Discovery in international arbitrations can be controversial for a lot of reasons. The District Court for the District of South Carolina recently added another one to the list in In re Servotronics, Inc., No. 2:18-MC-00364-DCN, 2018 WL 5810109 (D.S.C. Nov. 6, 2018). The case addresses a very practical question: does 28 U.S.C. § 1782, which allows a district court to order a person who resides in the court’s district to provide testimony or documents to be used in a proceeding in a foreign tribunal, apply to a private international arbitration? According to the court, the answer is “no.”

The dispute arose from an arbitration related to a fire at a Boeing facility in Charleston, South Carolina. Boeing was testing a plane when the plane’s engine caught fire. The fire caused several million dollars of damage to the plane and the test facility. Boeing sought compensation from the engine’s manufacturer, Rolls-Royce. Rolls-Royce, in turn, demanded indemnity from Servotronics, who had manufactured a valve in the engine. Servotronics refused the demand, and Rolls-Royce initiated an arbitration in London.

During the course of the proceeding, Servotronics sought the deposition of three Boeing employees residing in Charleston. Boeing would not voluntarily produce them, so Servotronics filed an action in the US District Court in South Carolina seeking to compel discovery for use in a foreign proceeding under §1782.

In denying Servotronics’ request, the court concluded that a private arbitral body does not qualify as a foreign or international “tribunal” for purposes of §1782. As the court noted, this conclusion squares with decisions of the Second and Fifth Circuits. See Nat’l Broad. Co. v. Bear Sterns & Co., Inc., 165 F.3d 184 (2d Cir. 1998); Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880 (5th Cir. 1999).

The Second and Fifth Circuit decisions, however, were cast into some question by SCOTUS’s subsequent interpretation of §1782 in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). Specifically, in dicta, SCOTUS said that Congress had amended §1782, expanding its application from “any judicial proceeding” to “a proceeding in a foreign or international tribunal.” Id. at 257–58. The Court noted that “Congress understood that change to ‘provide the possibility of U.S. judicial assistance in connection with administrative and quasi-judicial proceedings abroad.’” Id. (citations omitted). The Court went on to deploy a definition of “tribunal” from a law professor (Yay!) to include “ investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal, and administrative courts.” Id. at 258 (citations omitted).

In the wake of Intel, lower courts have divided over the question of whether §1782 applies to international arbitration bodies. Compare, e.g., In re Operadora DB Mexico, S.A. de C.V., 2009 WL 2423138, at *6 (M.D. Fla. Aug. 4, 2009) (“The Intel Court was not faced with—and did not address—the question of whether a private arbitral tribunal is a foreign or international tribunal under § 1782.”) with In re Roz Trading Ltd., 469 F. Supp. 2d 1221, 1224 (N.D. Ga. 2006) (“Although the Supreme Court in Intel did not address the precise issue of whether private arbitral panels are ‘tribunals’ within the meaning of the statute, it provided sufficient guidance for this Court to determine that arbitral panels convened by the [private arbitral institution] are ‘tribunals’ within the statute’s scope.”).

Joining the negative side of the ledger, the District Court for the District of South Carolina held that the Intel decision did nothing to alter the Second and Fifth Circuit precedent, noting that

[s]tretching the language of Intel to apply to private arbitration is simply too far of a reach absent more explicit language from Congress or the Supreme Court.

Given just how important the question is, I go on record now to predict that we’re going to see more Circuits weigh in on the issue in the very near future. If I were a betting person, I’d say that SCOTUS would come down in favor of broad support for international commercial arbitration and read §1782 as applying to arbitral bodies.

Hawaii issued a bold arbitration decision this month. It applied its state contract law to conclude that the parties did not form a clear arbitration agreement, but even if they did, it was unconscionable because it prohibited both discovery and punitive damages.  Narayan v. The Ritz-Carlton Dev. Co., Inc., __ P.3d __, 2015 WL 3539805 (Haw. June 3, 2015).

The plaintiffs purchased the first condos in a development in Kapalua Bay.  The developer defaulted on loans, however, and it or its agent withdrew over a million dollars from the association’s operating fund.  The plaintiffs sued for breach of fiduciary duty and other claims.

