In Schwebke v. United Wholesale Mortgage LLC, 6th Cir., Nos. 23-1507/1551 (Mar. 27, 2024), the plaintiff brought suit in federal district court for disability discrimination under state and federal law. The defendant employer engaged in extensive discovery for seven months, including production of thousands of pages of documents and issuance of 14 third-party subpoenas for education and employment records, without ever raising the existence of its arbitration agreement as an affirmative defense. The employer then filed a motion to compel arbitration. The district court denied the motion, saying the company had effectively waived its right to arbitration “because its conduct was completely inconsistent with reliance on its arbitration right.”
The Sixth Circuit affirmed, relying upon the Supreme Court’s 2022 decision in Morgan v. Sundance, which removed any requirement of prejudice in response to a waiver argument. The court rejected the defendant’s argument that its litigation activities were not significant enough to result in a waiver of its right to arbitrate, finding that participating in discovery without reference to arbitration suggested an intent not to enforce the arbitration clause. The defendant also argued that it did not waive its right to arbitrate because its attorney did not initially know about the arbitration clause, which was the reason for the failure to raise arbitration earlier. The Court rejected this argument as well, as the employer had “imputed knowledge” of its employment agreement, which contained the arbitration clause, when it produced the agreement in its first set of discovery documents.