How Long Can You Wait in a Lawsuit Before Demanding Arbitration Video
The parties to a recent case were siblings who purchased a shopping center from their father years ago. They established an LLC to serve as the holding company for the property. Thereafter they purchased a collection of properties from various revocable trusts set up by their father. The LLC continued to serve as the holding company for the properties.
The operating agreement for the holding company included a dispute resolution procedure. If the siblings were unable to resolve an issue regarding the management of the business, their respective positions on the issue were to be submitted to an arbitrator for a binding determination on which position was in the best interest of the business.
Disagreements developed and the sister filed a verified complaint against her brother and the holding company alleging he mismanaged the real estate and engaged in self-dealing.
After years of litigation, the brother filed a notice to dismiss the matters and compel arbitration. Plaintiffs opposed the motions, asserting that defendants had waived his right to arbitration as established under Cole v. Jersey City Med. Ctr., 215 N.J. 265 (2013).
Plaintiffs noted forty-one months had elapsed between the filing of the complaint and defendants’ application. They also described the extensive discovery and protracted motion practice in the litigation which caused them to incur substantial financial expense. In addition, plaintiffs pointed out that defendants did not raise arbitration as an affirmative defense.
The question raised was whether the parties waived arbitration through their actions. In determining whether a party has waived its right to compel arbitration, . . . [t]he [c]ourt must evaluate a series of factors, examine those factors in the[ir] context and based upon a totality of the circumstances, make a decision.
Any assessment of whether a party to an arbitration agreement has waived that remedy must focus on the totality of the circumstances. The following factors are considered by the deciding judge:
(1) the delay in making the arbitration request; (2) the filing of any motions and their outcomes; (3) whether the delay in seeking arbitration was part of the party’s litigation strategy; (4) the extent of discovery conducted; (5) whether the party raised the arbitration issue in its pleadings; particularly as an affirmative defense, or provided other notification of its intent to seek arbitration; (6) the proximity of the date on which the party sought arbitration to the date of trial; and (7) the resulting prejudice suffered by the other party, if any.
That, the judge denied the demand for arbitration. The reason, he was satisfied there was sufficient evidence in the record to support the court’s conclusion that defendants waived their right to arbitration, requiring a denial of the motion to compel arbitration.
If you are looking for additional details on this topic or if you require advice about your situation, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Arbitration Law Attorney