In response, the developer moved to compel arbitration.  It argued that the plaintiffs’ purchase agreements incorporated the condominium declaration, which had an arbitration clause.  The trial court denied the motion to compel, but the intermediate court of appeals reversed.  The Hawaii Supreme Court found the intermediate court gravely erred and the plaintiffs did not have to arbitrate their claims.

Under Section 2 of the FAA, the Hawaii Supreme Court applied state law to decide whether an arbitration agreement existed and whether it was valid.

On the first question, the Hawaii Supreme Court found the parties did not form an agreement to arbitrate, because the purchase agreement was ambiguous regarding the parties’ intent to arbitrate.  Notably the purchase agreements themselves did not mention arbitration and instead stated that the venue for any action shall be in Hawaii state court.  The arbitration clause was only included in the separate condominium declaration.  The court found “it is facially ambiguous whether those disputes would be consigned to arbitration in Honolulu pursuant to the condominium declaration or the [state court] pursuant to the purchase agreement.”  The court’s analysis applied Hawaii case law that appears to create different (and higher) standards for proving the existence of an arbitration agreement than the standards required to prove other contracts.  But, Hawaii avoided any FAA preemption problem by offering up a second, independent basis for its refusal to enforce the arbitration clause: unconscionability.

The court also found the arbitration agreement unconscionable under Hawaii law.  It found it was procedurally unconscionable because the plaintiffs could not negotiate it, it was “buried in an auxiliary document,” and it was ambiguous.  With respect to substantive unconscionability, the court focused on three provisions of the arbitration agreement.  The arbitration agreement provided that the arbitrator could order the parties to exchange copies of “nonrebuttable exhibits” and witness lists, but “the arbitrator shall have no other power to order discovery or depositions unless and then only to the extent that all parties otherwise agree in writing.”  The arbitration agreement  also precluded parties from “disclos[ing] the facts of the underlying dispute…without prior written consent of all parties.” The Hawaii Supreme Court concluded that “if the arbitration clause were enforced as written, the [plaintiffs] would have virtually no ability to investigate their claims, and thus, would be deprived of an adequate alternative forum.”  Furthermore, the arbitration agreement precluded punitive damages, which the court found “substantively unconscionable” in a contract of adhesion.

If there is a continuum of state arbitration decisions, varying from hostile to arbitration on one end to rubber-stamping of arbitration on the other end, I think Hawaii just situated itself on the very hostile end, even further than California and Missouri.  But, this case offers a reminder of two important rules for drafters of arbitration clauses: make the agreement to arbitrate very clear and easy to find; and do not overreach when inserting arbitration provisions that favor your client.

We haven’t had a good waiver case in a while.  The First Circuit served one up last week with a flourish, teaching me multiple new words in the process (not for the first time, either).  It found that a plaintiff had waived its right to arbitrate, not by bringing its claims to court in the first place, but by waiting nine months to compel arbitration, thereby seeming to “use [] an arbitration clause as a parachute when judicial winds blow unfavorably.”

In Joca-Roca Real Estate, LLC v. Brennan, __ F.3d __, 2014 WL 6737103 (1st Cir. Dec. 1. 2014), the plaintiff alleged fraud and breach of contract stemming from an asset purchase agreement.  The agreement required arbitration.  The parties conducted significant discovery, involved the court in discovery disputes, and were scheduled for trial on February 3, 2014.  On December 6, 2013, shortly before the summary judgment deadline, the plaintiff moved to stay proceedings pending arbitration.  (First big word: the court says the plaintiff did not explain its “cunctation” in invoking the arbitration provision.)  The district court found the plaintiff had waived its right to seek arbitration.

The First Circuit affirmed.  It reiterated the rule in its circuit that mere delay in seeking arbitration is insufficient to find waiver, there must be prejudice to the non-moving party.  To analyze prejudice, the court reviews a “salmagundi” of factors.  But the court admits the prejudice requirement is “tame” and can be inferred from a long delay accompanied by significant activity in the courts. In this case, the court focused on: the fact that the parties engaged in significant discovery, that the plaintiff waited until close to trial to seek arbitration, and that the change in forum would have delayed final disposition of the case and “nullify one of the primary benefits of arbitration.”

So we know at least two things: first, if you’re appearing before the First Circuit, you should use some fifty cent words in your briefs; and second, if you are on the eve of trial, it is probably too late to compel arbitration of the claim.

