In the Iowa Supreme Court
No. 25–0285
Submitted April 15, 2026—Filed May 8, 2026
Leroy Cole, personally and as executor of the Estate of Betty Ann Cole,
Appellant,
vs.
Arbor Court Healthcare LLC, Midwest Geriatric Management LLC, MGM Healthcare, Arbor Court Realty LLC, Southeast Iowa Orthopaedics and Sports Medicine, PC, and Michael W. Hendricks,
Appellees,
Appeal from the Iowa District Court for Henry County, Shane M. Wiley,
judge.
Interlocutory appeal from an order granting the defendants’ motion to
compel arbitration. Reversed and Case Remanded.
McDonald, J., delivered the opinion of the court, in which all justices
joined.
Benjamin Bergmann (argued), Clinton Luth, and Carly Scott of Parrish
Kruidenier L.L.P., Des Moines, for appellant.
Graham R. Carl (argued) and Tricia Hoffman-Simanek of Shuttleworth &
Ingersoll, P.L.C., Cedar Rapids, for appellees Arbor Court Healthcare, LLC,
Midwest Geriatric Management, LLC, MGM Healthcare, and Arbor Court Realty,
LLC. 2
McDonald, Justice.
This is an appeal concerning the enforceability of an arbitration
agreement. Arbor Court is a skilled nursing care facility.1 Arbor Court presented
an arbitration agreement to one of its residents, Betty Cole. Betty signed the
arbitration agreement. She died twelve days later. Her husband, Leroy Cole,
individually and as the executor of Betty’s estate, filed this suit in the district
court against Arbor Court and other defendants. Cole asserted claims for
negligence, gross negligence, wrongful death, and dependent adult abuse, among
others. After litigating the case in the district court for almost one year, Arbor
Court moved to compel arbitration. Cole resisted the motion, arguing that the
arbitration agreement was procedurally unconscionable and that Arbor Court
waived its contractual right to arbitration by availing itself of the litigation
process in the district court. The district court granted the motion, and this court
granted Cole’s application for interlocutory appeal. On review for the correction
of errors at law, see Wesley Ret. Servs., Inc. v. Hansen Lind Meyer, Inc., 594
N.W.2d 22, 29 (Iowa 1999), we conclude the district court erred in granting the
motion to compel because Arbor Court waived its contractual right to arbitration.
Because we conclude Arbor Court waived its contractual right, we need not
address Cole’s argument regarding procedural unconscionability.
A contractual right to arbitration, like all contract rights, may be waived,
Mod. Piping, Inc. v. Blackhawk Automatic Sprinklers, Inc., 581 N.W.2d 616, 619
(Iowa 1998), overruled in part on other grounds by, Wesley Ret. Servs., 594
N.W.2d 22. Iowa precedents have provided that “[t]he essential test for waiver of
1The entities alleged to be involved in the ownership and management of Arbor Court and
named as defendants in this case include Arbor Court Healthcare LLC, Midwest Geriatric Management LLC, MGM Healthcare, and Arbor Court Realty LLC. We refer to them collectively as “Arbor Court.” 3
arbitration requires conduct or activity inconsistent with the right to arbitration
and prejudice to the party claiming waiver.” Wesley Ret. Servs., 594 N.W.2d at
30 (quoting Clinton Nat. Bank v. Kirk Gross Co., 559 N.W.2d 282, 284 (Iowa
1997)). The two leading cases in Iowa are Modern Piping and Wesley Retirement
Services. In Modern Piping, this court held that a subcontractor waived its right
to arbitrate when it initiated suit in district court and then engaged in eighteen
months of litigation—utilizing discovery methods unavailable in arbitration—
before moving to compel arbitration only five days before trial. 581 N.W.2d at
621. By contrast, in Wesley Retirement Services, this court held that the
contractual right to arbitrate was not waived where the party seeking to compel
arbitration did not initiate the litigation, engage in discovery, or wait until the
eve of trial to move to compel. 594 N.W.2d at 30.
