Chassen v. Fid. Nat'l Fin., Inc.

• Decision Date: 08 September 2016
• Docket Number: No. 15-3789,15-3789
• Parties: Arthur Chassen; Deborah Meredith; Joel Oster; Dennis Scrimer; Glen J. Dalakian; Jack Hoffman; Deborah Hoffman ; Kathleen Cooper; Richard Murphy, individually and on behalf of others similarly situated; Ami Feller, Appellants v. Fidelity National Financial, Inc., a Delaware Corporation; Fidelity National Title Insurance Company, a California Corporation; Chicago Title Insurance Company, a Missouri Corporation; The First American Corporation, a California Corporation; First American Title Insurance Company, a California Corporation; Landamerica Financial Group, Inc., a Virginia Corporation; Transnation Title Insurance Company, a Nebraska Corporation; Lawyers Title Insurance Corporation, a Nebraska Corporation; Stewart Information Services Corporation, a Delaware Corporation; Stewart Title Guaranty Company, a Texas Corporation; Old Republic International Corporation, a Delaware Corporation; Old Republic Title Insurance Group, Inc., a Delaware Corporation; Old Republic National Title Insurance Company, a Minnesota Corporation; Weichert Title Agency
• Court: U.S. Court of Appeals — Third Circuit

836 F.3d 291

Arthur Chassen; Deborah Meredith; Joel Oster; Dennis Scrimer; Glen J. Dalakian; Jack Hoffman; Deborah Hoffman ; Kathleen Cooper; Richard Murphy, individually and on behalf of others similarly situated; Ami Feller, Appellants

v.Fidelity National Financial, Inc., a Delaware Corporation; Fidelity National Title Insurance Company, a California Corporation; Chicago Title Insurance Company, a Missouri Corporation; The First American Corporation, a California Corporation; First American Title Insurance Company, a California Corporation; Landamerica Financial Group, Inc., a Virginia Corporation; Transnation Title Insurance Company, a Nebraska Corporation; Lawyers Title Insurance Corporation, a Nebraska Corporation; Stewart Information Services Corporation, a Delaware Corporation; Stewart Title Guaranty Company, a Texas Corporation; Old Republic International Corporation, a Delaware Corporation; Old Republic Title Insurance Group, Inc., a Delaware Corporation; Old Republic National Title Insurance Company, a Minnesota Corporation; Weichert Title Agency

No. 15-3789

United States Court of Appeals, Third Circuit.

Argued July 13, 2016

Filed: September 8, 2016

Esther E. Berezofsky, Esq., Williams Cuker Berezofsky, 210 Lake Drive East, Woodland Falls Corporate Park, Suite 101, Cherry Hill, NJ 08002 Mark R. Cuker, Esq., Michael J. Quirk, Esq. [ARGUED], Williams Cuker Berezofsky, 1515 Market Street, Suite 1300, Philadelphia, PA 19102,

Andrew R. Wolf, Esq., Henry P. Wolfe, Esq., The Wolf Law Firm, 1520 U.S. Highway 130, Suite 101, North Brunswick, NJ 08902, Counsel for Appellant

Derrick R. Freijomil, Esq., Michael R. O'Donnell, Esq. [ARGUED], Riker Danzig Scherer Hyland & Perretti, One Speedwell Avenue, Headquarters Plaza, Morristown, NJ 07962, Grant J. Ankrom, Esq., Jason E. Maschmann, Esq., Charles A. Newman, Esq., Denton US, One Metropolitan Square, 211 North Broadway, Suite 3000, St. Louis, MO 63102, Frederick W. Alworth, Esq., Joshua R. Elias, Esq., Gibbons, One Gateway Center, Newark, NJ 07102, Kevin M. Fee, Jr., Esq., Gerard D. Kelly, Esq., Sidley Austin, One South Dearborn Street, Chicago, IL 60201, Steven P. Benenson, Esq., Porzio Bromberg & Newman, 100 Southgate Parkway, Morristown, NJ 07960, Counsel for Appellees

Before: SMITH, ROTH, and RENDELL, Circuit Judges

OPINION

SMITH

, Circuit Judge.

“A waived claim or defense is one that a party has knowingly and intelligently relinquished.” Wood v. Milyard , ––– U.S. ––––, 132 S.Ct. 1826, 1832 n.4, 182 L.Ed.2d 733 (2012)

. How, then, can a party waive a right “in a situation in which no right existed[?]” Ackerberg v. Johnson , 892 F.2d 1328, 1333 (8th Cir. 1989). The answer is: it cannot. Every circuit to have answered this question has held that “a litigant [need not] engage in futile gestures merely to avoid a claim of waiver.” Miller v. Drexel Burnham Lambert, Inc. , 791 F.2d 850, 854 (11th Cir. 1986), abrogated on other grounds by

Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 108 S.Ct. 1133, 99 L.Ed.2d 296 (1988). We too adopt this position and therefore hold that futility can excuse the delayed invocation of the right to compel arbitration. Because we also conclude that any attempt to compel bipolar—that is, individual—arbitration in this case prior to the Supreme Court's decision in AT&T Mobility LLC v. Concepcion , 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), would have been futile, we will remand with instructions that the District Court compel bipolar arbitration of all Plaintiffs' arbitrable claims in accordance with its May 14, 2015, order and this opinion.

