District Court (Md.) Finds Auto Finance Company Waived Right to Arbitrate By Participating in Litigation Process

In Rota-McLarty v. Santander Consumer USA, Inc., 2011 WL 2133698 (D.Md. 2011), Judge Quarles held that an auto finance company waived its right to arbitrate by participating in the litigation and discovery process before filing its petition to arbitrate: 

Santander argues that it initially participated in this class litigation because it feared that an arbitrator would have compelled class arbitration, and it was reluctant to take that risk when it had “not agreed to arbitrate on a class-wide basis.”  Santander argues that it delayed seeking arbitration because Stolt–Nielsen was not issued until after it filed its answer, and it wanted to wait for lower court decisions construing Stolt–Nielsen in the “consumer” context, such as Jock.  Id. at 11, 16. Santander argues that Rota–McLarty has not been prejudiced by the limited discovery, and denies that a hidden finance charge was revealed. Id. at 13 ¶  Whether a contracting party has waived its right to arbitrate involves consideration of several factors. Abramson v. Wildman, 184 Md.App. 189, 200, 964 A.2d 703, 709 (2009). These include: the extent of its participation in judicial proceedings, including whether an answer has been filed; whether there was a legitimate reason for the participation; and whether the delay in seeking arbitration prejudiced the other party. See, e.g., Freedman v. Comcast Corp., 190 Md.App. 179, 206, 988 A.2d 68, 84 (2010); Abramson, 184 Md.App. at 200, 964 A.2d at 709. The intention to waive must be “clearly established,” and “will not be inferred from equivocal acts or language.” Gold Coast Mall, 298 Md. at 109, 468 A.2d at 98. The “belated insistence on arbitration [that] has all the markings of a simple strategic decision” is improper. Abramson, 184 Md.App. at 202, 964 A.2d at 710. ¶  Santander has waived its contractual right to arbitrate. It moved to compel arbitration six months after Rota–McLarty sued, and five months after filing an answer directed to the merits of her complaint. It also engaged in discovery about Rota–McLarty’s allegations of hidden finance charges, which included exchanging hundreds of pages of documents, serving and responding to interrogatories, and taking Rota–McLarty’s deposition on all allegations. Santander’s fear that an arbitrator would have compelled class arbitration is not a legitimate reason for engaging in litigation rather than immediately seeking arbitration. Further, Santander has not answered Rota–McLarty’s assertion that it sought arbitration only after litigation had enabled it to fully evaluate her case.