Based on the parties’ briefing, the district court applied Modern Piping and
Wesley Retirement Services to the facts of this case. It concluded the facts more
closely resembled Wesley Retirement Services. The district court found there was
“limited prejudice to the Plaintiffs.” While “[s]ome discovery [had] been provided
to Arbor Court,” there was no “evidence provided to suggest that it [had] been
extensive.” In addition, the district court explained that when Arbor Court moved
to compel arbitration, “the trial date was still almost sixteen months into the
future.”
On appeal, the parties continue to contest whether Arbor Court waived its
contractual right to arbitrate this dispute under the two-part test set forth in
Modern Piping and Wesley Retirement Services. But that two-part test is
inapplicable here. The parties agree that the Federal Arbitration Act (FAA),
9 U.S.C. §§ 1–16, applies, and we agree with that conclusion. The arbitration
agreement at issue contains an interstate-commerce provision, and Arbor Court 4
submitted an affidavit from the administrator of Arbor Court showing that Arbor
Court is engaged in interstate commerce. While the parties agree that the FAA
applies here, they did not address a recent United States Supreme Court decision
holding that arbitration-specific waiver tests are preempted by the FAA. See
Morgan v. Sundance, Inc., 596 U.S. 411, 418 (2022).
In Morgan v. Sundance, Inc., the Supreme Court took up the question of
whether the “FAA authorize[d] federal courts to create” an arbitration-specific
rule where “[a] party can waive its arbitration right by litigating only when its
conduct has prejudiced the other side.” Id. at 413–14. The Court held that federal
courts could not create such a rule. Id. The Court explained that the FAA was
intended “to overrule the judiciary’s longstanding refusal to enforce agreements
to arbitrate and to place such agreements upon the same footing as other
contracts.” Id. at 418 (quoting Granite Rock Co. v. Int’l Brotherhood of Teamsters,
561 U.S. 287, 302 (2010)). “Or in another formulation: The policy is to make
‘arbitration agreements as enforceable as other contracts, but not more so.’ ” Id.
(quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12
(1967)). Under the FAA, a court “must hold a party to its arbitration contract just
as the court would to any other kind. But a court may not devise novel rules to
favor arbitration over litigation.” Id. The Court explained that the FAA bars the
use of “custom-made rules, to tilt the playing field in favor of (or against)
arbitration.” Id. at 419. Because “the usual federal rule of waiver does not include
a prejudice requirement,” the FAA “instructs that prejudice is not a condition of
finding that a party, by litigating too long, waived its right to stay litigation or
compel arbitration under the FAA.” Id.
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In the Iowa Supreme Court
No. 25–0285
Submitted April 15, 2026—Filed May 8, 2026
Leroy Cole, personally and as executor of the Estate of Betty Ann Cole,
Appellant,
vs.
Arbor Court Healthcare LLC, Midwest Geriatric Management LLC, MGM Healthcare, Arbor Court Realty LLC, Southeast Iowa Orthopaedics and Sports Medicine, PC, and Michael W. Hendricks,
Appellees,
Appeal from the Iowa District Court for Henry County, Shane M. Wiley,
judge.
Interlocutory appeal from an order granting the defendants’ motion to
compel arbitration. Reversed and Case Remanded.
McDonald, J., delivered the opinion of the court, in which all justices
joined.
Benjamin Bergmann (argued), Clinton Luth, and Carly Scott of Parrish
Kruidenier L.L.P., Des Moines, for appellant.
Graham R. Carl (argued) and Tricia Hoffman-Simanek of Shuttleworth &
Ingersoll, P.L.C., Cedar Rapids, for appellees Arbor Court Healthcare, LLC,
Midwest Geriatric Management, LLC, MGM Healthcare, and Arbor Court Realty,
LLC. 2
McDonald, Justice.
