In a recent opinion, the Appellate Division of the New Jersey Superior Court held that if the parties agreed to arbitration in the underlying agreement, the dispute will be referred to arbitration, rejecting a claim that the right to demand arbitration was waived.  Stephen Lerner (“Lerner”) and Robert Heidenberg (“Heidenberg”) were partners in a partnership.  The partnership agreement contained a provision that any controversy arising out of the agreement would be settled through arbitration by the American Arbitration Association.  Lerner filed suit against Heidenberg seeking to dissolve the partnership. Heidenberg filed an answer and counterclaim and sought injunctive relief.  The court denied the injunctive relief and dismissed certain counts of the counterclaim, finding that they were subject to arbitration.  Shortly thereafter, Heidenberg’s attorney advised the court that Heidenberg wanted all disputes between the parties to be resolved by arbitration.  The court directed Heidenberg to file a motion to refer the matter to arbitration but to defer filing the motion until the parties had attempted to resolve their disputes through mediation.  The mediation was unsuccessful and Heidenberg filed a motion to compel arbitration.  Lerner opposed the motion and argued that Heidenberg had waived his right to compel arbitration by “aggressively litigating” the matter in court.  The trial court granted the motion.

In an opinion issued May 2, 2013, the Appellate Division affirmed, holding that Heidenberg had not waived his right to demand arbitration.  The court first held that the failure to raise arbitration as an affirmative defense in Heidenberg’s answer did not constitute a waiver.  The court then held that Heidenberg’s filing of an answer and counterclaim, seeking injunctive relief, and serving discovery requests did not constitute a waiver.  The court noted that there must be prejudice to the aggrieved party before the court will find a waiver. The court distinguished earlier cases where the request for arbitration was not made until long after the case was filed and trial was imminent.  The court held that because Heidenberg promptly notified Lerner of his intention to seek to compel arbitration and filed his motion shortly thereafter, there was no waiver of the right to arbitrate. The court also rejected Lerner’s argument that Heidenberg’s motion to compel arbitration was barred by the doctrine of judicial estoppel.

If the written agreement between the parties contains an arbitration clause and you wish to invoke the clause and seek arbitration, you should do so promptly.  You should raise the arbitration clause as an affirmative defense in the answer and promptly file a motion to compel arbitration. The longer the case remains in court, the more likely that a court will find a waiver of the arbitration provision.