Estate of Cortez (CA2 12/22/10)

The issue here is whether, having failed to plead in your Answer the affirmative defense that you have an agreement to arbitrate, and having actively litigated for a year, and having participated in a comprehensive pretrial conference without mentioning arbitration, and having demanded a jury trial, you can then force arbitration.

Cortez died in a nursing home. Her PR sued it for wrongful death. Having done all of the above the nursing home then moved to compel arbitration because an agreement requiring it had been part of her admission paperwork. The court granted the motion. The Court of Appeals reverses.

Basically, the court takes several pages to explain that by doing these things the nursing home had waived the defense. The trial-court argument apparently used the word “repudiate”; a footnote informs us that “waiver” and “repudiation” are interchangeable in this context. This portion of the analysis concludes by saying that “Once [the nursing home] had demonstrated conduct wholly inconsistent with arbitration, it “acquiesce[d] in the waiver thereby making the revocation complete and binding on both.” In the charitable spirit of the season we will pass over that Delphic pronouncement without further comment.

The nursing home’s argument was that it hadn’t found the file before filing its Answer, therefore didn’t know about the arbitration agreement, and therefore didn’t intentionally relinquish a known right. The court says that it had “constructive knowledge” since it always used the same forms and since its employee had signed the agreement. Actually, the lawyers had constructive knowledge of their client’s actual knowledge; unfortunately, it’s pretty clear that this isn’t what the court means.

The home also argued that the PR hadn’t shown prejudice. “But in Arizona a showing of prejudice has been required only when a party is attempting to prove waiver specifically on the ground of unreasonable delay.” In other words, the court now reveals that the basis of the decision was not delay but  “conduct inconsistent with an intent to arbitrate, such as the filing of a complaint or answer [sic].” In other words, repudiation, not waiver, and there is a difference between them after all. In any event, the court next says what it should have said to begin with: the PR was of course prejudiced, by having to fight a year’s worth (two, including this appeal) of litigation.

The home also argued the public policy favoring arbitration. The court points out that when you’ve squandered the advantages of arbitration – a cheaper and speedier resolution – there’s no point in requiring it.

Speaking of the spirit of the season, this whole opinion should be passed over. As a memorandum it is perfectly serviceable; as a published opinion it makes no contribution except confusion.


(link to opinion)