Richard A. Messina Plaintiff- Appellee
North Central Distributing, Inc., doing business as Yosemite Home Decor Defendant-Appellant
Submitted: March 15, 2016
Appeal from United States District Court for the District of Minnesota - Minneapolis
Before MURPHY, BEAM, and GRUENDER, Circuit Judges.
MURPHY, Circuit Judge.
Richard Messina sued his former employer, North Central Distributing, Inc. d/b/a Yosemite Home Decor ("Yosemite") in Minnesota state court for breach of contract and wrongful termination. Yosemite removed the case to federal court, filed an answer, and later moved to transfer venue to the Eastern District of California. The district court denied that motion. Then, eight months after Messina filed his complaint, Yosemite moved to compel arbitration. The court denied that motion as well, after finding that Yosemite had acted inconsistently with its right to arbitration to the prejudice of Messina. It thus concluded that Yosemite had thereby waived the right. Yosemite appeals that decision. We affirm.
Messina traveled to Fresno, California in August of 2012 to negotiate and sign an employment contract with Yosemite's vice president Rockie Bogenschutz. Messina alleges that the two year contract made him Yosemite's vice president of sales and allowed him to work from his home in Minnesota. Messina also signed an arbitration agreement separate from the employment contract. Messina worked for Yosemite for about six months until he was terminated in January 2013.
Messina sued Yosemite in Minnesota state court for wrongful termination and breach of contract on July 1, 2014 and served Yosemite on July 7. Yosemite removed the case to federal court in the District of Minnesota in August. It then filed an answer raising twenty four affirmative defenses but did not mention arbitration. The parties filed a joint Rule 26(f) report in November which included a discovery and motion schedule and stipulated that the parties would be ready for trial in August 2015. The report also stated that the parties had discussed alternative dispute resolution and recommended mediation, but this report also did not mention arbitration.
On November 26 Yosemite moved to transfer venue to the Eastern District of California where it is headquartered. Messina states that counsel for the two parties conferred several times by phone prior to the filing of the transfer motion and that Yosemite's counsel never mentioned arbitration. In its motion Yosemite argued that convenience of the parties, convenience of the witnesses, and the location of evidence favored a transfer to Fresno. Again it did not mention arbitration. Messina's response in opposition to the motion to transfer included several affidavits and identified a list of witnesses who might testify on his behalf. On December 2 the parties attended a Rule 16 scheduling conference at which Yosemite again failed to mention arbitration. The district court denied Yosemite's motion to transfer on January 27, 2015.
According to Messina, Yosemite's attorney contacted his counsel on February 10 "and for the first time disclosed the Arbitration Agreement." Yosemite asked Messina to stipulate to arbitration. According to Yosemite, this conversation occurred "immediately" after the court denied Yosemite's motion to transfer, and Messina's counsel did not get back to Yosemite as he had allegedly promised. Messina's counsel served discovery on Yosemite on February 19 and a response rejecting Yosemite's request to stipulate to arbitration the following day.
One month later on March 13, more than eight months after the lawsuit was filed, Yosemite moved to compel arbitration. The district court found that Yosemite knew of its existing right to arbitration, that it had acted inconsistently with that right, and that its actions had prejudiced Messina. The court concluded that Yosemite had waived its right to arbitration and thus denied its motion. Yosemite now appeals. See 9 U.S.C. § 16(a)(1).
We review de novo the district court's conclusion that a party has waived arbitration and examine the factual findings underlying that ruling for clear error. Lewallen v. Green Tree Servicing, LLC, 487 F.3d 1085, 1090 (8th Cir. 2007). Because of the strong federal policy in favor of arbitration, "any doubts concerning waiver of arbitrability should be resolved in favor of arbitration." Id.
A party waives its right to arbitration if it "(1) knew of an existing right to arbitration; (2) acted inconsistently with that right; and (3) prejudiced the other party by these inconsistent acts." Lewallen, 487 F.3d at 1090. A party acts inconsistently with its right to arbitrate if it "substantially invokes the litigation machinery before asserting its arbitration right, . . . when, for example, it files a lawsuit on arbitrable claims, engages in extensive discovery, or fails to move to compel arbitration and stay litigation in a timely manner." Id. (citations omitted). To safeguard its right to arbitration, a party must "do all it could reasonably have been expected to do to make the earliest ...