Chapter 7 - § 7.9 • WAIVER OF RIGHT TO ARBITRATE

• Jurisdiction: Colorado

§ 7.9 • WAIVER OF RIGHT TO ARBITRATE

See § 8.6.5 as to whether the court or arbitrator decides the issue.

Like any other contract right, an agreement to arbitrate (as well as any specific provisions thereof) may be waived.²⁰⁸ The right to arbitrate can be waived by actions inconsistent with such right in circumstances where prejudice will occur to the other parties.²⁰⁹ Neither the FAA nor the CUAA has provisions defining the right to waiver.

CRUAA

The CRUAA, C.R.S. § 13-22-204 (2016), defines that the provisions of that statute that may be waived and at what stage of the proceedings. That section also defines the provisions of the statute that the parties may vary by agreement. There are no Colorado reported decisions under that statute, and the reader is referred to that statute should a waiver situation occur where that statute might otherwise be applicable.

In Harper Hofer & Associates, LLC v. Northwest Direct Marketing, Inc.²¹⁰ the plaintiff initiated an arbitration against the defendants for fees and costs. The defendants e-mailed the arbitrator requesting that a court determine whether the parties ever executed a valid contract containing the arbitration clause, and thereby agreed to arbitration. The defendants also requested that the arbitrator make a determination that no contract between the parties existed.

The arbitrator ruled that the parties had entered into the contract containing the arbitration agreement. The defendants never sought independent judicial relief pursuant to C.R.C.P. 57 (declaratory judgment) on the question of whether the parties had a valid agreement to arbitrate.

The arbitration proceeded, and an award was entered in favor of the plaintiff. When the plaintiff moved to confirm the award, the defendants moved to vacate the award on the ground that only the district court could determine the existence of a valid contract/arbitration agreement. The Colorado Court of Appeals held that under C.R.S. § 13-22-206(2), the court and not the arbitrator determines whether a controversy is subject to an agreement to arbitrate unless the parties have agreed that the arbitrator shall decide the issue in plain and unambiguous language.

Here, however, the defendants waived the right to have the court determine whether there was a contract/agreement to arbitrate between the parties. See C.R.S. § 13-22-204(3)(b) as to commercial entities.

[W]e conclude that defendants willingly arbitrated that question [existence of contract] and in doing so, waived any ability to seek such relief [declaratory judgment]. When a party does not seek judicial resolution of the question of whether a contract exists before participating in an arbitration regarding the existence of the contract and the contract's arbitration clause, he waives any arguments about the underlying contract on appeal.²¹¹

FAA

There is extensive case law of waiver under the FAA. This common law probably applies to the CRUAA to the extent not directly contrary to CRUAA provisions. Under both statutes, "[a] party may waive its right to arbitration by taking the actions that are inconsistent with an arbitration provi-sion."²¹² While there are no set criteria as to what constitutes a waiver or abandonment of the right to arbitration, the courts have defined various factors to be considered in determining whether a waiver has occurred. These factors include whether (1) the party has actually participated in the lawsuit or taken other action inconsistent with its rights to arbitrate; (2) litigation has substantially progressed by the time the intention to arbitrate was communicated by the party moving to dismiss; (3) there has been a long delay prior to seeking a stay of the litigation; (4) the defendant filed counterclaims without asking for a stay of the arbitration; (5) a request to compel arbitration was initiated close to trial; (6) the party seeking the arbitration has taken unfair advantage of discovery that would not have been available in arbitration; and (7) the other party was adversely affected, misled, or prejudiced by the delay. In sum, the elements are whether the parties'...