Security v. Fuller – 7/6/2017
Arizona Court of Appeals Division One holds that, under the Federal Arbitration Act, a party that does not request arbitration in its answer but raises the issue of arbitration twenty-nine days later has not waived its right to arbitration unless prejudice is shown.
An employer sued former employees in contract and tort. In answering the complaint, the employees did not raise any affirmative defense concerning arbitration. Twenty-nine days later, the employees contacted the employer to raise the existence of arbitration agreements that employees had signed when they began working for the employer. After the employer refused to arbitrate, the employees moved to dismiss and compel arbitration. The superior court denied the motion and the employees appealed.
The Court of Appeals accepted special action jurisdiction and reversed. The Court held that the arbitration agreements were not governed by Arizona’s arbitration statutes, which do not apply to employment agreements, but by the Federal Arbitration Act. The Court adopted the Ninth Circuit’s interpretation of the Federal Arbitration Act’s provision governing waiver, 9 U.S.C. § 3, which requires a showing of prejudice. The Court concluded that the employer had not shown prejudice and therefore that the employees had not waived their right to arbitration. Accordingly, the Court reversed the order denying the motion to dismiss and compelling arbitration.
Presiding Judge Johnsen authored the opinion of the court, in which Judges Norris and Campbell joined.