Morgan v. Sundance, Inc.

Robyn Morgan worked at a Taco Bell franchise owned by Sundance, Inc. She filed a nationwide collective action alleging the company violated the Fair Labor Standards Act by failing to pay overtime. Instead of promptly moving to compel arbitration under their mutual arbitration agreement, Sundance initially litigated the case for nearly eight months, filing a motion to dismiss and engaging in mediation. When Sundance finally moved to compel arbitration, the district court denied the motion, finding it had waived the right. The Eighth Circuit reversed, holding that Morgan needed to show she was prejudiced by the delay. The Supreme Court granted certiorari and, in a unanimous opinion authored by Justice Elena Kagan, vacated the Eighth Circuit's decision. The Court held that the Federal Arbitration Act does not impose a prejudice requirement for proving waiver; instead, ordinary contract principles govern. Waiver occurs when a party acts inconsistently with the right to arbitrate, regardless of prejudice to the opposing party.

The Supreme Court reversed the Eighth Circuit, holding that no showing of prejudice is required to establish waiver of an arbitration right. Waiver is governed by ordinary contract principles; a party can waive arbitration simply by acting inconsistently with that right. The case was remanded for further proceedings consistent with this standard.

Whether a party arguing that the opposing side waived its right to arbitrate must demonstrate prejudice resulting from the delay or inconsistent litigation conduct under the Federal Arbitration Act.

The decision harmonized arbitration waiver analysis with general contract waiver principles, eliminating the prejudice requirement that some circuits had added. This makes it easier for employees and consumers to argue that a company waived arbitration by participating in litigation, potentially allowing more disputes to stay in court rather than being forced into private arbitration. The ruling reinforces that arbitration agreements are not entitled to special, heightened protections beyond ordinary contract law.