Armstrong v. Michaels Stores, Inc.

The party asserting waiver of arbitration must demonstrate: (1) knowledge of an existing right to compel arbitration; and (2) intentional acts inconsistent with that existing right, and the burden for establishing waiver is no longer heavy.

In her employment contract with Defendant, Plaintiff agreed to settle disputes by arbitration. Despite this agreement, Plaintiff filed a class action suit in California state court in October 2017, alleging violations of state wage-and-hour laws. Defendant asserted its right to arbitration as an affirmative defense and removed the case to federal district court under the Class Action Fairness Act. Defendant moved to compel arbitration, which was granted by the district court. Plaintiff timely appealed the district court’s order compelling arbitration arguing that Defendant waited too long, thus waiving its right to arbitration. Following two recent Supreme Court cases, Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018) and Morgan v. Sundance, Inc., 142 S. Ct. 1708 (2022), the court adopted the rule that “a party asserting waiver must demonstrate: (1) knowledge of an existing right to compel arbitration; and (2) intentional acts inconsistent with that existing right.” Similarly, the Court recognized that the burden of establishing a waiver was no longer “heavy.” Despite this new lower burden, the Court held that Plaintiff failed to satisfy both prongs. Although Plaintiff satisfied the first prong, Plaintiff could not establish that Defendant made intentional acts of waiver. Because Defendant pleaded arbitration in response to the original complaint and did not take advantage of the judicial forum by seeking a judgment on the merits or requesting a large amount of discovery, Defendant's acts were inconsistent with an intentional act of waiver. AFFIRMED.