RYMER, Circuit Judge:
After receiving a favorable judgment against Hoffman Construction Company in Alaska state court, Active Erectors and Installers, Inc. filed a demand for arbitration of its RICO claim against Hoffman, a claim which Active had not litigated in state court. Hoffman then brought this suit for declaratory and injunctive relief in order- to forestall such an arbitration. The district court granted a permanent injunction in Hoffman’s favor. The court reasoned that Active waived its right to arbitrate its RICO claim when it opted to proceed in state court, and that the state court action, under the doctrine of res judicata, barred any subsequent attempt to arbitrate that claim.
On appeal, Active contends that its decision to proceed in state court on certain of its claims does not constitute a waiver of its right to seek a subsequent arbitration of its RICO claim. We believe, however, that the district court correctly found that Active’s waiver of arbitration in favor of an Alaska state court proceeding included a waiver of the right to arbitrate a potential RICO claim. That state court action therefore bars a subsequent RICO arbitration based on the same set of facts because of res judicata. Accordingly, we affirm.
I
In October 1983, Hoffman and the Kenai Peninsula Borough entered into a contract for the construction of a high school in Homer, Alaska. Hoffman then subcontracted the structural steel work to Active. The contract between Hoffman and Active provided that disputes between them that did not involve the conduct of the property owner had to be arbitrated unless they agreed otherwise.
[798]*798A dispute subsequently arose among the Borough, Hoffman, and Active concerning cost overruns. In December 1984, Active sued Hoffman in federal court asserting, among others, a RICO claim. In February 1985, Active demanded arbitration against Hoffman. On April 15 of that year, Active wrote a letter to Hoffman asserting that Active was prepared to “bring[ ] all of the monetary claims of Active against Hoffman” arising out of the construction project in Alaska state court. (Emphasis added). The letter, however, also stated that the RICO claim, along with two other claims, would remain in federal court. Active further informed Hoffman that it would dismiss its arbitration demand as soon as Hoffman assured Active that it would not change its position “that all claims against it may be tried [in state court].”
In May 1985, the district court dismissed the federal suit on the ground that the claims should have gone to arbitration instead of to federal court. We subsequently affirmed the dismissal in Sparling v. Hoffman Construction Co., 864 F.2d 635 (9th Cir.1988).
In December 1985, Active brought its Alaska state suit without any RICO claim. Thus, as of the time the state suit was initiated, the federal district court had dismissed the RICO claim (along with all the other claims), and no RICO claim had been asserted in any state court proceeding. Then, when Hoffman responded to the state suit and did not raise the issue of arbitration, Active, in March 1986, withdrew its arbitration request. The state court case was tried in July and August of 1987, and in March 1988 the superior court entered judgment in favor of Active.
We issued our opinion in Sparling in December 1988. We affirmed the district court on the ground that Active had agreed to submit its claims to arbitration. In January 1989, shortly after this opinion was issued, Active filed a new demand for arbitration of its RICO claim. Hoffman brought this suit in federal district court seeking declaratory and injunctive relief to prevent such an arbitration from proceeding. The district court ruled in favor of Hoffman. The court held that the RICO claim had always been arbitrable under the agreement, and that by proceeding in state court without a RICO claim, having waived arbitration to get into state court, Active was precluded from adjudicating the RICO claim in a new arbitration.
II
Hoffman argues that Active waived its right to compel arbitration. “A party seeking to prove waiver of a right to arbitration must demonstrate: (1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts.” Fisher v. A. G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir.1986). We agree with the district court that Hoffman satisfactorily demonstrated the existence of all three prongs.
First, it cannot be said that Active lacked knowledge of the right to compel arbitration. The contract itself called for arbitration of disputes between Active and Hoffman. Additionally, the district court, prior to initiation of the state action, dismissed the federal suit on the ground that the claim should have gone to arbitration. Thus, both the contract and the federal court informed Active of the arbitrability of its claim. The fact that the Supreme Court did not definitively address the arbi-trability of RICO claims until 1987 does not vitiate the conclusion that Active was aware that its claims were arbitrable. See Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 238-42, 107 S.Ct. 2332, 2343-46, 96 L.Ed.2d 185 (1987). Notably, Active faced no precedential barrier in this circuit to arbitration of its RICO claim prior to the Supreme Court’s decision in Shearson.
