On May 23, 2022, the United States Supreme Court, in Morgan v. Sundance, Inc., 2022 WL 1611788 (U.S. May 23, 2022), issued a surprising 9-0 ruling that brings the analysis of arbitration provisions back in line with that of all other contract provision when it comes to the important topic of waiver. Under Morgan, federal courts must now treat waiver of an arbitration provision the same way they would treat waiver of any other contractual right: by focusing on the actions of the waiving party without requiring a showing of prejudice. This overrules nine of the 11 U.S. circuit courts (including the Third Circuit) that had required a plaintiff to show that he or she had suffered prejudice in order to successfully establish a waiver defense to arbitration.

Of perhaps greater importance, the Morgan decision limits the oft-repeated claim that the Federal Arbitration Act (FAA) embodies a policy favoring arbitration. Justice Kagan’s opinion explains that the much-vaunted federal policy favoring arbitration was born from an early hostility to arbitration in the early 20th century that precipitated the FAA’s enactment in the first place, and to make arbitration agreements as enforceable as other contracts, “but not more so.”