The New Jersey Supreme Court recently rejected an employer's attempt to move a case to arbitration, finding that the employer delayed too long in bringing the issue to the court's attention and had actively participated in the lawsuit.
Karen Cole was a certified registered nurse anesthetist. Liberty
Anesthesia Associates LLC had a contract with Jersey City Medical
Center to provide anesthesia services to JCMC. Liberty entered into
an employment contract with Cole and assigned her to work at JCMC
in 2004. The employment contract contained a mandatory arbitration
clause covering all claims Cole might have related to her
employment with Liberty.
After about three years on the job, JCMC identified certain
discrepancies in Cole's accounting of controlled substances.
JCMC asked Cole to submit to drug testing, but she refused. JCMC
then suspended her staff privileges. As a result, Liberty
terminated Cole's contract, citing a provision allowing it to
do so if she were suspended at the hospital to which she was
assigned.
In September 2007, Cole filed a lawsuit against JCMC, asserting
whistleblowing, disability discrimination, and contract claims. In
May 2008, JCMC brought Liberty into the lawsuit as a third-party
defendant. A few weeks later, Cole filed an amended complaint
naming Liberty as a direct defendant. In its answer, Liberty did
not raise the arbitration provision in Cole's employment
contract. Instead, Liberty participated in discovery, including six
days of Cole's deposition, and filed various motions with the
trial court.
In early 2010, on the eve of trial, JCMC reached a settlement with
Cole. Liberty unsuccessfully sought summary judgment and engaged in
the required pre-trial exchange of information, all without
asserting the arbitration clause. Just three days before the
scheduled trial date, Liberty filed a motion to compel arbitration,
claiming that it could not have done so sooner because JCMC was not
a party to the arbitration agreement and, thus, there would have
been a risk of disparate results in two separate proceedings before
JCMC settled with Cole. The trial court granted Liberty's
motion and dismissed Cole's remaining claims, but the New
Jersey Appellate Division reversed the trial court's
order.
The Supreme Court focused its analysis on the question of whether
or not Liberty waived its right to force Cole's claims to
arbitration. The Court set forth the following non-dispositive
factors for courts to consider when determining whether a party has
waived its rights in an arbitration agreement:
(1) any delay in making the arbitration request;
(2) the filing of any motions, particularly dispositive motions,
and their outcomes;
(3) whether the delay in seeking arbitration was part of the
party's litigation strategy;
(4) the extent of discovery conducted;
(5) whether the party raised the arbitration issue in its
pleadings, particularly as an affirmative defense, or provided
other notification of its intent to seek arbitration;
(6) the proximity of the date on which the party sought arbitration
to the date of trial; and
(7) the resulting prejudice suffered by the other party, if
any.
The Court noted that any overall determination on these issues will
depend on the particular facts in each case.
Here, the Court found that Liberty had participated in the
litigation for twenty-one months before seeking arbitration. During
that time, it engaged in extensive discovery and motion practice
before the trial court without asserting the arbitration agreement
as a defense. According to the Court, "Liberty engaged in all
of the usual litigation procedures for 21 months and only on the
eve of trial invoked its right to arbitrate. Such conduct
undermines the fundamental principles underlying arbitration and is
strongly discouraged in our state."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