Did you know that 87% of experienced arbitrators report *always* trying to follow applicable law in rendering an award?  That will come as a surprise to many critics who like to complain that arbitrators do not adhere to established law.

The statistic comes from a survey that Prof. Thomas Stipanowich of Pepperdine University School of Law conducted recently.  He obtained responses from 134 highly experienced arbitrators –most of them had arbitrated more than 100 disputes in their career — to a range of questions.  And the results dispel some myths about arbitration.

Here’s another myth-buster: less than 1% of these arbitrators refuse to rule on motions for summary judgment.  Instead, about 70% of these arbitrators say they “readily” rule on dispositive motions.

A less surprising statistic is this one: 91% of responding arbitrators “usually” or “always” work with counsel to limit discovery, and 94% “usually” or “always” encourage the parties to limit the scope of discovery.  Here’s another non-shocker: 75% of these arbitrators generally “receive virtually all non-privileged evidence and discourage traditional objections (hearsay, foundation, etc.).”  Experienced arbitrators are proactive case managers in other ways as well, with the great majority requiring parties to submit a core collection of joint exhibits for the hearing, limiting duplicative testimony, and telling counsel when a point has been understood and “they can move on.”  (That is always an awkward moment.)

So, if there is a lull in conversation this Thanksgiving, you can shake things up by asking: “Did you know that most people choose to serve as arbitrators because they see it as a form of public service and a logical extension of their professional practice?”  I am sure that will receive just as welcome a reception as my recent query at a dinner party: “Tell me, what is your preferred method of judicial selection?”  [My husband won’t let me live that one down.]

***

Other interesting arbitration news and notes.

The DC Circuit ruled last week that FOIA does not require the Securities and Exchange Commission to turn over documents it collected while examining FINRA’s arbitration program.  Public Investors Arbitration Bar Assoc. v. SEC, __ F.3d __, 2014 WL 5904725 (D.C. Cir. Nov. 14, 2014).  An organization of lawyers who represent individual investors in FINRA disputes had requested those records.

The NLRB won’t go down without a fight on its controversial D.R. Horton ruling, which held that federal labor laws do not allow employers to force employees to give up class actions in arbitration.  In a late October opinion it wrote “we have carefully considered, and fully addressed, the views of both the Federal appellate courts that have rejected D.R. Horton and the views of our dissenting colleagues.  We have no illusions that our decision today will be the last word on the subject, but we believe that D.R. Horton was correctly decided, and we adhere to it.”

Finally, as of this month, the College of Commercial Arbitrators has its first female President, Deborah Rothman.  Cheers!

In a decision this week, the Third Circuit found two related parties had waived their right to arbitrate claims.  One was no suprise — it had vigorously litigated the dispute for eleven months.  But the second may have been simply guilty by association, as it had only litigated for two months.  Supermedia v. Affordable Electric, Inc,, 2014 WL 1690749 (3d Cir. April 30, 2014).

In Supermedia, the plaintiff sued AEI for breach of contract.  The contract at issue had been signed by Mr. Morley, AEI’s alleged president.  AEI moved to dismiss the complaint, and when that failed, it answered the compaint and engaged in months of discovery, incuding discovery motions to the court.  During those eleven months, AEI never mentioned its alleged right to arbitrate the dispute.  Instead, it primarily disputed Mr. Morley’s right to bind it to a contract.  Therefore, about nine months after filing its first suit, the plaintiff also sued Mr. Morley directly.  The two cases were then consolidated.

Mr. Morley and AEI made a joint motion to compel arbitration.  The district court denied the motion, finding both defendants had waived any right to arbitrate.  On appeal, the Third Circuit affirmed.

In analyzing AEI’s waiver, the Third Circuit focused on the eleven months during which AEI never mentioned its alleged right to arbitrate and vigorously pursued the litigation.  Furthermore, AEI had taken the position that the arbitration agreement was unenforceable in previous litigation between the parties.  With respect to Mr. Morley, the court acknowledged it was “a closer call.”  Although Mr. Morley moved to compel arbitration just two months after the lawsuit began, he did three things that the court found sufficient to constitute waiver.  First, he asserted claims against third parties.  Second, in answering claims, he asserted that there was no binding agreement among the parties.  And third, he participated in the pre-trial conference and acquiesced in the consolidation of the cases.