This is an appeal concerning the enforceability of an arbitration
agreement. Arbor Court is a skilled nursing care facility.1 Arbor Court presented
an arbitration agreement to one of its residents, Betty Cole. Betty signed the
arbitration agreement. She died twelve days later. Her husband, Leroy Cole,
individually and as the executor of Betty’s estate, filed this suit in the district
court against Arbor Court and other defendants. Cole asserted claims for
negligence, gross negligence, wrongful death, and dependent adult abuse, among
others. After litigating the case in the district court for almost one year, Arbor
Court moved to compel arbitration. Cole resisted the motion, arguing that the
arbitration agreement was procedurally unconscionable and that Arbor Court
waived its contractual right to arbitration by availing itself of the litigation
process in the district court. The district court granted the motion, and this court
granted Cole’s application for interlocutory appeal. On review for the correction
of errors at law, see Wesley Ret. Servs., Inc. v. Hansen Lind Meyer, Inc., 594
N.W.2d 22, 29 (Iowa 1999), we conclude the district court erred in granting the
motion to compel because Arbor Court waived its contractual right to arbitration.
Because we conclude Arbor Court waived its contractual right, we need not
address Cole’s argument regarding procedural unconscionability.
A contractual right to arbitration, like all contract rights, may be waived,
Mod. Piping, Inc. v. Blackhawk Automatic Sprinklers, Inc., 581 N.W.2d 616, 619
(Iowa 1998), overruled in part on other grounds by, Wesley Ret. Servs., 594
N.W.2d 22. Iowa precedents have provided that “[t]he essential test for waiver of
1The entities alleged to be involved in the ownership and management of Arbor Court and
named as defendants in this case include Arbor Court Healthcare LLC, Midwest Geriatric Management LLC, MGM Healthcare, and Arbor Court Realty LLC. We refer to them collectively as “Arbor Court.” 3
arbitration requires conduct or activity inconsistent with the right to arbitration
and prejudice to the party claiming waiver.” Wesley Ret. Servs., 594 N.W.2d at
30 (quoting Clinton Nat. Bank v. Kirk Gross Co., 559 N.W.2d 282, 284 (Iowa
1997)). The two leading cases in Iowa are Modern Piping and Wesley Retirement
Services. In Modern Piping, this court held that a subcontractor waived its right
to arbitrate when it initiated suit in district court and then engaged in eighteen
months of litigation—utilizing discovery methods unavailable in arbitration—
before moving to compel arbitration only five days before trial. 581 N.W.2d at
621. By contrast, in Wesley Retirement Services, this court held that the
contractual right to arbitrate was not waived where the party seeking to compel
arbitration did not initiate the litigation, engage in discovery, or wait until the
eve of trial to move to compel. 594 N.W.2d at 30.
Based on the parties’ briefing, the district court applied Modern Piping and
Wesley Retirement Services to the facts of this case. It concluded the facts more
closely resembled Wesley Retirement Services. The district court found there was
“limited prejudice to the Plaintiffs.” While “[s]ome discovery [had] been provided
to Arbor Court,” there was no “evidence provided to suggest that it [had] been
extensive.” In addition, the district court explained that when Arbor Court moved
to compel arbitration, “the trial date was still almost sixteen months into the
future.”
On appeal, the parties continue to contest whether Arbor Court waived its
contractual right to arbitrate this dispute under the two-part test set forth in
Modern Piping and Wesley Retirement Services. But that two-part test is
inapplicable here. The parties agree that the Federal Arbitration Act (FAA),
9 U.S.C. §§ 1–16, applies, and we agree with that conclusion. The arbitration
agreement at issue contains an interstate-commerce provision, and Arbor Court 4
submitted an affidavit from the administrator of Arbor Court showing that Arbor
Court is engaged in interstate commerce. While the parties agree that the FAA
applies here, they did not address a recent United States Supreme Court decision
holding that arbitration-specific waiver tests are preempted by the FAA. See
Morgan v. Sundance, Inc., 596 U.S. 411, 418 (2022).
