Is Mandatory Arbitration favorable or unfavorable for defense attorneys? Harmful or helpful? Dreaded or demanded? It depends. Contractual constraints, or lack thereof, and missed or overlooked opportunity may dictate and preclude choice. The Washington Court of Appeals analyzes these parameters in Lee v. Evergreen Hospital Medical Center, 434 P.3d 1071 (2019).

Background

In Lee, Lee was an emergency room nurse at Evergreen Hospital Medical Center (Evergreen). Her employment was governed by a collective bargaining agreement (CBA). Lee brought a putative class action based on statutory rights. Evergreen appealed the trial court’s decision denying its motion to compel arbitration and included the assertion Lee failed to exhaust grievance and arbitration under the applicable CBA.

Facts

Eleven months after filing her original complaint, Lee filed a first amended complaint. Both parties engaged in discovery, conducted depositions, disagreed about trial dates, and disputed class certification until a deposition triggered a motion to continue six months later.

The motion to continue was triggered by Lee adding Evergreen-deposed, class member McFarland as a representative plaintiff. The trial court granted Lee’s four month motion to continue. The court also granted Lee’s motion to file her second amended complaint.

Evergreen filed its motion to compel arbitration and alleged the second complaint, recent discovery requests, and deposition testimonies made it clear claims arose under the CBA. Evergreen appealed the denial of its motion. The court of appeals reviewed de novo the denial of Evergreen’s motion and whether a party waived the right to compel arbitration.

Analysis

First, the court of appeals analyzed whether the CBA required arbitration. It considered whether the arbitration agreement was valid and whether the agreement encompassed the claims asserted. The court held union employees working for a public employer do not waive the ability to bring statutory claims in a judicial forum unless the CBA “clearly and unmistakably” does so. Here, the CBA did not waive the ability to enforce statutory rights in a judicial forum.

Second, the court analyzed whether a party waives its right to compel arbitration. The court reasoned because Washington courts have long held the contractual right to arbitration may be waived if not timely invoked, the party arguing against it bears a heavy burden of showing waiver.

The court held the waiver must be established by “(1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts.” Here, Evergreen had knowledge of its right to compel arbitration and chose to litigate for 9 months before moving to compel arbitration. This behavior was inconsistent with a party seeking to arbitrate. Additionally, Lee incurred over $140,000 in expenses from formal discovery and pretrial litigation. As such, Lee would be prejudiced if the court granted Evergreen’s motion.

Takeaway

In sum, parties may contract around statutory rights, but the contract must clearly and unmistakably do so. Yes, the fine print (which typically, no one reads) may dictate a win or a loss. Even if statutory rights are not waived, mandatory arbitration may be waived with knowledge, actions, and prejudice to the opposing party. As always, thoughtful care and attention to detail are paramount.

This case summary was derived from an opinion published on February 11, 2019.

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