Waiver of the Right to Arbitrate Federal Claim Does Not Extend to Later-Asserted State-Law Claims

On April 21, the Eleventh Circuit decided Collado v. J. & G. Transport, Inc., 820 F.3d 1256 (11th Cir. 2016), holding that a defendant’s waiver through litigation of the right to arbitrate claims under the Fair Labor Standards Act (FLSA) did not extend to state-law claims asserted by a later amendment to the complaint.

Enrique Collado, a former truck driver for J. & G., filed a collective action lawsuit against the company for failure to pay overtime in violation of the FLSA. After the close of discovery, but before trial was set to begin, Collado moved to amend his complaint to add state-law claims for breach of contract and quantum meruit.  The motion was granted over J. & G.’s objections, and J. & G. moved to dismiss the state-law claims or, in the alternative, to compel arbitration of those claims.  J. & G. conceded that it had waived arbitration of the FLSA claim but argued that the amendment revived its right to elect arbitration of the state-law claims because those claims unexpectedly broadened the scope of the case.  The district court denied the motion, concluding that, although the amendment altered the theory of the case, that alteration was not unexpected, and fairness did not compel reviving J. & G.’s right to arbitrate.

On appeal, J. & G. again argued that the amendment unexpectedly changed the scope or theory of the litigation, while Collado argued that this change was not unexpected. These arguments were based on Eleventh Circuit precedent on revival of a waived right to arbitrate:  “In limited circumstances, [] where a party has waived the right to compel arbitration, an amended complaint can revive that right ‘if it is shown that the amended complaint unexpectedly changes the scope or theory of the plaintiff’s claims.’”  820 F.3d at 1259 (quoting Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194, 1202 (11th Cir. 2011)).

The court, however, took a different approach. In Krinsk, the issue was whether the right to arbitrate, once waived, had been revived by an amendment to the complaint substantially increasing the size of the plaintiff class (it had, the court concluded).  Here, on the other hand, “it is more accurate to say that there was never a waiver of the right to arbitrate the state claims in the first place.”  820 F.3d at 1260.  Further, it did not matter whether the amendment was foreseeable:  “A defendant is not required to litigate against potential but unasserted claims. By the same token, a defendant will not be held to have waived the right to insist that previously unasserted claims be arbitrated once they are asserted.” Id. at 1261.

The published opinion was issued per curium by Chief Judge Ed Carnes, Judge William Pryor, and Judge Peter Fay.

Posted by Stacey Mohr.

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