As to the second prong of the waiver test, the district court properly concluded that Active acted in a manner inconsistent with its right to arbitration. Active withdrew its request to arbitrate in light of Hoffman’s waiver of arbitrability, and that waiver extended to “any of the disputes [799]*799between it and Active Erectors.” (Emphasis added). Thus, Active waived arbitration of all its claims against Hoffman, including its RICO claim. Active then sued in state court, an act that undeniably is inconsistent with enforcing its arbitration right. Furthermore, at the time Active initiated its state court suit, it had already been told by the district court that all of its claims were arbitrable, and yet it still opted for a route — state court litigation — that was inconsistent with that arbitration right.
Active contends that it did not waive its right to arbitration when it initiated the Alaska state court suit because it did not believe that it could bring a RICO claim in state court. This argument in unavailing because we decided Lou v. Belzberg, 834 F.2d 730, 735-39 (9th Cir.1987), cert. denied, 485 U.S. 993, 108 S.Ct. 1302, 99 L.Ed.2d 512 (1988), permitting such jurisdiction, before final judgment was entered in the state action. Active, therefore, could have sought permission from the state court to amend its pleadings to include a RICO claim. Because the holding in Lou gave Active the right to assert its RICO claim in the state court, it had no excuse not to do so, given that the RICO claim indisputably arose out of the same course of conduct as the other state claims.
Nor does our decision in Sparling,
Free access — add to your briefcase to read the full text and ask questions with AI
RYMER, Circuit Judge:
After receiving a favorable judgment against Hoffman Construction Company in Alaska state court, Active Erectors and Installers, Inc. filed a demand for arbitration of its RICO claim against Hoffman, a claim which Active had not litigated in state court. Hoffman then brought this suit for declaratory and injunctive relief in order- to forestall such an arbitration. The district court granted a permanent injunction in Hoffman’s favor. The court reasoned that Active waived its right to arbitrate its RICO claim when it opted to proceed in state court, and that the state court action, under the doctrine of res judicata, barred any subsequent attempt to arbitrate that claim.
On appeal, Active contends that its decision to proceed in state court on certain of its claims does not constitute a waiver of its right to seek a subsequent arbitration of its RICO claim. We believe, however, that the district court correctly found that Active’s waiver of arbitration in favor of an Alaska state court proceeding included a waiver of the right to arbitrate a potential RICO claim. That state court action therefore bars a subsequent RICO arbitration based on the same set of facts because of res judicata. Accordingly, we affirm.
I
In October 1983, Hoffman and the Kenai Peninsula Borough entered into a contract for the construction of a high school in Homer, Alaska. Hoffman then subcontracted the structural steel work to Active. The contract between Hoffman and Active provided that disputes between them that did not involve the conduct of the property owner had to be arbitrated unless they agreed otherwise.
[798]*798A dispute subsequently arose among the Borough, Hoffman, and Active concerning cost overruns. In December 1984, Active sued Hoffman in federal court asserting, among others, a RICO claim. In February 1985, Active demanded arbitration against Hoffman. On April 15 of that year, Active wrote a letter to Hoffman asserting that Active was prepared to “bring[ ] all of the monetary claims of Active against Hoffman” arising out of the construction project in Alaska state court. (Emphasis added). The letter, however, also stated that the RICO claim, along with two other claims, would remain in federal court. Active further informed Hoffman that it would dismiss its arbitration demand as soon as Hoffman assured Active that it would not change its position “that all claims against it may be tried [in state court].”
In May 1985, the district court dismissed the federal suit on the ground that the claims should have gone to arbitration instead of to federal court. We subsequently affirmed the dismissal in Sparling v. Hoffman Construction Co., 864 F.2d 635 (9th Cir.1988).
In December 1985, Active brought its Alaska state suit without any RICO claim. Thus, as of the time the state suit was initiated, the federal district court had dismissed the RICO claim (along with all the other claims), and no RICO claim had been asserted in any state court proceeding. Then, when Hoffman responded to the state suit and did not raise the issue of arbitration, Active, in March 1986, withdrew its arbitration request. The state court case was tried in July and August of 1987, and in March 1988 the superior court entered judgment in favor of Active.
We issued our opinion in Sparling in December 1988. We affirmed the district court on the ground that Active had agreed to submit its claims to arbitration. In January 1989, shortly after this opinion was issued, Active filed a new demand for arbitration of its RICO claim. Hoffman brought this suit in federal district court seeking declaratory and injunctive relief to prevent such an arbitration from proceeding. The district court ruled in favor of Hoffman. The court held that the RICO claim had always been arbitrable under the agreement, and that by proceeding in state court without a RICO claim, having waived arbitration to get into state court, Active was precluded from adjudicating the RICO claim in a new arbitration.
