By Glenn Sulzer, J.D.
A party that continues to litigate an arbitrable issue for over nine months risks waiving its right to arbitration by behaving inconsistently with that right.
A hospital that knew of its right to arbitrate a nurses’ grievance regarding unpaid meal breaks but continued to litigate the issue for nearly nine months waived its right to compel arbitration of the dispute, according to the Washington Supreme Court. Allowing the employer to compel arbitration at such a late stage in the litigation, the court added, would be prejudicial to the plaintiffs (Lee v. Evergreen Hospital Medical Center, June 4, 2020, Wiggins, C.).
Alleged violation of state mandated meal breaks. A nurse employed by the Evergreen Hospital Medical Center (Evergreen) filed a putative class action suit in November 2016, alleging that the hospital failed to provide rest and meal breaks as required under Washington state law. Specifically, the nurse charged that she and other nurses often worked without rest breaks for every four hours worked, worked more than five and upward of 16 hours without a meal break, had their breaks interrupted and were not permitted to resume their breaks, and that Evergreen did not compensate them for all missed breaks.
The governing collective bargaining agreement contained a somewhat different provision, under which nurses were allowed three 15-minute paid breaks and one 30-minute unpaid break per 12-hour shift. The CBA also included a grievance procedure, which allowed the union to submit a grievance to binding arbitration. The CBA, however, did not indicate that Evergreen or individual nurses could submit a grievance to arbitration.
In addition to the statutory claims, the nurse also sought declaratory and injunctive relief. Evergreen countered, by challenging her standing to assert claims for declaratory judgment and injunctive relief and charging that she failed to exhaust the grievance and arbitration process set forth under the CBA.
Although it asserted arbitration as a possible defense, Evergreen did not move for arbitration. Rather, the hospital continued to litigate the issue, challenging the nurse’s motion for class certification and other issues regarding the approved class. In contesting the nurse’s motion for a continuance, the hospital further indicated in August 2017 that it was ready to proceed to trial on the statutory claims.
In August 2017, the nurse added a party to the suit and filed a second amended complaint, identical to the first complaint. In September 2017, the hospital moved to compel arbitration, charging that the plaintiffs’’ claims arose under the CBA and were, thus, subject to the arbitration clause.
A trial court denied the motion to compel arbitration, reasoning that every iteration of the complaint was brought under the applicable statute, the timing of the second amended complaint did not change the court’s assessment of the case, the parties had been litigating for months, and the defendant had not previously sought to enforce the right to arbitration. The court was also uncertain as to whether Evergreen was authorized to compel arbitration.
A state appellate court affirmed the lower court, holding that the plaintiffs’ claims were statutory and not subject to arbitration. However, the court stressed that, even if their claims were subject to arbitration, the hospital waived arbitration by litigating the case for nine months prior to moving to compel arbitration.
Evergreen subsequently petitioned the state supreme court for review. Specifically, the hospital sought review of whether the claim for late meal breaks (those not within the first five hours of a shift) were subject to arbitration and whether Evergreen waived its right to compel arbitration.
Waiver of right to arbitration. Initially, the state supreme court, noting that the right to arbitration can be waived if it is not timely invoked, explained that three factors determine whether a party has waived the right to arbitration: (1) knowledge of an existing right to compel arbitration, (2) acts inconsistent with that right, and (3) prejudice to the other party.
Knowledge of an existing right. The court found it undisputed that Evergreen believed it had an existing right to arbitrate. The hospital, in fact, had raised arbitration as a potential affirmative defense in response to the nurse’s first complaint. However, Evergreen argued that it did not know of the specific arbitrability of the claims until the addition of the second plaintiff, challenging the CBA and its historic implementation of the single 30-minute meal break on a 12-hour shift.
The court concluded that the addition of the second plaintiff did not modify the nurse’s claims. Moreover, the court reasoned that under Evergreen’s own interpretation of the CBA, it would have been allowed to, and would have had to, move for arbitration in response to the initial complaint for missed meal breaks because under its interpretation of the CBA does not allow a second meal break as required under the state law.
Actions inconsistent with arbitration. The court primarily stressed, as did the lower courts, that Evergreen’s decision to litigate the grievance for nearly nine months was inconsistent with a party seeking arbitration. The fact that Evergreen did not move to compel arbitration until the third iteration of the complaint (even though the complaints stated identical claims) and opposed the nurse’s motion for a continuance because it was ready to go to trial, indicated, the court concluded, that it chose to litigate rather than arbitrate.
Prejudice to plaintiffs. Finally, the court found that granting Evergreen’s motion to compel arbitration at such a later stage in the proceedings would cause severe prejudice to the plaintiffs. The plaintiffs claimed to have incurred over $140,000 in legal fees from discovery, sending the notice of the class action to other nurses, and securing expert witnesses. In addition, the court noted, compelling arbitration would allow Evergreen the opportunity to relitigate the class certification issue on which it had been unsuccessful.
Remand. As Evergreen had waived its right to compel arbitration, the case was remanded to the trial court. An issue in the lower court will be whether the plaintiffs’ claims were statutory or contractual under the CBA.
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