Often, parties to a dispute will disagree on whether the matter should go to court or arbitration. Sometimes the party that prefers court will file suit first and the other party wanting arbitration must decide what to do.
The party preferring arbitration cannot ignore the lawsuit, but also must be careful not to waive its right to arbitration. A recent Ohio Court of Appeals case dealt with a case in which the owner sued the contractor, and the contractor filed a motion to stay the litigation (because of an arbitration clause), but also filed counterclaims. The trial court ruled that the contractor had waived arbitration by filing the counterclaims.
The contractor appealed and the Court of Appeals for the 11th District ruled in its favor by finding that the contractor’s answer (seeking arbitration) and its subsequent efforts to force the dispute to arbitration preserved its right to arbitrate, regardless of the counterclaims. Paradie v. Turning Point Builders, Inc., 2021-Ohio-2178 (Ohio App. 11th Dist., 2021).
The Court of Appeals applied a “totality of the circumstances” test and found there was no waiver, nor prejudice to the other party. In reversing the trial court, the Court of Appeals supported Ohio’s public policy of encouraging arbitration as a cost-effective way to resolve disputes.
But this case emphasizes the need to be careful not to waive arbitration inadvertently by filing pleadings in a lawsuit suggesting your party is participating in the litigation process – rather than arbitration.
