral argument, Shales raised the issue of the validity of the class action restriction contained in the agreement. Although he cites to a California state court decision that struck such a restriction as unconscionable under California law, the Court notes that such restrictions are routinely enforced in this jurisdiction. See, e.g., Vigil v. Sears National Bank, 2002 WL 987412 (E.D. La. 5/10/02).
In sum, the Court concludes that Shales's claims are subject to arbitration as stated in the agreement.
The Courts notes that regardless of which way its decision comes down today, the aggrieved party can seek relief from the Fifth Circuit. See American Heritage Life Insurance Company v. Orr, 294 F.3d 702 (5th Cir. 2002).
Accordingly;
IT IS ORDERED that Discover's Motion to Compel Arbitration Stay Plaintiff's Actions Pending Completion of Arbitration (Rec. Doc. 19) should be and is hereby GRANTED. Civil Actions 02-80, 02-801, and 02-802 are STAYED pending arbitration;
IT IS FURTHER ORDERED that the Clerk of Court administratively CLOSE these matters pending further order of the Court.