BOSC, INC.; THOMAS WAYNE HAYES, Plaintiffs Counter Defendants -Appellants,
BOARD OF COUNTY COMMISSIONERS OF THE COUNTY OF BERNALILLO, Defendant Counterclaimant -Appellee.
from the United States District Court for the District of New
Mexico (D.C. No. 1:15-CV-01042-KG-LF)
M. Burden (Frederic Dorwart, with him on the brief) Frederic
Dorwart, Lawyers, Tulsa, Oklahoma, for Plaintiffs Counter
Clinton W. Marrs, Marrs Griebel Law, LTD., Albuquerque, New
Mexico, for Defendant Counterclaimant-Appellee.
TYMKOVICH, Chief Judge, BALDOCK, and BRISCOE, Circuit Judges.
BALDOCK, Circuit Judge.
Mexico county board filed a lawsuit in state court against
its securities broker and registered agent. The board
refrained, however, from serving process while it determined
whether arbitration was available. The securities broker and
agent nonetheless removed the case to federal court and moved
to dismiss the suit. Four days after briefing was complete
and about three months after the board had filed suit, the
board voluntarily dismissed the case and filed for
arbitration. The securities broker and agent then filed this
action to enjoin arbitration, arguing the board waived its
right to demand arbitration when it filed the state court
action. The district court disagreed and instead granted the
board's counterclaim to compel arbitration. The broker
and registered agent appealed the waiver issue. Exercising
jurisdiction under 9 U.S.C. § 16(a)(3), we affirm.
and 2013, BOSC, Inc., a registered securities broker and
member of the Financial Industry Regulatory Authority
(FINRA), and Thomas Hayes, one of BOSC's registered
representatives, recommended and sold certain investments to
the Board of County Commissioners of the County of
Bernalillo, New Mexico ("the Board"). In July 2015,
the Board filed a lawsuit in New Mexico state court against
BOSC, Hayes, and others for allegedly selling it unsuitable
investments and recommending investments that conflicted with
Bernalillo County's liquidity needs, in violation of
FINRA Rule 2111. The Board did not, however, serve the
petition on any of the defendants. According to the
Declaration of Clinton Marrs, the Board's attorney, he
refrained from serving the complaint because he had not yet
"completed [his] inquiry into whether the Board was
required or permitted by contract to arbitrate its
claims." R. at 31.
September 2015, BOSC and Hayes removed the case to federal
court and moved to dismiss under Federal Rule of Civil
Procedure 12(b)(6). The Board opposed the motion. In October,
four days after briefing on the motion was complete and
before the district court ruled on the motion, the Board
voluntarily dismissed the case without prejudice because the
Board's attorney was "satisfied that the Board could
pursue its claims in arbitration." R. at 32. Four days
after that, the Board initiated FINRA arbitration. Less than
three months had lapsed from the time the Board filed the
state court action to when it voluntarily dismissed it.
November 2015, BOSC and Hayes filed this federal lawsuit
against the Board for preliminary and permanent injunctive
relief in an attempt to enjoin the Board from pursuing FINRA
arbitration. BOSC and Hayes asserted that the Board waived
its right to arbitration when it filed the state court
action. The Board answered the complaint and filed a
counterclaim for judgment compelling arbitration. In
response, BOSC and Hayes asked the district court for the
opportunity to conduct discovery regarding the Board's
motivation for filing the state court action.
district court denied BOSC and Hayes' requests for
injunctive relief and instead granted the Board's
counterclaim to compel arbitration. The district court
applied the factors from Peterson v. Shearson/American
Express, Inc., 849 F.2d 464, 467-68 (10th Cir. 1988), to
conclude the Board did not waive its option to arbitrate. The
district court also denied the discovery request, explaining
that the Board's motivation for filing the state court
action was irrelevant to the Peterson factors. BOSC
and Hayes appealed.
parties do not dispute that the FINRA rules apply to them and
would ordinarily permit the Board, as BOSC and Hayes'
customer, the option to request arbitration. They also agree
that the Federal Arbitration Act ("FAA") applies
here. The primary issue is whether the Board waived its right
to arbitrate. We review the district court's decision
rejecting the waiver argument de novo but review the
factual findings underlying that decision for clear error.
In re Cox Enterprises, Inc. Set-top Cable Television Box
Antitrust Litig., 835 F.3d 1195, 1205 (10th Cir. 2016).
FAA's primary substantive provision declares that a
written agreement to arbitrate "a contract evidencing a
transaction involving commerce . . . shall be valid,
irrevocable, and enforceable, save upon such grounds as exist
at law or in equity for the revocation of any contract."
9 U.S.C. § 2. This provision reflects "a liberal
federal policy favoring arbitration agreements, " and
creates "a body of federal substantive law of
arbitrability, applicable to any arbitration agreement within
the coverage of the Act." Moses H. Cone Mem'l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983).
"The Arbitration Act establishes that, as a matter of
federal law, 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 an allegation of waiver, delay, or a like
defense to arbitrability." Id. at 24-25.
Section 3 of the FAA obliges courts to stay litigation on
matters the parties have agreed to arbitrate so long as the
applicant for the stay is not in default in proceeding with
arbitration, while § 4 authorizes a court that otherwise
has subject matter jurisdiction to compel arbitration.
See 9 U.S.C. §§ 3 & 4.
recognized two forms of waiver, although we have only ever
applied the second form: (1) when a party intentionally
relinquishes or abandons its right to arbitration; (2) when a
party's conduct in litigation forecloses its right to
arbitrate. See In re Cox, 835 F.3d at 1205. The
second form of waiver-based on a party's conduct-came
first in this Circuit. In Reid Burton Construction, Inc.
v. Carpenters District Council of Southern Colorado, 614
F.2d 698 (10th Cir. 1980), this Circuit's "leading
opinion" on waiver of the right to arbitrate, Hill
v. Ricoh Americas Corp., 603 F.3d 766, 772 (10th Cir.
2010), we explained there is "no set rule as to what
constitutes a waiver or abandonment of the arbitration
agreement; the question depends upon the facts of each
case." 614 F.2d at 702. We noted several factors useful
in analyzing waiver, which we later summarized in
(1) whether the party's actions are inconsistent with the
right to arbitrate; (2) whether "the litigation
machinery has been substantially invoked" and the
parties "were well into preparation of a lawsuit"
before the party notified the opposing party of an intent to
arbitrate; (3) whether a party either requested arbitration
enforcement close to the trial date or delayed for a long
period before seeking a stay; (4) whether a defendant seeking
arbitration filed a counterclaim without asking for a stay of
the proceedings; (5) "whether important intervening
steps [e.g., taking advantage of judicial discovery
procedures not ...