Morgan v. Sundance, Inc. | Case No. 21-328 | Date Argued: 3/21/2022 | Date Decided: 5/23/2022

Background: Waiver is the intentional relinquishment of a known right and, in the context of contracts, occurs when one party to a contract either explicitly repudiates its rights under the contract or acts in a manner inconsistent with an intention of exercising them.

Question Presented: Does the arbitration-specific requirement that the proponent of a contractual waiver defense prove prejudice violate this Court's instruction that lower courts must "place arbitration agreements on an equal footing with other contracts?" AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011).

Holding: The Eighth Circuit erred in conditioning a waiver of the right to arbitrate on a showing of prejudice. Federal courts have generally resolved cases like this one as a matter of federal law, using the terminology of waiver. The parties dispute whether that framework is correct. Assuming without deciding that it is, federal courts may not create arbitration-specific variants of federal procedural rules, like those concerning waiver, based on the FAA’s “policy favoring arbitration.” Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U. S. 1, 24. That policy “is merely an acknowledgment of the FAA’s commitment to overrule the judiciary’s longstanding refusal to enforce agreements to arbitrate and to place such agreements upon the same footing as other contracts.” Granite Rock Co. v. Teamsters, 561 U. S. 287, 302 (internal quotation marks omitted). Accordingly, a court must hold a party to its arbitration contract just as the court would to any other kind. But a court may not devise novel rules to favor arbitration over litigation. See Dean Witter Reynolds Inc. v. Byrd, 470 U. S. 213, 218–221. The federal policy is about treating arbitration contracts like all others, not about fostering arbitration. The text of the FAA makes clear that courts are not to create arbitration-specific procedural rules like the one here. Section 6 of the FAA provides that any application under the statute—including an application to stay litigation or compel arbitration—“shall be made and heard in the manner provided by law for the making and hearing of motions” (unless the statute says otherwise). A directive to treat arbitration applications “in the manner provided by law” for all other motions is simply a command to apply the usual federal procedural rules, including any rules relating to a motion’s timeliness. Because the usual federal rule of waiver does not include a prejudice requirement, Section 6 instructs that prejudice is not a condition of finding that a party waived its right to stay litigation or compel arbitration under the FAA. Stripped of its prejudice requirement, the Eighth Circuit’s current waiver inquiry would focus on Sundance’s conduct. Did Sundance knowingly relinquish the right to arbitrate by acting inconsistently with that right? On remand, the Court of Appeals may resolve that question, or determine that a different procedural framework (such as forfeiture) is appropriate. The Court’s sole holding today is that it may not make up a new procedural rule based on the FAA’s “policy favoring arbitration.”.

Result: Judgment VACATED and case REMANDED.

Voting Breakdown: 9-0. Justice Kagan delivered the opinion for a unanimous Court.

Link to Opinion: Here.

Oral Advocates:

For Petitioner: Karla A. Gilbride, Washington, D.C. For Respondent: Paul D. Clement, Washington, D.C.