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Waiver Beware: Suffolk County Superior Court Holds Contractor Waived Right to Escape Arbitration

On September 22, 2021, the Suffolk County Superior Court held a contractor would be compelled to arbitrate a dispute with its electrical subcontractor.  The decision shows that by taking action consistent with an agreement to arbitrate—in this case arguing the merits of the dispute before the arbitrator—a party can inadvertently acquiesce to the arbitration proceeding and waive its right to have a court weigh in.

The case, LMH-Lane Cabot Yard Joint Venture v. Mass. Electric Construction Co., involves a dispute between a contractor and subcontractor working on a South Boston construction project at a facility owned by the MBTA. LMH-Lane subcontracted out $65 million worth of electrical work to Mass. Electric Construction Co. (“MEC”). Delays in the project caused MEC to incur $11 million in additional costs, which MEC sought to have reimbursed by LMH-Lane. LMH-Lane, in turn, submitted portions of MEC’s claims to the MBTA for reimbursement as “owner pass-through claims.” The contract between LMH-Lane and MEC mandates arbitration of any disputes, whereas the contract between LMH-Lane and the MBTA proscribes arbitration.

MEC filed a demand for arbitration to resolve disputes with LMH-Lane regarding its cost claims. LMH-Lane did not immediately object to the arbitration, instead insisting on mediation, which is outlined as a precondition to arbitration in the MEC contract. Rather than seeking court intervention to stay the arbitration, LMH-Lane willingly engaged in discovery and filed dispositive motions before the arbitration panel. Only after the panel denied the dispositive motions did LMH-Lane finally seek to stay the arbitration by filing an action in Superior Court.

The Court held that, by actively participating in the arbitration for a year and a half, LMH-Lane had waived its right to raise the dispute in court. The Court reasoned that waiver of a right to object to arbitration would be analyzed using the same legal principles as waiver of a right to arbitrate. The court found that “LMH-Lane’s insistence on mediation was thus an admission that the arbitration requirement in the Contract applies to this dispute,” and noted that LMH-Lane “substantively argued the merits” of the dispute before the arbitrator and “engaged in extensive discovery” in arbitration.  Moreover, the Court found that even if LMH-Lane had not waived its right to object, the Court would still have determined the dispute to be arbitrable under the language of the governing contract.

This case highlights the importance of staking out a position on the arbitrability of a dispute early and taking actions consistent with that position. If a party objects to the arbitration, moreover, stating that objection before the arbitrator is not enough. Instead, to avoid waiving the right to object, it is imperative to (1) refuse to engage in discovery or argue the merits of the dispute in the arbitration proceeding, and (2) file action in court as soon as possible seeking a stay of arbitration.

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