Losing Your Right to Compel Arbitration

Traditionally, and in most jurisdictions, the test for whether or not a party waived its right to compel arbitration required an examination of how the other party was prejudiced by the inconsistent acts of the first party.  The Supreme Court of the United States, in so far as the FAA is concerned, changed that in Morgan v. Sundance, Inc. 142 S.Ct. 1708 (2022). 

 But what about the prejudice created to a defendant where the plaintiff invoked court jurisdiction for a preliminary injunction and then wants to go to arbitration? 

 The US Court of Appeals for the Eighth Circuit recently addressed this in Breadeaux’s Pisa, LLC v. Beckman Bros. Ltd.  In this case, Beckman had been a franchisee of Breadeaux, but the franchise agreement lapsed.  Beckman then continued to operate under the name Main Street Pizza.  Breadeaux did not like this and filed in US District Court for a preliminary injunction which was denied.  Subsequently, Breadeaux filed for arbitration and sought to relitigate the preliminary injunction issue in an arbitral proceeding. 

 The Eighth Circuit wrote a good analysis of Morgan and ultimately found that, as far as Breadeaux was concerned, the horse had already left the barn.  The opinion (link above), which is only 8 pages, is worth the read.