In Morgan v. Sundance, Inc., the Supreme Court took up the question of
whether the “FAA authorize[d] federal courts to create” an arbitration-specific
rule where “[a] party can waive its arbitration right by litigating only when its
conduct has prejudiced the other side.” Id. at 413–14. The Court held that federal
courts could not create such a rule. Id. The Court explained that the FAA was
intended “to overrule the judiciary’s longstanding refusal to enforce agreements
to arbitrate and to place such agreements upon the same footing as other
contracts.” Id. at 418 (quoting Granite Rock Co. v. Int’l Brotherhood of Teamsters,
561 U.S. 287, 302 (2010)). “Or in another formulation: The policy is to make
‘arbitration agreements as enforceable as other contracts, but not more so.’ ” Id.
(quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12
(1967)). Under the FAA, a court “must hold a party to its arbitration contract just
as the court would to any other kind. But a court may not devise novel rules to
favor arbitration over litigation.” Id. The Court explained that the FAA bars the
use of “custom-made rules, to tilt the playing field in favor of (or against)
arbitration.” Id. at 419. Because “the usual federal rule of waiver does not include
a prejudice requirement,” the FAA “instructs that prejudice is not a condition of
finding that a party, by litigating too long, waived its right to stay litigation or
compel arbitration under the FAA.” Id.
While Morgan speaks directly to federal courts, the same principle applies
with equal force to state courts. Section 2 of the FAA establishes “an equal- 5
treatment principle: A court may invalidate an arbitration agreement based on
‘generally applicable contract defenses’ like fraud or unconscionability, but not
on legal rules that ‘apply only to arbitration or that derive their meaning from
the fact that an agreement to arbitrate is at issue’ ” Kindred Nursing Ctrs. Ltd.
P’ship v. Clark, 581 U.S. 246, 251 (2017) (quoting AT&T Mobility LLC v.
Concepcion, 563 U.S. 333, 339 (2011)). Under that principle, the FAA “preempts
any state rule discriminating on its face against arbitration.” Id.
Iowa’s test set forth in Modern Piping and Wesley Retirement Services is a
legal rule that derives its meaning from the fact that an agreement to arbitrate
is at issue. Under Iowa contract law, waiver is “the voluntary or intentional
relinquishment of a known right.” Scheetz v. IMT Ins. (Mut.), 324 N.W.2d 302,
304 (Iowa 1982) (en banc) (quoting Travelers Indem. Co. v. Fields, 317 N.W.2d
176, 186 (Iowa 1982)); see also EMC Ins. Grp. v. Shepard, 960 N.W.2d 661, 672
(Iowa 2021). “The essential elements of a waiver are the existence of a right,
knowledge, actual or constructive, and an intention to relinquish such a right.”
EMC Ins. Grp., 960 N.W.2d at 672 (quoting DuTrac Cmty. Credit Union v. Hefel,
893 N.W.2d 282, 292 (Iowa 2017)). Establishing prejudice is not part of that test.
In re Guardianship & Conservatorship of Collins, 327 N.W.2d 230, 233–34 (Iowa
1982) (stating that waiver of contractual rights does not require a showing of
prejudice). Thus, the arbitration-specific two-part test that requires a showing of
prejudice is different from our law regarding the waiver of contractual rights.
This contravenes the Supreme Court’s instruction that the FAA precludes a court
from “devis[ing] novel rules to favor arbitration over litigation.” Morgan, 596 U.S.
at 418.
Because the two-part test in Modern Piping and Wesley Retirement Services
imposes a prejudice requirement to establish waiver unique to arbitration 6
agreements, it is preempted by the FAA, where the FAA is applicable. See CNU
of Ala., LLC v. Cox, 416 So. 3d 154, 161–62 (Ala. 2024) (“[A] recent case from the
United States Supreme Court requires us to modify our longstanding test for
determining whether there has been waiver of an arbitration claim. . . . [T]he
prejudice requirement is no longer good law.” (citations omitted)); Quach v. Cal.
