Party Waived Right to Arbitrate By Asserting Claims in Litigation

On July 5, 2019, Justice Masley of the New York County Commercial Division issued a decision in WZ USA, LLC v. United Rest. Group Intl. Inc., 2019 NY Slip Op. 32067(U), holding that a party waived its right to arbitrate by asserting claims in court, explaining:

Li and Qifan contend that this litigation should be stayed because the parties agreed to arbitrate. In reply, plaintiffs assert that Li and Qifan are not signatories to the Subscription Agreement, and therefore unable to compel arbitration. Plaintiffs argue that URGI, the only signatory to the Subscription Agreement, filed an Answer that did not raise jurisdictional defenses, therefore waiving the arbitration clause.

. . .

Although Li and Qifan contend that this action should be stayed in favor of arbitration, assuming the arbitration clauses reach them, they haye waived their opportunity to arbitrate by asserting cross-claims in their Answer without asserting their right to arbitrate. WZ USA and QiPai also waived their right to arbitration by commencing this action.

(Internal citations omitted).

Commercial litigation involves more than courts. Disputes often are--by agreement--decided by private arbitrators. But as this decision shows, a party can lose the right to arbitrate if it litigates in court instead. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a dispute that is subject to an arbitration agreement.