In a beautifully written opinion, the Tenth Circuit examined an under-used aspect of the Federal Arbitration Act this week: having a jury or court trial. Usually disputes about arbitrability can be determined on a motion akin to summary judgment, but the FAA states in Section Four: “If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof.”  The Tenth Circuit held that’s what needs to happen in Howard v. Ferrellgas Partners, L.P., __ F.3d__2014 WL 1363963 (10th Cir. April 8, 2014).

Ferrellgas involves a class of propane customers who sued Ferrellgas for alleged overcharges.  Ferrellgas moved to compel individual arbitration.  The named plaintiff responded that he had no arbitration agreement with Ferrellgas because the parties reached a complete oral contract in their initial phone call that covered all subsequent orders, and negated the subsequent form contract sent by the company.  In response to open questions of fact raised on the motion, the district court allowed discovery and another set of motions.  When that second round of motions did not resolve the factual dispute, the court invited more discovery and a third round of motions.  Finally, the district court found that material disputes of fact remained and denied the motion to compel arbitration.

The Tenth Circuit reversed.  It found the district court erred in two respects.  First, the district court erred by allowing “death by discovery” on the issue of whether an arbitration agreement existed instead of calling for the “summary trial” envisioned in the FAA.  The court said that when “a quick look at the case suggests material disputes of fact do exist on the question whether the parties agreed to arbitrate, round after round of discovery and motions practice isn’t the answer.  Parties should not have to endure years of waiting… merely to learn where their dispute will be heard.”  (Another good line: “We appreciate both sides’ evident frustration at how long this case has lingered at the transom without having entered either the door into arbitration or litigation.”)

The Tenth Circuit also found the district court erred in denying the motion to compel arbitration after concluding that material disputes of fact remained.  It explained: “That’s like mixing apples and oranges, like saying someone who fails to win a summary judgment motion must necessarily lose after trial.”  Therefore, the court remanded the case for the summary trial called for in the FAA.

Of course, the Tenth Circuit had a relatively easy target in this particular instance.  Not many district court judges would allow three rounds of motions and multiple rounds of discovery on the issue of arbitrability.  But, it may be less clear in the future where the line is between allowing reasonable discovery on arbitrability and “death by discovery.”  Should judges allow just one round of discovery and say any factual disputes after that point will be decided by trial?  The Tenth Circuit does not try to set forth any rules about when exactly to push parties over the transom, if you will.

 

** P.s.:  SCOTUS denied cert in Walia v. Dewan on Monday.  The circuit split over manifest disregard will continue.

Albert Einstein supposedly once said “you have to learn the rules of the game. And then you have to play better than anyone else.” In arbitration, that means figuring out which organizations’ rules are best suited for your arbitration clause. This post is designed to help drafters make that decision by giving a quick and dirty overview of the similarities and differences between the administered rules for commercial disputes at the three most common arbitration providers: AAA, JAMS, and CPR.

Generally speaking, the rules of the three organizations are very similar. That said, attorneys and clients should consider the following:

  • FEES:  In addition to hourly arbitrator rates, all three organizations have some kind of administrative/filing fee.  JAMS charges this administrative fee as a function of the arbitrator’s time and thus may be the most cost-effective for short arbitrations. On the other hand, AAA and CPR charge on claim value.  Between those two organizations, AAA is more cost-effective for claims under $5,000,000, while CPR becomes cheaper for claims above that figure.
  • DEFAULT AWARD: JAMS and AAA do not allow arbitrators to render an award solely on the basis of default or absence of a party. CPR, on the other hand, does provide for a default award.  However, all three organizations require an arbitrator to consider substantive evidence before ruling against an absent party.
  • DISCOVERY: JAMS has a detailed set of Expedited Procedures parties can adopt that limit discovery (for example, to one deposition per party) and preclude dispositive motions.  The AAA also allows parties to adopt its Expedited Procedures (those procedures apply automatically to disputes under $75,000), but the procedures do not expressly limit discovery and instead generally adopt shorter timelines for the arbitration.  If speed and efficiency of arbitration is your number one goal, the Expedited Procedure under JAMS are a great choice. On the other hand, for parties anticipating a more complex dispute, or needing more flexibility in discovery, the general commercial rules of these organizations all allow the arbitrator(s) to tailor the discovery to the needs of the case.
  • ARBITRATORS: The three organizations all have similar, and complicated, methods for selecting arbitrations if (okay, when) the parties cannot agree on their own.  The number of available arbitrators varies, though.  Our best research indicates there are over 3,600 on the AAA roster, 500-600 on the CPR roster, and approximately 150-300 on the JAMS roster.
  • AWARD DEADLINES: JAMS and AAA explicitly require 30 days’ time in which arbitrators must render a final award. However, the CPR’s 30-day requirement is more of a “best efforts” suggestion than a hard and fast rule.  Thus, parties looking to get to the final award as quickly as possible may want to choose JAMS or AAA.
  • MOTION PRACTICE: AAA and CPR do not explicitly provide for summary disposition, but the JAMS Comprehensive Arbitration rules do (the Comprehensive rules are for claims over $250,000. JAMS has a Streamlined set of rules for claims under $250,000).  Thus, drafting parties who want to ensure the possibility of summary disposition are better off looking to JAMS’ Comprehensive rules.

