Morgan v. Sundance, Inc.

Courts may not make arbitration preferential procedural rules.

While working at a resutaurant owned by Respondents, Petitioners signed an agreement to arbitrate employment disputes. Despite the existence of the agreement, Petitioners filed a class action suit for alleged violations of the Fair Labor Standards Act. Although Respondents began defending the suit as if no arbitration agreement existed, approximately eight months after filing, they moved to stay the litigation and compelled arbitration under the Federal Arbitration Act (FAA). Petitioners argued Respondents waived their right to compel arbitration. The district court applied an arbitration specific test for waiver used by many circuit courts, based on the FAA’s “policy favoring arbitration,” determining that Petitioners were prejudiced by Respondents' eight month wait before compelling arbitration. The Eighth Circuit reversed. On appeal, the Supreme Court reversed, holding that courts may not make arbitration preferential procedural rules. The FAA’s “policy of favoring arbitration” is to be read in a light making arbitration agreements as enforceable as any other contract right, not to favor arbitration above litigation. The language of Section 6 of the FAA makes clear that ordinary procedural rules apply to arbitration applications, and the ordinary test for waiver has no prejudice requirement. REVERSED and REMANDED.