One Deposition Taken in Matter Designated for Arbitration May Waive Right to Arbitration

IIn the matter of HCW, et al v HCW et al, the NC Court of Appeals has ruled that the taking of a deposition (utilization of discovery) in a matter where the legal dispute can be arbitrated works as a waiver of the arbitration process.

The HCW opinion

“As a result, North Carolina’s waiver-related jurisprudence generally establishes that, in the event that a party makes material use of discovery procedures available in ordinary civil litigation that are not available in arbitration, that party has waived the right to insist that claims that were addressed during the discovery process be submitted to arbitration.

The record in this case clearly establishes that, during the deposition of Plaintiff Drake, Defendants questioned him for approximately one hour concerning the matters that underlie the relevant claims. The questioning of Plaintiff Drake concerning the claims which Defendants now seek to have arbitrated occupied some 48 pages of the deposition transcript. During the course of this portion of Plaintiff Drake’s deposition, Defendants “prompted [Mr. Drake] to admit certain facts regarding the [claims].” Capps, 184 N.C. App. at 272, 645 S.E.2d at 829. Although the exact amount of monetary cost that Plaintiff Drake -24- incurred during the portion of the deposition that addressed the relevant claims is not spelled out in the record, the Supreme Court’s description of the showing needed in order to establish the right to arbitration by engaging in discovery does not include a cost-related component. Servomation Corp., 316 N.C. at 544, 342 S.E.2d at 854 (stating that a waiver of the right to have a claim submitted to arbitration can be waived if the party seeking arbitration “makes use of judicial discovery procedures not available in arbitration”).

Thus, we conclude that the trial court’s determination that Defendants waived their right to have the relevant claims submitted to arbitration by engaging in discovery that would not have been available as a matter of right during the arbitration process has adequate support in both the trial court’s findings and the record…”

If you have a matter that has to be filed in court, you should immediately seek a stay of proceedings and an order for arbitration. Further, you should not engage in formal discovery and if your opposing party attempts to do so, you should seek an order of protection.

Chris Nichols
www.NicholsTrialLaw.com