Of course, there are many more rules for each organization and other important issues to consider.  However, this list should give drafters a good starting point for analyzing which arbitral forum (and specific rules in that forum) are best for their arbitration agreement.

**ArbitrationNation thanks Max Corey, a student at the University of Virginia School of Law, for his work on this post.

In an opinion that feels a bit like a report from the annual meeting of arbitration nerds, the Third Circuit last week clarified when district courts must allow discovery about arbitrability.  Guidotti v. Legal Helpers Debt Resolution, LLC, ___ F.3d ___, 2013 WL 2302324 (3d Cir. May 28, 2013).  Although the standard articulated is a bit unwieldy, it at least gives district courts in that federal circuit (and the others who have not clarified this issue) some method of identifying when plaintiffs are entitled to discovery and when to apply the summary judgment standard.

In Guidotti, the plaintiff in a putative class action sued 22 parties, alleging they were supposed to help negotiate down her consumer debt but did nothing other than accept her significant monthly payments.  Thirteen defendants moved to compel arbitration, and the district court granted that motion with respect to eleven of them.  The district court refused to compel arbitration of the plaintiff’s claims against two defendants, the financial institution where plaintiff had to open a special new account (RMBT) and the process agent that transferred money to and from the account (Global Client Solutions).

The district court concluded that those defendants had not proved they had any agreement to arbitrate with the plaintiff.  It did not allow any discovery relating to the motion to compel, but relied on inferences from the face of the documents themselves.  The contract between RMBT and the plaintiff did not explicitly provide for arbitration, but instead incorporated another agreement that provided for arbitration (the “Account Agreement”).  Yet there was no proof that the defendants provided the plaintiff with the Account Agreement at the time she signed the RMBT agreement.  In particular, the RMBT agreement was electronically signed via the DocuSign process, and reflected that timing, but the Account Agreement had no similar DocuSign stamp.  The plaintiff alleged the Account Agreement was sent to her three weeks after she signed the electronic documents.

[As a side note, I do hope the Third Circuit addresses the merits of this case at some point, because it raises very interesting issues.  For example, can an arbitration agreement be formed by documents that are not available when the main document is signed?  (The Second Circuit has said no.)  And, is an arbitration enforceable if one party has no input in the selection of the arbitrator?  The Account Agreement called for binding arbitration “utilizing a qualified independent arbitrator of Global’s choosing”.]

The Third Circuit vacated the district court decision and remanded for “limited discovery” on what documents were available to the plaintiff at the time of her electronic signature and a decision under the summary judgment standard.  After acknowledging that its earlier pronouncements on whether motions to compel arbitration should be treated like motions to dismiss or motions for summary judgment were not crystal clear, the Third Circuit took the opportunity to give guidance to district court judges.  Here is the standard it set:

“[W]hen it is apparent, based on ‘the face of a complaint, and documents relied upon in the complaint,’ that certain of a party’s claims ‘are subject to an enforceable arbitration clause, a motion to compel arbitration should be considered under a Rule 12(b)(6) standard without discovery’s delay.’  But if the complaint and its supporting documents are unclear regarding the agreement to arbitrate, or if the plaintiff has responded to a motion to compel arbitration with additional facts sufficient to place the agreement to arbitrate in issue, then ‘the parties should be entitled to discovery on the question of arbitrability before a court entertains further briefing on [the] question.’  After limited discovery, the court may entertain a renewed motion to compel arbitration, this time judging the motion under a summary judgment standard.  In the event that summary judgment is not warranted because … there is ‘a genuine dispute as to the enforceabilty of the arbitration clause,’ the ‘court may then proceed summarily to a trial regarding the ‘making of the arbitration agreement.'”

