In re Tyco Int'l Ltd. MDL

2004 DNH 090

• Court: District Court, D. New Hampshire
• Decided: May 24, 2004
• Docket: MDL-02-1335
• Status: Published

Opinion

In re Tyco Int'1 Ltd. MDL MDL-02-1335 05/24/04

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

In re Tyco International, Ltd. Multidistrict Litigation (MDL 1335) MDL DOCKET NO. 02-1335-B TYCO-PLAINTIFF ACTIONS Case No. 03-1350-B

Opinion No. 2004 DNH 090 ORDER

Mark H. Swartz moves to stay and compel arbitration of all

claims asserted against him by Tyco International, Ltd. and Tyco

International (US) Inc. (collectively "Tyco"). He reiterates the

same arguments he made in his earlier failed motion to dismiss

under Fed. R. Civ. P. 12(b)(1) and 12(b)(6). This motion suffers

from the same shortcomings and I therefore deny both it and his

reguest for oral argument.

Swartz was Tyco's Chief Financial Officer from February 1995

until his departure from the company on September 10, 2002. As

part of Swartz's departure, he and Tyco entered into an agreement

whereby "all disputes between them arising from or concerning

Swartz's employment at the Company [would] be subject to binding

arbitration." (Mot. to Stay & Compel Ar b . Ex. 2A 5 4). Tyco sought to invoke this arbitration provision on October 2002, by

demanding arbitration before the American Arbitration Association

("AAA"). Swartz refused to consent to arbitration unless Tyco

agreed to stay the arbitration until after Swartz's criminal

proceedings had been concluded. Swartz never presented an

alternative arbiter and no agreement was reached on an acceptable

arbitration forum. In effect, Swartz refused to arbitrate until

after the conclusion of his pending criminal proceedings.

On March 31, 2003, Tyco filed its current complaint against

Swartz. Swartz responded with a motion to dismiss based on the

arbitration clause, which I denied on December 29, 2003. He now

resurrects the arguments he first raised in the motion to

dismiss. Tyco responds by claiming that Swartz explicitly waived

his right to arbitrate by refusing Tyco's demand for arbitration.

When determining whether a party has waived its arbitration

rights, I must be mindful that any doubts as to arbitrability

"should be resolved in favor of arbitration, whether the problem

at hand is . . . an allegation of waiver, delay, or a like

defense to arbitrability." Moses H. Cone Mem'1 Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 25 (1983). "Waiver is not to be

- 2 - lightly inferred, and mere delay in seeking [arbitration],

without some resultant prejudice to a party cannot carry the

day." Creative Solutions Group v. Pentzer Corp., 252 F.3d 28, 32

(1st Cir. 2001) (guotation marks omitted); Page v. Moseley,

Hallgarten, Estabrook & Weeden, Inc., 806 F.2d 291, 293 (1st Cir.

1986); see also In re Tyco Int'l, Ltd., 2004 DNH 48, 7 n.3.

Prejudice, however, is not reguired when a waiver stems from an

affirmative act rather than mere inaction. Rankin v. Allstate

Ins. C o ., 336 F.3d 8, 12 (1st Cir. 2003) ("Where we are dealing

with a forfeiture by inaction (as opposed to an explicit waiver),

the components of waiver of an arbitration clause are undue delay

and a modicum of prejudice to the other side.")(emphasis added);

Menorah Ins. Co. v. INX Reinsurance Corp., 72 F.3d 218, 222 (1st

Cir. 1995)(explicit waiver of arbitration occurred when party

declined invitation to arbitrate). Here, Swartz has actively

resisted arbitration by refusing to arbitrate in accordance with

the agreement. In re Tyco Int'l, Ltd., 2003 DNH 229. He refused

the arbitration forum suggested by Tyco and refused to offer any

acceptable alternatives. See, e.g.. Lane, Ltd. v. Larus & Bro.

C o ., 243 F.2d 364, 367 (2d Cir. 1957)(refusal to arbitrate is a

- 3 - forfeiture of the right to arbitrate). These actions equate to

an explicit abandonment of his arbitration rights and Tyco need

not show prejudice in order to defeat the motion to stay and

compel arbitration.1

Swartz has attempted to accomplish by dilatory tactics what

he could not accomplish through negotiation: a stay of

arbitration until the conclusion of his criminal proceedings.

Arbitration clauses, however, are "not meant to be another weapon

in the arsenal for imposing delay and costs in the dispute

resolution process." Menorah, 72 F.3d at 222; see also Lane, 243

F.2d at 367 ("A party cannot raise unjustifiable objections to a

valid demand for arbitration, all the while protesting its

willingness in principle to arbitrate and then, when the other

side has been forced to abandon its demand, seek to defeat a

1 Swartz invokes Hilti, Inc. v. Oldach, 392 F.2d 368, 372 (1st Cir. 1968), for the proposition that a defendant's delay in moving to compel arbitration, or even participation in preliminary discovery, does not alone justify a finding of waiver. Hilti, however, is distinguishable from the present case. In Hilti, the First Circuit noted that the defendant had placed the plaintiff on notice of defendant's intention to invoke the relevant arbitration clause. Thus, the plaintiff in Hilti never sought arbitration, and more importantly, the defendant in Hilti never refused arbitration before requesting it at a later date. Therefore, Hilti is not controlling.

- 4 - judicial determination by asking for arbitration after suit has

been commenced."). Swartz adopted the litigation strategy of

refusing to arbitrate or actively pursue arbitration until after

the close of evidence in his criminal proceedings, knowing full

well that such an action could be deemed an explicit waiver of

his right to arbitration. He now reaps the conseguences of that

decision.

I hereby deny Swartz's motion to stay and compel arbitration

(Doc. No. 131).

SO ORDERED.

Paul Barbadoro Chief Judge

May 24, 2 004

cc: All Counsel of Record

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