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BMD Appellate Win Clarifies Waiver of Contractual Right to Arbitrate

Client Alert
April 12, 2021

Brennan, Manna & Diamond, LLC attorneys David M. Scott, Lucas K. Palmer, and Krista D. Warren prevailed before the United States Court of Appeals for the Sixth Circuit regarding if/when a party waives a contractual right to arbitrate. Borror Property Management, LLC v. Oro Karric North, LLC, No. 20-3146 (the “Decision”).

BMD clients Oro Karric North, LLC and its affiliates (collectively, “Oro”) entered into a property management agreement with Borror Property Management, LLC (“Borror”), in which Borror agreed to manage several apartment properties owned by Oro. The property management agreement stated that, “[i]f either party shall notify the other that any matter is to be determined by arbitration,” the parties would proceed to arbitration unless the matter could be resolved.

Oro came to believe that Borror breached the management agreement, so Oro sent various correspondence and demand letters to Borror prior to filing suit/arbitration (what Judge Readler, author of the Decision, describes as the “legal equivalent of a shot across the bow”). Oro went so far as to threaten litigation. Borror declined to compromise and instead filed suit against Oro in the United States District Court for the Southern District of Ohio. Oro promptly moved to compel arbitration, but the District Court denied, holding that Oro’s pre-suit threat to litigate constituted a waiver of Oro’s contractual right to require arbitration. Oro appealed.

On appeal, Borror argued that the District Court was correct in deeming Oro’s pre-litigation letters to constitute a waiver of its contractual right to arbitrate. But the Sixth Circuit Court of Appeals notes that strong public policy considerations favor arbitration, and “the exchange of letters between parties as a prelude to more formal dispute resolution is a time-honored tradition.” Further noting that Oro almost immediately moved to compel arbitration after the suit was filed, the Sixth Circuit holds that Borror was not prejudiced and sending a pre-suit “posturing” letter does not constitute a waiver.

Takeaway: This significant precedent has already been cited as authoritative in numerous decisions regarding if/when parties waive the right to arbitrate. Knowing how far one may push in negotiations can make the difference between resolution or impasse and help a party control its own destiny in a conflict scenario.

For any litigation or arbitration questions, please contact Litigation Member David Scott at dmscott@bmdllc.com.

David ScottChristopher CalpinBrennan Manna Diamond6th Circuit Court of AppealsLitigation
Client Alert

Bankruptcy Law Changes - 2020 Recap And What To Expect In 2021

January 11, 2021In a year of health challenges and financial distress to many individuals and businesses affected by the pandemic, the year 2020 brought some significant changes to the bankruptcy laws. Some of these changes were in place prior to the pandemic; others were a direct response to the pandemic with the goal of helping struggling businesses and individuals. Ahead, we can likely expect further changes to the Bankruptcy Code with the incoming Congress.Client Alert

UPDATE - SBA Releases Rules and Guidance for Second Round PPP Funding

January 7, 2021Late yesterday (January 6, 2021), the U.S. Small Business Administration released rules and guidance for businesses wishing to take part in the long awaited second round of Paycheck Protection Program (“PPP”) funding. As most businesses are aware, the rules governing PPP loans have been updated as part of The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (“Act”). The Act was just one section of the massive 2021 Consolidated Appropriations Act that was passed by Congress and signed into law by the President on December 27, 2020. To combat the ongoing disruptions caused by the COVID-19 pandemic, the Act generally provides (a) first time PPP loans for businesses that did not obtain a loan in the first instance, (b) PPP second draw loans for businesses that already obtained a loan but need additional funding, and (c) additional funding for businesses that returned their first PPP loan or did not get the full amount for which they qualified.Client Alert

UPDATE - Vaccine Policy Considerations for Employers

January 4, 2021If you read our post from November, you’re already an informed employer. This first post of 2021 is to share good news, give a few updates, and answer some other common questions. Q: What’s the Good News? First, the EEOC confirmed that employers may require employees receive the COVID-19 vaccine. Second, polling indicates that the number of Americans who said they will receive a vaccine has increased from around 63% to over 71%. The number of Americans who are strongly opposed to a vaccine is about 27%. Third, initial returns show that the efficacy rate for certain vaccines is as high as 95% for some at-risk recipients.Client Alert

Changes to FFCRA Paid Leave: Congress’ Revisions to Employment COVID-19 Leave Benefits Signals the Light is at the End of the Tunnel

December 28, 2020Late in the evening on December 27th, President Trump signed into law the government’s $900 billion COVID-19 relief package (the “Stimulus Bill”). Among other economic stimulus benefits, the Stimulus Bill contains the $600 stimulus checks that will be issued to eligible individuals as well as, relevantly, changes to the Families First Coronavirus Response Act (“FFCRA”). The FFCRA was implemented in April 2020 and provided benefits to individuals who missed work as a result of an actual or suspected COVID-19 illness or to care for a child when their school or childcare service was closed because of COVID-19. Importantly, the Stimulus Bill extends eligibility for employer payroll tax refunds for leave payments made to employees on or before March 31, 2021 under the FFCRA, signaling to the American people that Congress believes many of the employed public will be vaccinated by this time, the light at the end of the tunnel. However, the Stimulus Bill does contain a caveat that employers are no longer required to provide FFCRA leave benefits after December 31, 2020, but if they do, they will receive the payroll tax credits, up to the maximums provided in the FFCRA, for payments made prior to April 1, 2021. Below we provide a list of questions and answers we received to date following the passage of the Stimulus Bill. We expect the U.S. Department of Labor (“DOL”) to issue additional questions and answers as the Stimulus Bill is implemented, and we will update this Client Alert as these are received.Client Alert

Healthcare Speaker Programs: New OIG Alert

December 11, 2020In a rare Special Fraud Alert issued on November 16, 2020 (the “Alert”), the Office of Inspector General (“OIG”) urged companies who host speaker programs to reassess their programs in light of the “inherent risks” associated with these activities. The Alert reports that, in the last three years, drug and device companies have reported paying nearly $2 billion to health care professionals for speaker-related services.
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