(Internal citations omitted.)  Applying its standard, the Third Circuit found that the plaintiff in Guidotti raised sufficient doubt about the existence of an arbitration agreement with the financial institutions, and therefore the dispute should have been treated as one requiring discovery and a Rule 56 standard.

 

In contrast to recent decisions from other circuit courts, the Fourth Circuit found a defendant did not waive its right to arbitrate, despite litigating for more than 6 months and conducting discovery.  Rota-McLarty v. Santander Consumer USA, Inc., __ F.3d __, 2012 WL 5936033 (4th Cir. Nov. 28, 2012).

In this potential class action, the named plaintiff alleged a finance company violated Maryland consumer protection laws.  The finance company answered the complaint (asserting arbitration as an affirmative defense) and participated in discovery, including agreeing to phased discovery, taking and defending multiple depositions, and producing documents.  After six and a half months, the defendant moved to compel individual arbitration.  It explained its delay by pointing to “uncertainty” in the federal law regarding class arbitration, and saying it waited until after Stolt-Nielsen was decided and the district courts began applying it.

The district court found that the defendant’s actions waived its right to arbitrate, but the Fourth Circuit reversed.  It said the dispositive test in the Fourth Circuit is whether the opposing party has suffered actual prejudice (and noted that the reason for delay should not be considered).  It concluded that the plaintiff had not been prejudiced because six and a half months of litigation is “relatively short” and because the mere fact of participating in discovery does not equate to prejudice.

Recent cases shows significant difference among the federal circuit courts in how they are evaluating claims that a party waived its right to arbitrate.  For example:

  • In the Fourth Circuit, 6.5 months and significant discovery is not enough to waive the right to arbitrate.  In the Third Circuit, however, 10 months and no discovery is enough to waive the right to arbitrate, if a dispositive motion was filed.
  • In the Eleventh Circuit, a litigant who delays moving to compel arbitration until the law develops in a favorable direction waives its right to arbitrate.  While in the Fourth Circuit, a litigant who delays moving to compel arbitration until the law develops in a favorable direction does not waive its right to arbitrate.

Because there is so much flux in the law, defendants who want to retain their right to arbitrate should err on the side of caution and make their motion to compel early.

The Sixth Circuit easily affirmed a district court’s finding that the defendant had waived its right to arbitration by participating in litigation for eight months.  Johnson Assoc. Corp. v. HL Operating Corp., __ F.3d __, 2012 WL 1861675 (6th Cir. May 23, 2012).  Plaintiffs had filed suit in late December of 2009 and a discovery deadline was set for August 26, 2010.  The defendant did not assert its right to arbitrate in its answer, engaged in judicial settlement conferences, and participated in discovery.  Then, the day before the discovery deadline, the defendant moved to compel arbitration.  The court found that the defendant’s behavior was inconsistent with its right to arbitrate.  Furthermore, it found the plaintiffs were prejudiced by the defendant’s behavior, largely because they “engaged in more discovery than would be permitted in arbitration.”

Neither of those rulings is especially surprising, but the court also had to address an interesting argument by the defendant.  It argued that it could not have waived arbitration, because the contract at issue stated “no waiver by either party of any provision of this Agreement or of any breach or default shall constitute a continuing waiver of such provision or of any other provisions of this Agreement.”  In essence, the defendant was hoping it had contracted around federal case law holding that parties can waive their arbitration rights.  The Sixth Circuit made clear that a “no waiver” clause will not affect courts’ analysis of whether a party waived its right to arbitrate.  It quoted reasoning from the Second Circuit:

“[T]o allow the ‘no waiver’ clause to preclude a finding of waiver would permit parties to waste scarce judicial time and effort and hamper judges’ authority to control the course of the proceedings” and allow parties to “test[] the water before taking the swim” by delaying assertion of their right to arbitration until the litigation is nearly complete.

I don’t usually associate arbitration with swimming, but the policy point here is right on target.