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The Art of Asking For Arbitration

In McKissock v. Polymer and McKissock and Hoffman v. Polymer Dynamics, the court showed that you can't always get what you want, even out of a contract. It stated that since McKissock "did not seek to enforce an arbitration agreement until after several unfavorable rulings were received and nearly twelve months after Polymer instituted the underlying action." This was seen as waiting too long and dilatory. The court shows that once you've availed yourself of the legal process for a prolonged period of time, you can't wait until you're losing to try arbitration. 

McKissock filed Preliminary Objections to the original legal malpractice Complaint. The defenses of demurrer and lack of specificity to Polymer's claims for breach of contract, fraud and negligent misrepresentation were raised. The parties' agreement to arbitrate the legal fees and costs owed by Polymer from the Bayer litigation was not raised in either the Preliminary Objections or by way of a Motion to Compel Arbitration at that time.

An Amended Complaint was filed. McKissock again filed Preliminary Objections to the pleading and again did not raise the arbitration agreement regarding any fee/cost dispute between the parties.

The court found McKissock's assertion that they had petitioned for arbitration of the legal fees/costs owed to them by Polymer was disingenuous. The arbitration agreement they were seeking to enforce was directly related to the legal malpractice action instituted by Polymer. McKissock's representation of Polymer began in February of 2004 when they replaced Polymer's trial counsel in some previous litigation.

The Court noted that, "as a matter of public policy, our courts favor the settlement of disputes by arbitration however, the right to enforce an arbitration clause can be waived." Further, "waiver may be established by a party's express declaration or by a party's undisputed acts or language so inconsistent with a purpose to stand on the contract provisions as to leave no opportunity for a reasonable inference to the contrary. Most importantly in this case, the court noted that, "a party's acceptance of the regular channels of the judicial process can demonstrate its waiver of arbitration."

The Court noted that it was limited to making a determination of whether the lower court's findings were supported by substantial evidence and whether the lower court abused its discretion in denying the motion. Goral v. Fox Ridge, Inc., 453 Pa. Super. 316; 683 A.2d 931; 1996 Pa. Super. LEXIS 3518.

In a previous case, the court found that there was a waiver of the arbitration when a party pursued the judicial process before seeking arbitration, and that party waited until they had filed a petition for preliminary injunction and initial and amended complaints in the trial court, filed multiple answers and counterclaims, and the parties had engaged in discovery. Because of that extensive use of the judicial process, the court found that they have waived their right to arbitration.

In the previous case, as with this one, the Superior Court concluded that had the defendants truly wanted to, they could have raised the issue of arbitration in preliminary objections rather than waiting many months after the complaint was served before filing a motion to compel arbitration, which was prompted only after unfavorable rulings.

Finally, the court stated that to arbitrate McKissock's dispute over the payment of legal fees and reimbursement of costs by Polymer to Petitioners in connection with the Bayer litigation while Polymer's underlying legal malpractice action against Petitioners stemming from the same litigation is pending would result in the bifurcation of related and connected disputes, thus resulting in judicial inefficiency. Moreover, Petitioners waived their right to arbitrate the fee/cost dispute and availed themselves of the judicial process to the detriment of Polymer.

The take away notion from this case is that choosing whether or not to ask for arbitration is a strategic timing decision because if not raised early enough, it may ultimately be considered waived.

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