Teresa Armstrong agreed to arbitrate disputes regarding the terms and conditions of her employment with Michael Stores Inc. However, when a dispute arose, she filed a complaint in federal district court. The District Court ordered her to take her claims to arbitration, and the arbitrator ruled in favor of Michaels. Teresa Armstrong v Michaels Stores, Inc.; Does 1 – 100, 59 F.4th 1011 (9th Cir. 2023).
Armstrong argued that Michaels waited too long to move for arbitration, and therefore waived its right to the arbitral forum. The Court held Michaels did not actively litigate the merits of the case for a prolonged period to take advantage of being in court. Although Michaels did not immediately move to compel arbitration, its actions did not amount to a relinquishment of the right to arbitrate. Michael’s repeatedly reserved its right to arbitration, did not ask the district court to weigh in on the merits, and did not engage in any meaningful discovery.
In making its ruling, the court observed that Morgan v, Sundance, Inc, 142 S. Ct. 1708 (2022) teaches there is no longer a special rule favoring arbitration. Rather, courts must hold a party to its arbitration contract just as the court would to any other contract. A court may not devise novel rules to favor or disfavor arbitration over litigation. It is error to require parties arguing waiver of the right to arbitration to demonstrate prejudice because the federal rule of waiver does not include a prejudice requirement.
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