In case you missed it, before its recent Term ended, the Supreme Court sided with the D.C. Circuit in an important case about arbitration clauses.
The question is, How long can you litigate before you’ve waived a contractual right to arbitrate? Many circuits said, Not until your opponent can show prejudice. Long ago, the D.C. Circuit rejected that requirement. In Morgan v. Sundance, Inc., 142 S. Ct. 1708 (2022), the Supreme Court agreed.
Here’s what Justice Kagan, writing for a unanimous Court, said:
Nine circuits … have invoked “the strong federal policy favoring arbitration” in support of an arbitration-specific waiver rule demanding a showing of prejudice. Two circuits [the D.C. Circuit and the Seventh Circuit] have rejected that rule. We do too.
[T]he [Federal Arbitration Act’s] “policy favoring arbitration” does not authorize federal courts to invent special, arbitration-preferring procedural rules. … Th[e] policy … is merely an acknowledgment of the FAA’s commitment to … place [arbitration] agreements upon the same footing as other contracts. … The policy is to make arbitration agreements as enforceable as other contracts, but not more so. Accordingly, a court must hold a party to its arbitration contract just as the court would to any other kind. But a court may not devise novel rules to favor arbitration over litigation.
Id. at 1712, 1713.
Of course, contracts are creatures of state law. So if arbitration agreements are to be treated like “any other contract,” then state law controls the construction of those agreements. And the state law governing your agreement may require considering prejudice.
The point, then, isn’t that you can waive arbitration rights even without prejudicing your opponent. State law may say otherwise. The point is that prejudice is not required under federal law.