Opinion
No. 111,062.
2014-11-26
FIRST NATIONAL BANK OF OMAHA, Appellee, v. Robert PRICE and Carla Price, Appellants.
Appeal from Reno District Court; Patricia Macke Dick, Judge.David C. Graham, of Kansas City, for appellants.Lauren L. Mann and Brandy L. Sutton, of Pendleton & Sutton, LLC, of Lawrence, for appellee.
Appeal from Reno District Court; Patricia Macke Dick, Judge.
David C. Graham, of Kansas City, for appellants. Lauren L. Mann and Brandy L. Sutton, of Pendleton & Sutton, LLC, of Lawrence, for appellee.
Before SCHROEDER, P.J., BUSER and ATCHESON, JJ.
MEMORANDUM OPINION
PER CURIAM.
When Robert and Carla Price didn't pay on their credit card, the First National Bank of Omaha, which issued the card, sued them in Reno County District Court. Literally on the eve of a hearing on the Bank's motion for summary judgment, the Prices asked to have the dispute submitted to arbitration, an option under the credit card agreement. The district court denied the request, finding the Prices waived their right to arbitrate by actively participating in the litigation process for more than a year. A party may immediately appeal a court order declining to enforce a contractual arbitration clause. The Prices have appealed. We agree with the district court—the Prices were too late to arbitrate. We affirm the order denying arbitration and remand to the district court for further proceedings.
The contract governing the use of the credit card provided that either the Prices, as the cardholders, or the Bank, as the issuer, could request arbitration of any dispute between them related to that financial relationship. By May 2012, the Prices had an unpaid and delinquent balance of nearly $17,000 on the credit card, reflecting purchases, interest, and other charges. The Bank filed a Chapter 61 limited action in the district court on August 27, 2012. The Prices answered on September 21. The parties filed various motions and other papers and participated in hearings and conferences with the district court. Each side served discovery requests on the other. The Bank filed a motion for summary judgment on August 6, 2013, and an amended motion about a week later. The Prices filed their opposition on October 11. The district court set a hearing on summary judgment for October 18. On October 17, at 4:42 p.m., the Prices filed a “notice of election to arbitrate” the Bank's action to collect the delinquent credit card debt. The Bank opposed the arbitration request.
After a hearing, the district court issued a memorandum opinion on November 18 denying the Prices' request for arbitration. The district court held that the Prices' active participation in the litigation process in a judicial forum for more than a year amounted to a waiver of their contractual right to request arbitration. The Prices have appealed that ruling.
At the outset, we recognize that the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. (2012), governs the arbitration agreement between the Bank and the Prices. The federal act covers “[a] written provision in ... a contract ... involving commerce” permitting arbitration of a dispute related to the contract or transaction. 9 U.S.C. § 2 (2012). The term “involving commerce” means “ ‘within the flow of interstate commerce.’ “ Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56, 123 S.Ct. 2037, 156 L.Ed.2d 46 (2003) (quoting Allied–Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 273, 115 S.Ct. 834, 130 L.Ed.2d 753 [1995] ). The contractual relationship here affected interstate commerce. Documents submitted in support of the Bank's motion for summary judgment show that the Prices were expected to submit payments to an address in Omaha, Nebraska, and that they used the credit card to purchase goods from companies outside Kansas. See CompuCredit Corp. v. Greenwood, 565 U.S. ––––, 132 S.Ct. 665, 672–73, 181 L.Ed.2d 586 (2012) (applying FAA to credit card agreement). We would affirm the district court under the Kansas Uniform Arbitration Act, K.S.A. 5–401 et seq. , which is legally and functionally no different from the FAA in any way material to this case, if that statutory scheme were applicable.
