United States District Court, M.D. Georgia, Macon Division
T. TREADWELL, UNITED STATES DISTRICT COURT JUDGE.
Party Defendants Rob Fletcher, Angela Fletcher, and Silver
Dollar Farmshave moved to stay the case pending
arbitration and compel arbitration of the claims between
Third Party Plaintiff Charles A. Fletcher and the Third Party
Defendants. Doc. 21. After careful consideration, the Court
concludes that the Third Party Defendants have waived their
contractual rights to arbitration. Accordingly, the motion is
matter arises from an alleged non-payment of a debt owed to
Producers Credit Corporation (“PCC”) by Charles
Fletcher. Docs. 1; 8. After PCC sued Charles for failing to
pay a promissory note, Charles filed a third party complaint
against the Third Party Defendants, alleging that the Third
Party Defendants are liable to him for all or part of the
claim asserted against him by PCC. See generally id.
underlying claim, which was filed on May 2, 2018, PCC alleges
that Charles failed to pay a promissory note. Doc. 1. Charles
filed his third party complaint on May 24, 2018, alleging
that he, Rob, and Angela entered into a partnership
agreement, creating Silver Dollar Farms. Doc. 8 ¶ 11.
The Agreement required the parties to “indemnify each
partner in respect of payments made and personal liabilities
reasonably incurred by each partners [sic] in the ordinary
and proper conduct of the partnership business or for the
preservation of the business or property of the
partnership.” Id. ¶ 17. Charles alleges
that the debt he incurred from PCC was “intended solely
for the benefit” of Silver Dollar Farms, and the Third
Party Defendants are thus also liable for the PCC debt.
Id. ¶¶ 23, 35-36.
parties engaged in the following litigation activity up until
the filing of its motion to compel arbitration: (1) the Third
Party Defendants filed an answer to the third party
complaint, wherein the Third Party Defendants admitted that
the first ten pages of the Agreement-including the
arbitration clause-were true and correct, but yet did not
raise the issue of arbitration (Doc. 14); (2) both parties
participated in a Rule 26(f) conference and prepared and
filed a joint scheduling and discovery order, which does not
mention arbitration, but rather announced the parties',
including the Third Party Defendants', intentions to
engage in all types of discovery permissible under the
Federal Rules of Civil Procedure, e.g., interrogatories,
requests for production of documents and admissions, and
depositions (Doc. 18); and (3) since the entry of the
scheduling and discovery order on August 9, 2018, both
parties participated in discovery, including providing and
amending initial disclosures, and, significantly, the Third
Party Defendants noticed and took Charles' deposition
(Docs. 26-1; 26-2; 26-3; 27 ¶ 3).
November 12, 2018, one day before Charles' noticed
deposition, the Third Party Defendants moved to stay the case
and compel arbitration pursuant to Article XVIII of the
Agreement creating Silver Dollar Farms. Doc. 21. Nonetheless,
the Third Party Defendants proceeded with the deposition.
Docs. 26-3; 27 ¶ 3.
XVIII of the Agreement provides,
It is agreed that disputes arising under this agreement, or
under any instrument made to carry out the terms of this
agreement, shall be submitted to arbitration in accordance
with the arbitration laws of the State of Georgia.
Doc. 8-1 at 9. Charles filed a response, arguing that the
Third Party Defendants have waived their rights to
arbitration. Doc. 26 at 6. The Third Party Defendants did not
file a reply.
response to the Third Party Defendants' motion to stay
the case and compel arbitration, Charles does not challenge
the existence of the arbitration agreement, the applicability
of the Federal Arbitration Act,  or the premise that his
claims are covered by the arbitration agreement. Doc. 26.
Rather, Charles contends that the Third Party Defendants,
through their conduct in this litigation, have waived their
rights to demand arbitration under the Agreement.
Id. at 6. As a threshold matter, questions of
whether a party, by earlier litigating in court, has waived
its right to arbitrate is presumptively for the courts-and
not the arbitrators-to decide. Grigsby & Assocs.,
Inc. v. M Sec. Inv., 664 F.3d 1350, 1353 (11th Cir.
2011). “This presumption leaves the waiver issue to the
decisionmaker with greater expertise in recognizing and
controlling abusive forum-shopping.” Id. at
1354 (citations omitted). Thus, absent “clear and
unmistakable evidence of an agreement to the contrary,
disputes regarding conduct-based waiver are left to the
courts to decide.” Plaintiff's S'holders
Corp. v. S. Farm Bureau Life Ins. Co., 486 Fed.Appx.
786, 789 (11th Cir. 2012) (quotation marks and citations
omitted). Here, the Third Party Defendants have not shown
“clear and unmistakable evidence” that the
parties intended to arbitrate the issue of waiver. In fact,
the Third Party Defendants do not discuss this threshold
matter in their brief. Accordingly, the Court, and not an
arbitrator, will decide whether the Third Party Defendants
have waived their rights to arbitrate.
the FAA, which governs the Third Party Defendants'
motion, creates a strong federal policy favoring enforcement
of arbitration agreements, a party may, by its conduct, waive
its rights to arbitration. S & H Contractors, Inc. v.
A.J. Taft Coal Co., 906 F.2d 1507, 1514 (11th Cir. 1990)
(citations omitted). This determination is made using a
two-part test. First, courts decide if, under the totality of
the circumstances, the party has acted inconsistently with
its arbitration rights, such as by “substantially
invok[ing] the litigation machinery prior to demanding
arbitration.” Garcia v. Wachovia Corp., 699
F.3d 1273, 1277 (11th Cir. 2012) (citations omitted). Second,
courts examine whether those inconsistent actions by the
movant have “in some way prejudiced the other party,
” based on factors such as “the length of delay
in demanding arbitration and the expense incurred by that
party from participating in the litigation process.”
Id. (citations omitted). And because federal policy
strongly favors arbitration, the party arguing waiver
“bears a heavy burden of proof” under this
two-part test. Krinsk v. SunTrust Banks, Inc., 654
F.3d 1194, 1200 n.17 (11th Cir. 2011) (citations omitted).
Charles has met that burden.
it is clear that the Third Party Defendants waived their
rights to arbitration under the two-part test. First, given
the totality of the circumstances, the Court concludes that
the Third Party Defendants have acted in a manner
inconsistent with their contractual rights to arbitrate. As
mentioned above, the Third Party Defendants actively and
substantially participated in this litigation and failed to
raise the arbitration issue, despite having many
opportunities to do so. The Third Party Defendants filed
their answer; participated in a Rule 26(f) conference and
prepared and filed a joint scheduling and discovery order;
and participated in discovery, including providing initial
disclosures and taking Charles' deposition. The Court