Com. Club, Inc., 551 P.3d 1123, 1132 (Cal. 2024) (“While Morgan is not binding
when the CAA’s procedural rules apply, our state law arbitration-specific
prejudice rule is based on the federal appellate authority that Morgan
disapproved.”); Kingery Constr. Co. v. 6135 O St. Car Wash, LLC, 979 N.W.2d
762, 770–71 (Neb. 2022) (holding that Morgan required Nebraska to overrule its
prior test for waiver of arbitration agreements based on litigation conduct and
remanding for the district court to apply ordinary waiver standards); Dall.
Excavation Sys., Inc. v. Orellana, 697 S.W.3d 702, 709 (Tex. Ct. App. 2024)
(“[B]ased on Morgan, we conclude a showing of prejudice is no longer required in
order to establish waiver, at least in cases involving the FAA.”).
In light of Morgan and the parties’ agreement that the FAA controls here,
we must apply generally applicable principles of contract law to determine
whether Arbor Court impliedly waived its contractual right to arbitrate. As noted
above, waiver is “the voluntary or intentional relinquishment of a known right.”
Scheetz, 324 N.W.2d at 304 (quoting Travelers, 317 N.W.2d at 186). Waiver may
be express or implied. Id. “When the waiver is implied, intent is inferred from the
facts and circumstances constituting the waiver.” Id. Scheetz v. IMT Insurance
(Mutual) is the controlling case with respect to the implied waiver of contractual
rights. See id. In that case, homeowners contracted with an insurance company
to insure their residence under a fire policy containing a contractual limitations
provision. Id. at 303. The provision required any suit on the policy to be 7
commenced within twelve months of the loss. Id. Following a loss, the parties
engaged in settlement negotiations beyond the twelve-month contractual
limitation period. Id. At no point during those negotiations did the insurer invoke
or reserve the contractual limitation defense. Id. When negotiations were
unsuccessful and the homeowners filed suit, the insurer moved for summary
judgment based on the contractual limitation. Id. The district court granted
summary judgment. Id. at 303–04. This court reversed, holding that the insurer
had waived the contractual defense. Id. at 304. By “carr[ying] the negotiations
through the end of the twelve-month period[,] [the insurer] could have had no
other intent than to relinquish its contractual right to limit suits to that period.”
Id.
A recent federal decision applying general rules regarding contractual
waiver post-Morgan is instructive with respect to the implied waiver question
presented here. In Thomas v. Pawn America, Minnesota, LLC (In re Pawn America
Consumer Data Breach Litigation), the parties seeking to compel arbitration
litigated in district court for several months before invoking their arbitration
right. 108 F.4th 610, 612–13 (8th Cir. 2024). The court explained that, under
Morgan, the waiver question “boil[ed] down to” whether the party had
“intentional[ly] relinquish[ed] or abandon[ed] . . . a known right.” Id. at 613
(second, third, and fourth alterations and omission in original) (quoting Morgan,
596 U.S. at 417). One way parties impliedly relinquish the right to arbitrate, the
court observed, is by “substantially invok[ing] the litigation machinery rather
than promptly seek[ing] arbitration.” Id. at 614 (quoting McCoy v. Walmart, Inc.,
13 F.4th 702, 703 (8th Cir. 2021)). The defendants in Pawn America raised
multiple affirmative defenses without mentioning arbitration, participated in
developing a joint discovery plan, requested and attended a pretrial conference, 8
and fully argued a motion to dismiss. Id. They chose to wait until after the
hearing on the motion to dismiss to invoke their arbitration right. Id. at 615. The
United States Court of Appeals for the Eighth Circuit held that this conduct
constituted waiver. Id. It reasoned that the parties’ extensive participation in the
litigation was “hardly the actions of [litigants] trying to move promptly for
arbitration.” Id. (alteration in original) (quoting Sitzer v. Nat’l Ass’n of Realtors,
12 F.4th 853, 857 (8th Cir. 2021)). Instead, their actions “substantially invoke[d]
the litigation machinery,” which evinced an intention to relinquish their
contractual right. Id. (alteration in original) (quoting Donelson v. Ameriprise Fin.
