4th Circuit Finds Defendant Defaulted On Right To Arbitration

Today in Forrester v. Penn Lyon Homes the Fourth Circuit held that the defendant defaulted on its right to compel arbitration under the Federal Arbitration Act (FAA) because, before moving to compel arbitration, the defendant engaged in extensive litigation measures that caused the plaintiffs actual prejudice. The defendant waited until the eve of trial to file its motion to compel arbitration, after two years of litigation.

Under section 3 of the FAA, a party loses its right to a stay of court proceedings in order to arbitrate if it is "in default in proceeding with such arbitration." 9 U.S.C. § 3. Default in this context resembles waiver, but because of the strong federal policy favoring arbitration, courts have limited the circumstances that can result in statutory default. Today's case qualified for default and is a reminder that it's best to move early to compel arbitration.