For anyone who has agonized over a decision between moving to dismiss or moving to compel arbitration, your strategic torment may be over. A short but important order from the Business Court yesterday ruled that the two options are not mutually exclusive.
In Triad Group, Inc. v. Wachovia Bank, N.A., a bond swap lawsuit filed in April 2009, Wachovia moved to dismiss the claims of the various nursing center plaintiffs. This April, Judge Tennille dismissed the punitive damages and Chapter 75 claims, but denied the motion as to all remaining claims. Soon thereafter, Wachovia moved to stay the case and compel arbitration based on a comprehensive arbitration clause contained in one of the written agreements between the parties, and the Court agreed that the clause was enforceable.
The Plaintiffs’ most interesting argument was that Wachovia waived the right to arbitrate by moving to dismiss, which caused the Plaintiffs to incur substantial litigation expense during the year that the lawsuit was pending before the Court. Judge Tennille rejected that argument:
Although the Court is always concerned about the ever-increasing costs of litigation, the fact that one party may file a motion to dismiss prior to invoking an existing arbitration clause is in and of itself insufficient to warrant denial of enforcement of an otherwise valid arbitration agreement. It would be bad public policy to discourage parties from filing early motions to test the legal sufficiency of claims.
The Court also noted that the Plaintiffs could have avoided their own litigation expense by moving to compel arbitration themselves before Wachovia moved to dismiss.
Although the Order does not address this point, it is consistent with the growing sentiment of many commentators in the profession that arbitration often is no less expensive than litigation. If that sentiment is accurate, then the expense of some judicial proceeding before compelling arbitration is less likely to constitute the prejudice that must be shown for a waiver of the right to arbitration.
(The image is the only one I could find from Miller Lite’s excellent "Let’s Watch Both!" series of commercials circa 1993, featuring amalgamated sports like the Full Contact Golf depicted above).