I.

Plaintiffs represent a putative class of New Jersey real estate purchasers and refinancers who were overcharged between $70 and $350 in fees stemming from the recording of their deeds and mortgage instruments. Plaintiffs allege that the settlement agents—title agents and attorneys who were, in turn, agents of the Defendants—intentionally charged Plaintiffs more than the county clerk charged for recording these documents and pocketed the difference. Plaintiffs further allege that the class claims add up to over $50 million, exclusive of treble damages and interest.

On January 22, 2009, Plaintiffs filed a complaint in the U.S. District Court for the District of New Jersey alleging both breach of contract and violation of New Jersey law. In response, Defendants sought to dismiss a number of these claims and raised several affirmative defenses. They did not, however, seek to compel arbitration based on the arbitration clauses present in their contracts with Plaintiffs.¹ While no explanation for this inaction was given, we conclude infra that an attempt to compel bipolar arbitration would have been futile under prevailing New Jersey law. Because arbitration was not sought, the case was litigated for two and a half years with the focus primarily on class certification. In that time, both sides conducted broad discovery and contested several substantive motions on their merits. Plaintiffs have also extensively documented their efforts in this case and note that they served over 130 non-party subpoenas and spent over $50,000 on experts before Defendants sought bipolar arbitration.

However, on April 27, 2011, the Supreme Court in Concepcion

held that the Federal Arbitration Act (FAA) preempted state laws that had previously prohibited a party from compelling bipolar arbitration in certain situations even when it was specifically agreed to by contract. 563 U.S. at 352, 131 S.Ct. 1740.² Sensing an opportunity to ward off this potential class action, Defendants sent a letter to Plaintiffs on June 8, 2011, demanding enforcement of the arbitration agreements in light of this change in the law.³ Plaintiffs rejected this arbitration demand and noted that the question of arbitration “might have been an interesting issue had you thought of it two and a half years ago when the case was filed....” JA 816. Defendants then filed a motion in the District Court to compel bipolar arbitration on August 1, 2011. The District Court concluded that any attempt to compel bipolar arbitration prior to Concepcion would have been futile. Accordingly, the District Court granted the motion, stayed the case, and ordered bipolar arbitration.

This decision, however, led to a barrage of motions for reconsideration that, as the District Court observed, “has come to resemble a ping pong match between the parties.” JA 42. Ultimately, the District Court conducted an evidentiary hearing and found that all but two Plaintiffs had agreed to bipolar arbitration. Accordingly, over Plaintiffs' strong protest, it again compelled bipolar arbitration of the remaining claims.

Three issues relating to this ruling were certified for interlocutory appeal pursuant to 28 U.S.C. § 1292(b)

:

(a) Whether the [District] Court's decision to allow Defendants to assert the affirmative defense of arbitration due to a change in law even though a substantial period of time elapsed between [D]efendant[s'] answer and filing of the motion to assert the defense was in error; (b) Whether Plaintiffs' claims against Defendants alleging a violation of the New Jersey Consumer Fraud Act, N.J.S.A. §§ 56:8–1 et seq.

, are barred; and (c) any other issues arising out of the District Court's decision concerning the arbitration of the claims.

JA 195-96 (internal citations omitted). Because we conclude that the District Court did not err in compelling bipolar arbitration, we need not address any other issues on appeal.⁴

II.

We first consider whether, as an abstract matter, the futility of raising bipolar arbitration as a defense should excuse the delay in doing so. Generally, “[a] written provision in any ... contract ... to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Federal Arbitration Act, 9 U.S.C. § 2

. The Supreme Court has stated that this provision reflects a “ ‘liberal federal policy favoring arbitration.’ ” Concepcion , 563 U.S. at 339, 131 S.Ct. 1740 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ). Thus “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or any allegation of waiver, delay, or a like defense to arbitrability.” Moses H. Cone , 460 U.S. at 24–25, 103 S.Ct. 927 ; see also

Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ. , 489 U.S. 468, 476, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) (“There is no federal policy favoring arbitration under a certain set of procedural rules; the federal policy is simply to ensure the enforceability, according to their terms, of private agreements to arbitrate.”). Given this strong preference to enforce arbitration agreements, we have concluded that a party waives the right to arbitrate “only where the demand for arbitration came long after the suit commenced and when both parties had engaged in extensive discovery.” PaineWebber Inc. v. Faragalli , 61 F.3d 1063, 1068–69 (3d Cir. 1995) (internal quotation marks and citation omitted).

For example, in Ehleiter v. Grapetree Shores, Inc.

, we held that a defendant seeking to compel arbitration may waive the right to do so when the plaintiff demonstrates unfair prejudice arising from the defendant's delay in raising arbitration as an affirmative defense. 482 F.3d 207, 223 (3d Cir. 2007). To guide this prejudice inquiry, in Hoxworth v. Blinder, Robinson & Co . we identified six nonexclusive factors that courts should consider when determining if the defense of arbitration has been waived: (1) the timeliness or lack thereof of the motion to arbitrate; (2) the extent to which the party seeking arbitration has contested the merits of the opposing party's claims; (3) whether the party seeking...