Arbitration: Preferred Policy or Standard Contract?

A wooden gavel on a white marble backdrop

Is an arbitration agreement to be treated the same as any other contract? This question became the topic of conversation on Monday, May 23rd, 2022, after the Supreme Court unanimously ruled on Morgan v. Sundance. Morgan, a former employee of Sundance, filed a collective action seeking damages for lost wages due to overtime payment discrepancies. Sundance engaged in litigation with Morgan for nearly one year before moving to stay litigation and compel arbitration. While Morgan did sign an agreement to arbitrate any employment dispute when hired by Sundance, did Sundance forfeit this right by engaging in litigation for such a long period of time? Most courts have previously answered this question by applying the rule of waiver specific to the context of arbitration.

The Eighth Circuit Court applied the rule of waiver and reversed the lower courts holding on grounds that Morgan was not prejudiced by the delay in arbitration. The issue arising from the court of appeals opinion is whether to apply a policy favoring arbitration. Justice Kagan delivered the opinion of the Supreme Court, holding an arbitration agreement is to be assessed in the same manner as any other contract. The Federal Arbitration Act, according to the Court, does not create a policy in favor of arbitration; it merely eliminated the prior policy which disfavored arbitration. With Morgan v. Sundance now on remand, the Eighth Circuit Court (among other courts, attorneys, employers, and employees) will need to reconsider how arbitration agreements will be enforced, utilized, and evaluated as a contract and not as a tool favoring arbitration over litigation.

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