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Forby v. One Technologies, L.P.

United States Court of Appeals, Fifth Circuit

November 28, 2018

VICKIE FORBY, individually and on behalf of all others similarly situated in Illinois, Plaintiff - Appellant
v.
ONE TECHNOLOGIES, L.P., ONE TECHNOLOGIES MANAGEMENT, L.L.C.; ONE TECHNOLOGIES CAPITAL, L.L.P., Defendants - Appellees

          Appeal from the United States District Court for the Northern District of Texas

          Before GRAVES and COSTA, Circuit Judges, and BENNETT, District Judge. [*]

          ALFRED H. BENNETT, DISTRICT JUDGE

         Plaintiff-Appellant Vicky Forby ("Forby") appeals the district court's grant of Defendant-Appellee One Technologies, L.P.'s ("One Tech") motion to compel arbitration. Forby contends that the district court erred in finding she was not prejudiced by One Tech's substantial invocation of the judicial process. For the reasons set forth below, we conclude that the district court erred when it found One Tech had not waived its right to arbitration because Forby had not demonstrated that she was prejudiced. Accordingly, we reverse the district court's judgment.

         I.

         On April 24, 2015, Forby filed a class action in Illinois state court that was later removed to the United States District Court for the Southern District of Illinois on July 14, 2015. Forby brought claims against One Tech for violation of the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA") and unjust enrichment under Illinois law. In the notice of removal, One Tech did not reference arbitration but rather argued that Forby's claims were baseless, and that no class should be certified. On July 21, 2015, One Tech filed a motion to dismiss for failure to state a claim and, in the alternative, moved to transfer the case for forum non conveniens, arguing that Forby's claims were subject to arbitration in Texas and that an Illinois district court could not compel arbitration outside of the confines of its district. On September 4, 2015, One Tech filed an opposed motion to stay discovery until the Illinois district court ruled on the motion to dismiss. On March 25, 2016, the Illinois district court issued a Memorandum and Order transferring the case to the Northern District of Texas.

         After the case was transferred, One Tech retained new counsel, who filed an unopposed extension of time to answer the complaint to "investigate [Forby's] claims and prepare an appropriate response." On May 9, 2016, One Tech filed a 12(b)(6) motion to dismiss, asking the Texas district court to dismiss all of Forby's claims with prejudice. The motion to dismiss did not mention arbitration. Forby filed her response to One Tech's motion to dismiss. In its reply to Forby's response, One Tech once again did not mention compelling arbitration. On March 31, 2017, the district court denied the motion to dismiss with respect to Forby's ICFA claim concerning the deceptiveness of One Tech's website and granted the motion as to the unjust enrichment claim-dismissing that claim with prejudice.

         On April 17, 2017, four days after attending a Rule 26(f) conference and receiving Forby's requests for production, One Tech finally filed its motion to compel arbitration. Additionally, that same day, One Tech filed an expedited motion to stay all discovery pending the resolution of the motion to compel. On April 24, 2017, the district court conducted a hearing and granted the motion to stay.

         On July 7, 2017, the district court issued an order granting One Tech's motion to compel arbitration and dismissed the case with prejudice. The district court found that One Tech had substantially invoked the judicial process but that Forby had not suffered prejudice. Specifically, the district court stated that Forby had "suffered some prejudice" but not to "the extent required by existing precedent in the Fifth Circuit," concluding that "the only prejudice that Forby has adequately demonstrated is delay, and delay alone is insufficient . . . ." Forby now appeals the decision of the district court.

         II.

         We review the district court's determination of a motion to compel arbitration de novo, but review any factual findings underlying that determination for clear error. Janvey v. Alguire, 847 F.3d 231, 240 (5th Cir. 2017).

         III.

         "Although waiver of arbitration is a disfavored finding," the right to arbitrate-like all contract rights-is subject to waiver. Nicholas v. KBR, Inc., 565 F.3d 904, 907 (5th Cir. 2009). "[A] party waives its right to arbitrate if it (1) 'substantially invokes the judicial process' and (2) thereby causes 'detriment or prejudice' to the other party." Al Rushaid v. Nat'l Oilwell Varco, Inc., 757 F.3d 416, 421 (5th ...


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