Cole v. Jersey City Medical Center
72 A.3d 224, 215 N.J. 265 (2013)
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Rule of Law:
A party waives its contractual right to arbitration when its litigation conduct, viewed under the totality of the circumstances, is inconsistent with the intent to arbitrate. Such conduct includes significant delay in seeking arbitration, active participation in discovery, and the filing of dispositive motions.
Facts:
- In September 2004, Karen Cole signed an employment agreement with Liberty Anesthesia Associates, LLC (Liberty) that included a clause requiring any employment-related disputes to be settled by arbitration.
- The agreement specified that Liberty could terminate Cole's employment immediately if her staff privileges at her assigned hospital were suspended or revoked.
- In April 2007, Jersey City Medical Center (JCMC), the hospital where Cole was assigned, discovered discrepancies in her accounting of controlled substances.
- On May 1, 2007, during a meeting with JCMC and Liberty staff, Cole was asked to submit to a drug test, which she refused.
- Following her refusal, JCMC suspended Cole's staff privileges.
- On the same day, citing the suspension of her privileges, Liberty terminated Cole's employment contract.
Procedural Posture:
- Karen Cole filed a complaint against Jersey City Medical Center (JCMC) in the New Jersey Law Division (trial court).
- The trial court granted JCMC's motion to implead Liberty Anesthesia Associates, LLC (Liberty) as a third-party defendant.
- Cole then filed an amended complaint naming Liberty as a direct defendant.
- Liberty filed an answer asserting thirty-five affirmative defenses, none of which mentioned the arbitration agreement.
- After the close of discovery, Liberty filed a motion for summary judgment, which the trial court granted in part and denied in part.
- Three days before the scheduled trial, Liberty filed a motion to compel arbitration.
- The trial court granted Liberty's motion to compel arbitration and dismissed Cole's complaint.
- Cole appealed to the Appellate Division, which reversed the trial court's order, finding Liberty was equitably estopped from compelling arbitration.
- The Supreme Court of New Jersey granted Liberty's petition for certification.
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Issue:
Does an employer waive its contractual right to compel arbitration by actively participating in litigation for 21 months, including engaging in extensive discovery and filing a motion for summary judgment, before moving to compel arbitration three days before trial?
Opinions:
Majority - Judge Cuff
Yes. A party waives its right to compel arbitration when its conduct in litigation is inconsistent with an intent to arbitrate. The court adopted a totality-of-the-circumstances test to determine if a party has implicitly waived its right. The court found Liberty's conduct was inconsistent with its right to arbitrate because it delayed its request for 21 months, failed to raise arbitration as an affirmative defense, fully participated in extensive discovery, and filed a dispositive summary judgment motion to test the merits of the case in court. Waiting until three days before trial, after receiving a partial benefit from the court's summary judgment ruling, was a strategic decision that prejudiced Cole by causing significant delay and expense. This conduct demonstrated an intentional relinquishment of the known right to arbitrate.
Analysis:
This decision establishes a flexible, fact-sensitive 'totality of the circumstances' test for determining waiver of arbitration rights in New Jersey. It prevents parties from using litigation as a trial run, gaining advantages through court procedures like dispositive motions, and then switching to arbitration if the judicial outcome is unfavorable. The ruling emphasizes that a right to arbitrate must be invoked in a timely and consistent manner, otherwise, it is considered waived. This precedent discourages strategic delays and protects opposing parties from the prejudice of litigating a case extensively only to have it diverted to a different forum on the eve of trial.
