Arbitration – Motion to Compel – Default Allegation – Recently-Filed Litigation

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Shearline Boatworks, LLC v. Trost (Lawyers Weekly No. 11-02-1082, 5 pp.) (Terrence W. Boyle, J.) E.D.N.C.

Holding: Even though it was plaintiff who initiated litigation, plaintiff did not unreasonably delay its request for arbitration, it did not unreasonably avail itself of trial-oriented activity, and arbitration would not prejudice defendant. The parties will be held to their agreement to arbitrate disputes arising under their contracts.

Plaintiff’s motion to stay proceedings and to compel arbitration is granted.

Plaintiff filed the instant motion to compel just over one month after it filed its complaint in state court. At the time of filing this motion, only the complaint, notice of removal, counterclaim, and motion to dismiss defendant’s wife had been filed.

Defendant removed the case to federal court and filed a counterclaim against plaintiff on May 6. Plaintiff responded to the counterclaim and sought a stay and order compelling arbitration 11 days later, on May 17. Previous cases have held that a delay of one month or longer after filing of the complaint is relatively short and does not defeat a motion to compel arbitration.

Defendant alleges that he has been prejudiced because (1) he incurred legal fees responding to the lien and complaint filed by plaintiff in state court, (2) he prepared for and incurred the cost of preparing for a state court hearing scheduled in an extremely short time frame, (3) he incurred legal fees to determine if he had the right to remove this case and if removal was advisable, (4) he incurred a filing fee to remove his case, (5) he analyzed and addressed plaintiff’s discovery request, (6) he and his wife had to incur time and expense of analyzing plaintiff’s claims against his wife and developing a defense, and (7) he has had to reveal his overall theory and strategy for his defenses and claims in advance of any arbitration that might be compelled.

However, given that discovery in this action has not yet begun, the court finds that defendant has not met his burden of proving prejudice. Any work that he has done with his lawyers in preparing for litigation will be equally necessary in arbitration. Those costs were not incurred for naught.

Motion granted.