The FAA permits a party to appeal a court order refusing to enforce a contractual arbitration provision. 9 U.S.C. § 16(a)(1)(B) (2012); Janiga v. Questar Capital Corp., 615 F.3d 735, 740 (7th Cir.2010); Hardin v. First Cash Financial Services, Inc., 465 F .3d 470, 475 (10th Cir.2006). We perceive no disputed facts material to the enforceability of the arbitration provision in the credit card agreement. The issue then presents a question of law that we resolve without any particular deference to the district court's ruling. See City of Neodesha v. BP Corporation, 295 Kan. 298, 324, 287 P.3d 214 (2012) (if facts undisputed, even issue typically for jury may be decided as question of law).
A party may waive or relinquish a contractual right to arbitrate through actions that are inconsistent with an assertion of that right. Jackson Trak Group, Inc. v. Mid States Port Authority, 242 Kan. 683, 693, 751 P.2d 122 (1988); Hill v. Ricoh Americas Corp., 603 F.3d 766, 772 (10th Cir.2010). Actively litigating a legal dispute in a judicial forum before a judge or jury may be viewed as compelling evidence of an intention to abandon any right to resolve the dispute in an arbitral forum before an arbitrator. A defendant wishing to arbitrate a civil action filed against him or her has an obligation to promptly assert that right and may not fully engage the judicial litigation process only to opt for arbitration well into the process. Hill, 603 F.3d at 774. The circumstances of a given case drive the determination and no single consideration typically will be conclusive. 603 F.3d at 772.
The United States Court of Appeals for the Tenth Circuit has formulated and regularly relies upon an instructive set of factors to assess relinquishment of a contractual right to arbitrate:
“(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) ‘whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place’; and (6) whether the delay ‘affected, misled, or prejudiced’ the opposing party.” Hill, 603 F.3d at 772–73.
The appellate court outlined those criteria in Reid Burton Const ., Inc. v. Carpenters District Council of Southern Colorado, 614 F.2d 698, 702 (10th Cir.1980), and later distilled them into six specific factors in Peterson v. Shearson/American Express, Inc., 849 F.2d 464, 467–68 (10th Cir.1988). They do not trace a bright-line rule. And they must be balanced against the strong legislative preference, evinced in the FAA, favoring enforcement of agreements to arbitrate. See Hill, 603 F.3d at 775.
We choose not to belabor the point. Simply put, as the district court recognized, this case typifies circumstances demonstrating a relinquishment of a contractual right to arbitrate. In addition to answering the petition, the Prices filed a demand for a jury trial, filed a motion to dismiss (not to seek arbitration but based on purported defects in the petition), responded to discovery, served discovery, and opposed the Bank's motion for summary judgment on the merits. They did all of that over the course of about 14 months before giving notice to arbitrate. During that period, they also participated in numerous conferences and hearings with the district court and made no mention of arbitrating the dispute with the Bank. The lapse of time alone, although not determinative, is indicative of the Prices' abandonment of arbitration as an alternative forum for resolving the Bank's claim. What happened during that time is equally significant. The Prices assumed an active, even aggressive litigation posture in the district court—something that was within their rights but which was also incompatible with employing arbitration as an alternative forum for dispute resolution. Arbitration typically operates in a streamlined way intended to reduce the costs and time necessary to litigate in the civil court system. Those putative benefits were lost as a result of the Prices' delay in requesting arbitration. In turn, had the Prices' late request been granted, the Bank would have been prejudiced to the extent it had already incurred legal expenses associated with discovery and motion practice that either would not have been permitted or likely would have been unnecessary in arbitration.
The manipulative character of the Prices' request for arbitration is all the more plain in light of its timing. The Prices made their request late on the day before the court hearing on the Bank's motion for summary judgment. The Prices' decision to make their request then belies a genuine interest in using arbitration as a legitimate tool for alternative dispute resolution and bespeaks a ploy to further delay the Bank's efforts to remedy the asserted breach of the credit card agreement.
The Prices relinquished their option to arbitrate long before they asserted it in this case. The district court correctly denied their request.
Affirmed and remanded for further proceedings.