Servs., Inc., 999 F.3d 1080, 1087 (8th Cir. 2021)).
Like the insurer in Scheetz and the defendants in Pawn America, Arbor
Court impliedly waived its contractual right. See Scheetz, 324 N.W.2d at 304
(“When the evidence is undisputed, . . . the issue [of waiver] is one of law for the
court.”). First, a right existed. It is undisputed that Betty signed an arbitration
agreement. The agreement contained an arbitration provision covering disputes
arising out of the care provided by Arbor Court.
Second, Arbor Court had knowledge of the right. Arbor Court was in
possession of the arbitration agreement. Arbor Court’s counsel became aware of
the arbitration agreement no later than October 2023. On October 31, 2023,
Arbor Court’s counsel sent a letter to plaintiff’s counsel requesting that the
claims be submitted to arbitration.
Third, Arbor Court’s conduct demonstrated an intention to relinquish its
contractual right to arbitrate. Cole filed his petition in June 2023. Arbor Court
responded by filing its answer and asserting affirmative defenses; it did not plead
arbitration as an affirmative defense. Arbor Court participated in the trial
scheduling conference, and the district court set a date for trial. On October 31, 9
Arbor Court’s counsel sent the letter described above, demanding arbitration.
Plaintiff’s counsel responded the following day: “We are in receipt of your request
to agree to arbitration. We decline.” Arbor Court did not move to compel
arbitration in the face of Cole’s refusal. Instead, it continued to litigate and
employ district court discovery processes. Arbor Court served initial disclosures.
It served the plaintiff with interrogatories and requests for the production of
documents. The plaintiff served answers to the interrogatories and responses to
the requests for production. Arbor Court supplemented its initial disclosures.
After the plaintiff designated expert witnesses, Arbor Court served additional
interrogatories and requests for the production of documents on the plaintiff,
and the plaintiff served supplemental answers. All the while, the plaintiff’s
discovery requests remained unanswered by Arbor Court. Only after the plaintiff
was preparing to move to compel discovery did Arbor Court finally move to
compel arbitration in May 2024—eleven months after the petition was filed, nine
months after Arbor Court filed its answer, seven months after the plaintiff
explicitly rejected Arbor Court’s request to submit this case to arbitration,
months after obtaining discovery from the plaintiff, and weeks after serving
supplemental interrogatories and requests for production of documents.
We acknowledge that the October 31 demand, standing alone, was an act
asserting—not relinquishing—the arbitration right. Arbor Court contends that
the seven-month interval between that demand and its motion to compel is
explained by the need to investigate the agreement’s enforceability, including
Betty’s cognitive capacity at the time of signing. But whatever Arbor Court’s
subjective intentions during that interval, its objective conduct in the district
court was inconsistent with any intent to preserve the right to arbitrate. A party
that demands arbitration but then serves extensive discovery and waits seven 10
months after refusal to file a motion to compel arbitration has demonstrated
through its actions an intention to resolve the dispute through litigation in the
district court, not arbitration. See Quach, 551 P.3d at 1139 (applying general
contract law post-Morgan and concluding the party waived its right to compel
arbitration where it “actively engaged in discovery” and did not move to compel
arbitration for thirteen months).
The undisputed facts show Arbor Court “could have had no other intent
than to relinquish its contractual right” to compel arbitration. Scheetz, 324
N.W.2d at 304. We therefore reverse the district court’s order granting the motion
to compel arbitration and remand this matter to the district court for further
proceedings.
Reversed and Case Remanded.