Fifth Circuit Re-examines ‘Forby’ Case and Waiver of Right to Arbitrate Based on Amended Complaint | Baker
As we have said in the past, determining when a party waives its right to arbitrate is never easy, and nuanced standards vary by circuit. Now, a case that has been taken to the United States Court of Appeals for the Fifth Circuit a second time confirms our belief. The opinion of the fifth circuit in Forby v. One Technologies, LP (N ° 20-10088, decided on September 14, 2021) (Forby II), arose out of a class action lawsuit claiming that One Technologies, LP (One Tech), tricked customers into signing up for allegedly “free” credit reports that weren’t. First Forby decision, reported at 909 F. 3d 780, 784 (5th Cir. 2018) (Forby I), the appeals court ruled that One Tech had waived its ability to arbitrate claimants’ state law claims when it filed a motion to dismiss rather than seek arbitration. See our Blog post of December 4, 2018 on the Forby i decision.
The Forby i The panel stated: “One Tech was fully aware of its right to demand arbitration when it filed its motion for dismissal 12 (b) (6), it sued and partially obtained a dismissal with prejudice, showing a desire to resolve the dispute through litigation rather than arbitration.
The Fifth Circuit then quashed the order requiring arbitration and referred the matter back to the lower court. Once there, Forby was allowed to file a second amended complaint – this time with a federal claim under the Credit Repair Organizations Act (CROA), 15 USC § 1679 et seq., A protection statute. of consumers. As might be expected, One Tech filed a second motion to force arbitration. But the district court dismissed the petition, finding Forby’s second amended complaint “d[id] not alter the scope or theory of the underlying litigation in an unforeseeable manner. Indeed, the AORC claim “rested ‘on the same core of operational facts'” as the state law claim. And the putative class was not increased by adding the CROA claim.
One Tech appealed again, raising only one argument – that the waiver contemplated in Forby i did not include the federal claims first raised in the second amended complaint. The fifth circuit in Forby II OK. The first step in the waiver analysis requires that “a party invokes the legal process only to the extent that it is pleading a specific claim he then seeks to arbitrate. See Metro equipment. Leasing Corp. vs. Strong, 169 F. 3d 324, 328 (5th Cir. 1999). One Tech did not attempt to argue Forby’s CROA claim. Indeed, the earlier motion to dismiss “did not (and, in fact, could not) include the CROA’s request. Forby only raised the CROA request after we returned and after the district court allowed him to modify his complaint. The waiver of the right to arbitrate is “claim specific” and does not extend to federal CROA claims, which “were not even part of the lawsuit at the time of the waiver.” The panel Forby II refused to follow the definition of a “claim” as arising from the “same core of operational facts” as mentioned in the unpublished document Sabatelli v. Baylor Scott & White Health decision, 832 F. App’x 843, 849 (5th Cir. 2020) (by curium). We blogged on the Sabatelli decision on.
The panel concluded, however, that the decision of the Eleventh Circuit Collado v. J&G Transport, 820 F. 3d 1256 (11th Cir. 2016), “informative”. In Collado, the plaintiff initially filed a complaint under the Fair Labor Standards Act (FLSA), but before trial, filed an amended complaint with state law claims. While the defendant in Collado agreed that he was waiving the right to arbitrate the FLSA claim, he asserted that arbitration of the state claim was still possible.
The Eleventh Circuit agreed. He found that a defendant did not waive his right to arbitrate state law claims raised in an amended claim because “those claims were not in the event he waived through litigation. the right to arbitrate the claims of the FLSA ”.
The Forby II case was the “reverse of ColladoWhere the waiver of initial federal claims did not apply to newly filed state claims. And in Forby II, waiver of initial state claims does not have apply to federal claims made in an amended complaint. (emphasis added) The waiver of arbitral rights is “claim specific”. And while Forby II did not involve any employment-related claims, his analysis of the waiver issue is instructive.
A defendant does not waive its right to arbitrate claims made in an amended complaint when they were not in the event the original waiver took place.