Cabinetree of Wisconsin, Inc. v. Kraftmaid Cabinetry, Inc.

• Decision Date: 03 March 1995
• Docket Number: No. 94-2872,94-2872
• Citation: 50 F.3d 388
• Parties: CABINETREE OF WISCONSIN, INCORPORATED, Plaintiff-Appellee, v. KRAFTMAID CABINETRY, INCORPORATED, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 388

50 F.3d 388

CABINETREE OF WISCONSIN, INCORPORATED, Plaintiff-Appellee, v. KRAFTMAID CABINETRY, INCORPORATED, Defendant-Appellant.

No. 94-2872.

United States Court of Appeals,

Seventh Circuit.

Argued Jan. 24, 1995.

Decided March 3, 1995.

Gordon F. Barrington, Wauwatosa, WI (argued), for plaintiff-appellee Cabinetree of Wisconsin, Inc.

Thomas R. Schrimpf, Hinshaw & Culbertson, Milwaukee, WI (argued), for defendant-appellant Kraftmaid Cabinetry, Inc.

Before POSNER, Chief Judge, and CUMMINGS and ROVNER, Circuit Judges.

POSNER, Chief Judge.

This appeal in a diversity breach of contract suit requires us to consider the circumstances in which a procedural choice operates as a waiver of a contractual right to arbitrate. The plaintiff, Cabinetree, had made a contract with the defendant, Kraftmaid, in 1989 whereby Cabinetree became a franchised distributor in Wisconsin of kitchen and bath cabinets made by Kraftmaid. In September 1993, Cabinetree filed suit in a Wisconsin state court against Kraftmaid, charging that Kraftmaid had terminated the franchise in violation of the Wisconsin Fair Dealership Law, Wis.Stat. Secs. 135.01 et seq., and of Wisconsin common law as well. The case was removable to federal district court, and within the thirty-day limit specified by law Kraftmaid removed the case to a federal district court in Wisconsin. 28 U.S.C. Secs. 1441(a), 1446(b). Discovery began. In January 1994, a trial date of December 6, 1994, was set. In response to Kraftmaid's discovery demands, Cabinetree produced almost two thousand documents. Kraftmaid dragged its heels in responding to Cabinetree's discovery demands.

On July 11 Kraftmaid dropped a bombshell into the proceedings. It moved the district court under 9 U.S.C. Sec. 3 to stay further proceedings pending arbitration of the parties' dispute. (A plaintiff who wants arbitration moves for an order to arbitrate. 9 U.S.C. Sec. 4. A defendant who wants arbitration is often content with a stay, since that will stymie the plaintiff's effort to obtain relief unless he agrees to arbitrate.) The franchise agreement, which had been drafted by Kraftmaid, provides that "any controversy, claim, dispute, credit, or other matter in question should be decided by arbitration in Cleveland, Ohio in accordance with the rules of the American Arbitration Association." Cleveland is Kraftmaid's headquarters.

The district court denied the motion, and Kraftmaid appeals, as it is entitled to do, even though the denial of its motion to stay was an interlocutory ruling. 9 U.S.C. Sec. 16(a)(1)(A).

Our decision in St. Mary's Medical Center of Evansville, Inc. v. Disco Aluminum Products Co., 969 F.2d 585 (7th Cir.1992), establishes four principles that frame our analysis in this case: 1. Review of a finding that a party has waived its contractual right to invoke arbitration is for clear error only; it is not plenary. 2. Such a waiver can be implied as well as express. 3. In determining whether a waiver has occurred, the court is not to place its thumb on the scales; the federal policy favoring arbitration is, at least so far as concerns the interpretation of an arbitration clause, merely a policy of treating such clauses no less hospitably than other contractual provisions. 4. To establish a waiver of the contractual right to arbitrate, a party need not show that it would be prejudiced if the stay were granted and arbitration ensued.

Today we take the next step in the evolution of doctrine, and hold that an election to proceed before a nonarbitral tribunal for the resolution of a contractual dispute is a presumptive waiver of the right to arbitrate. Although not compelled by our previous cases, this presumption is consistent with them; for we have deemed an election to proceed in court a waiver of a contractual right to arbitrate, without insisting on evidence of prejudice beyond what is inherent in an effort to change forums in the middle (and it needn't be the exact middle) of a litigation. Ohio-Sealy Mattress Mfg. Co. v. Kaplan, 712 F.2d 270, 273-74 (7th Cir.1983); Midwest Window Systems, Inc. v. Amcor Industries, Inc., 630 F.2d 535, 537 (7th Cir.1980). And the District of Columbia Circuit likewise. National Foundation for Cancer Research v. A.G. Edwards & Sons, Inc., 821 F.2d 772 (D.C.Cir.1987), esp. p. 777. Other courts require evidence of prejudice--but not much. E.g., Kramer v. Hammond, 943 F.2d 176, 179-80 (2d Cir.1991); Miller Brewing Co. v. Fort Worth Distributing Co., 781 F.2d 494, 497-98 (5th Cir.1986); S & H Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507, 1514 (11th Cir.1990). Ours may be the minority position but it is supported by the principal treatise on arbitration. 2 Ian R. Macneil, Richard E. Speidel & Thomas J. Stipanowich, Federal Arbitration Law: Agreements, Awards, and Remedies under the Federal Arbitration Act Sec. 21.3.3 (1994). It is not a revival of the doctrine of election of remedies, which survives only as a bar to double recovery. Olympia Hotels Corp. v. Johnson Wax Development Corp., 908 F.2d 1363, 1371 (7th Cir.1990); UCC Sec. 2-703, Official Comment 1. For what is in question here is not a choice between remedies in the usual sense (rescission versus damages, damages versus an injunction, and so forth) but the selection of the forum. Cf. 1 Dan Dobbs, Law of Remedies: Damages-Equity-Restitution Sec. 1.1 (2d ed. 1993). We add that in ordinary contract law, a waiver normally is effective without proof of consideration or detrimental reliance. E. Allan Farnsworth, Contracts Sec. 8.5 (2d ed. 1990); 3A Arthur Linton Corbin, Corbin on Contracts Sec. 753 (1960); and see the majority and dissenting opinions in Wisconsin Knife Works v. National Metal Crafters, 781 F.2d 1280 (7th Cir.1986).

An arbitration clause gives either party the choice of an alternative, nonjudicial forum in which to seek a resolution of a dispute arising out of the contract. But the intention behind such clauses, and the reason for judicial enforcement of them, are not to allow or encourage the parties to proceed, either simultaneously or sequentially, in multiple forums. Cabinetree, which initiated this litigation, could, instead of filing suit in a Wisconsin state court, have demanded arbitration under the contract. It did not, thus signifying its election not to submit its dispute with Kraftmaid to arbitration. Kraftmaid if it wanted arbitration could have moved for a stay of...