II
Hoffman argues that Active waived its right to compel arbitration. “A party seeking to prove waiver of a right to arbitration must demonstrate: (1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts.” Fisher v. A. G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir.1986). We agree with the district court that Hoffman satisfactorily demonstrated the existence of all three prongs.
First, it cannot be said that Active lacked knowledge of the right to compel arbitration. The contract itself called for arbitration of disputes between Active and Hoffman. Additionally, the district court, prior to initiation of the state action, dismissed the federal suit on the ground that the claim should have gone to arbitration. Thus, both the contract and the federal court informed Active of the arbitrability of its claim. The fact that the Supreme Court did not definitively address the arbi-trability of RICO claims until 1987 does not vitiate the conclusion that Active was aware that its claims were arbitrable. See Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 238-42, 107 S.Ct. 2332, 2343-46, 96 L.Ed.2d 185 (1987). Notably, Active faced no precedential barrier in this circuit to arbitration of its RICO claim prior to the Supreme Court’s decision in Shearson.
As to the second prong of the waiver test, the district court properly concluded that Active acted in a manner inconsistent with its right to arbitration. Active withdrew its request to arbitrate in light of Hoffman’s waiver of arbitrability, and that waiver extended to “any of the disputes [799]*799between it and Active Erectors.” (Emphasis added). Thus, Active waived arbitration of all its claims against Hoffman, including its RICO claim. Active then sued in state court, an act that undeniably is inconsistent with enforcing its arbitration right. Furthermore, at the time Active initiated its state court suit, it had already been told by the district court that all of its claims were arbitrable, and yet it still opted for a route — state court litigation — that was inconsistent with that arbitration right.
Active contends that it did not waive its right to arbitration when it initiated the Alaska state court suit because it did not believe that it could bring a RICO claim in state court. This argument in unavailing because we decided Lou v. Belzberg, 834 F.2d 730, 735-39 (9th Cir.1987), cert. denied, 485 U.S. 993, 108 S.Ct. 1302, 99 L.Ed.2d 512 (1988), permitting such jurisdiction, before final judgment was entered in the state action. Active, therefore, could have sought permission from the state court to amend its pleadings to include a RICO claim. Because the holding in Lou gave Active the right to assert its RICO claim in the state court, it had no excuse not to do so, given that the RICO claim indisputably arose out of the same course of conduct as the other state claims.
Nor does our decision in Sparling, 864 F.2d 635, support Active’s contention. In Sparling, we held that Hoffman had not waived arbitrability in favor of a federal court case. Id. at 639 (“Hoffman only waived the arbitration clause in favor of ongoing state court proceedings, not the federal action.”). Thus, Sparling simply stands for the proposition that, if the choice were between arbitration and a federal court case as to any claims (including RICO), Active had to arbitrate those claims because Hoffman never waived its right to arbitration in favor of a federal case.
Active, foreclosed from federal court, still could reach an agreement with Hoffman, as it actually did, that any of its claims could be brought in state court. Pursuant to that agreement, Hoffman waived arbitration for all claims, including RICO, in favor of the state court action, but retained its position that it would demand arbitration over federal litigation. As a result, the only court in which Active could bring any of its claims was state court, and by choosing to sue in state court, it waived its right to arbitration.
Finally, prejudice to Hoffman is apparent. As the district court stated, “[t]he prejudice is staleness of the claim, and more importantly, the subjection of Hoffman to the litigation process in State Court, the discovery process, the expense of litigation, and the judgment for $679,434.76.”
Having waived arbitration in favor of the Alaska state court proceeding, res judicata now bars a RICO arbitration based on the same set of facts. Active received a judgment against Hoffman in state court. “It is now settled that a federal court must give to a state-court judgment the same preclusive effect as would be given that judgment under the law of the State in which the judgment was rendered.” Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 81, 104 S.Ct. 892, 896, 79 L.Ed.2d 56 (1984). In Alaska, res judicata would bar Active’s RICO claim because res judicata covers “relevant claims that could have been raised” in the prior case, but were not. DeNardo v. State, 740 P.2d 453, 456 (Alaska) (emphasis added), cert. denied and appeal dismissed, 484 U.S. 919, 108 S.Ct. 277, 98 L.Ed.2d 239 (1987). A mere change in the legal theory asserted cannot revive an already barred action. Id. Because the RICO claim arose out of the same course of events already litigated in the Alaska state court suit, Active may not arbitrate that claim now.
AFFIRMED.