Morgan v. Sundance, Inc.

Robyn Morgan (plaintiff) worked at a Taco Bell franchise that was owned by Sundance, Inc. (defendant). In her employment application, Morgan agreed to submit any employment disputes to binding arbitration. Nevertheless, Morgan commenced a nationwide class-action lawsuit against Sundance, alleging that Sundance violated the Fair Labor Standards Act by failing to pay required overtime. For the ensuing approximately eight months, Sundance’s responses to Morgan’s suit (including a motion to dismiss and an answer) made no mention of arbitration. However, Sundance eventually moved pursuant to the Federal Arbitration Act (FAA) to stay the litigation in favor of arbitration. Morgan countered that Sundance waived its arbitration right by participating in the litigation for so long without seeking arbitration. Following the precedent of the United States Court of Appeals for the Eighth Circuit (and the precedent of eight other federal circuit courts of appeal) regarding waiver in the arbitration context, the district court ruled that a party did not waive arbitration unless, among other things, its failure to seek arbitration sooner prejudiced the opposing party. Concluding that Morgan was prejudiced by Sundance’s delay, the district court denied Sundance’s motion. The Eighth Circuit reversed, ruling that although the district court applied the correct legal standard, Morgan in fact suffered no prejudice. However, a dissenting Eighth Circuit judge argued that in the nonarbitration context, a finding of waiver did not require prejudice. The dissenting judge further observed that two circuit courts of appeal did not require prejudice in order for a party to waive its right to arbitration. Morgan appealed the Eighth Circuit’s ruling. On appeal to the United States Supreme Court, the parties disputed, among other things, whether the waiver of arbitration rights depended on prejudice and whether other rules regarding, for example, forfeiture were relevant to Sundance’s ability to compel arbitration.