The state Supreme Court on Wednesday set down guidelines for deciding on whether a party to a lawsuit impliedly waives a contractual right to arbitration by extensive delay in raising it.
The court found an implicit waiver where an employer opted to participate in a suit for a period of 21 months and did not raise the issue of arbitration until three days before trial was to begin.
"A review of the employer's conduct before trial leads us to conclude that it did, in fact, waive its right to invoke the arbitration clause in its contract with plaintiff," the court said in Cole v. Jersey City Medical Center, A-6-12.
"Such conduct undermines the fundamental principles underlying arbitration and is strongly discouraged in our state," Judge Mary Cuff wrote.
The plaintiff, Karen Cole, a nurse anesthetist, lodged the suit in 2007 after she was fired by Liberty Ins. Co., the contractual provider of anesthesia services for Jersey City Medical Center, for refusing the hospital's request for a drug test. Her employment agreement provided for arbitration of job-related disputes. She first sued the hospital but added Liberty in 2008 after the hospital made it a third-party defendant.
Liberty answered with 35 affirmative defenses, none of which mentioned the arbitration clause.
Discovery ended in late 2009, and after defamation and public policy counts were thrown out on summary judgment and several trial dates were set and adjourned, a firm trial date of March 22, 2010, was scheduled. Cole and the hospital settled that February.
Liberty moved to compel arbitration on March 19, 2010. It said it did not act earlier because it did not want to risk a different result in arbitration than a jury might find in trying the nearly identical claims involving the hospital.
Superior Court Judge Menelaos Toskos granted Liberty's motion and dismissed the case but the Appellate Division reversed on grounds of equitable estoppel, finding Liberty's conduct indicated a knowing and deliberate decision to forgo raising arbitration as a forum to adjudicate Cole's claims.
The Supreme Court affirmed, not on estoppel grounds but based on finding of implicit waiver.
"We have determined that a party need not expressly state its intent to waive a right; instead, waiver can occur implicitly if 'the circumstances clearly show that the party knew of the right and then abandoned it, either by design or indifference,'" Cuff wrote.
"In deciding whether a party to an arbitration agreement waived its right to arbitrate, we concentrate on the party's litigation conduct to determine if it is consistent with its reserved right to arbitrate the dispute."
The court set out seven factors trial judges should consider when a party moves to compel arbitration late in the litigation process:
• The delay in making the request.
• Whether motions have been filed, especially dispositive ones, and the results.
• Whether the delay was part of a litigation strategy.
• The extent of discovery.
• Whether the party raised the agreement in its pleadings, particularly as an affirmative defense.
• The proximity of the filing of the motion to compel arbitration to the date of trial.
• Any resulting prejudice to the other party if the motion is granted.
Both Cole's attorney, Gerald Resnick, who runs a firm in Roseland, and Liberty's lawyer, Dominick Bratti, of Woodbridge's Wilentz, Goldman & Spitzer, were away from their offices Wednesday and were unavailable for comment.
Justice Barry Albin, a former partner at Wilentz, Goldman, recused.