SunTrust Bank v. Lilliston

809 S.E.2d 819, 302 Ga. 840
CourtSupreme Court of Georgia
DecidedJanuary 29, 2018
DocketS17G0433
StatusPublished
Cited by9 cases

This text of 809 S.E.2d 819 (SunTrust Bank v. Lilliston) is published on Counsel Stack Legal Research, covering Supreme Court of Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
SunTrust Bank v. Lilliston, 809 S.E.2d 819, 302 Ga. 840 (Ga. 2018).

Opinion

HUNSTEIN, Justice.

Despite the strong presumption against the waiver of the right to arbitrate, such a right may be waived by a party who acts inconsistently with that right and, in so doing, prejudices the other party to the contract. See, e.g., S & H Contractors v. A.J. Taft Coal Co., 906 F2d 1507 (III) (11th Cir. 1990); McCormick-Morgan, Inc. v. Whitehead [841]*841Elec. Co., 179 Ga. App. 10, 12 (345 SE2d 53) (1986). The question presented in this case is whether a party’s demand for arbitration in a renewal action, see OCGA § 9-2-61 (a), may be deemed waived based on that party’s conduct in the earlier, original litigation; the Court of Appeals answered this question in the affirmative. See SunTrust Bank v. Lilliston, 338 Ga. App. 738 (791 SE2d 614) (2016). We conclude, however, that a renewal suit filed pursuant to OCGA § 9-2-61 (a) is a de novo action, see, e.g., Cleveland v. Skandalakis, 268 Ga. 133 (485 SE2d 777) (1997), and, thus, that a party’s conduct in the original action has no bearing on the question of waiver in the recommenced action. Accordingly, we reverse the judgment of the Court of Appeals.

The pertinent facts and procedural history are not in dispute. In 2001, appellant SunTrust Bank entered into a loan agreement with L-T Adventures, Inc. (“LTA”); this agreement did not include an arbitration provision. In 2005, SunTrust entered into a subsequent agreement with Jedon Lilliston (a co-owner of LTA) and her former husband in a transaction guaranteed by LTA. In connection with this second loan, the parties entered into an “ISDA Master Agreement,” also known as the “Swap Agreement.” The Swap Agreement included an arbitration clause, providing, inter alia, that “any party may demand arbitration.” Following a dispute concerning interest charges associated with both transactions, Lilliston and LTA filed suit against SunTrust in April 2013. In January 2015, the plaintiffs voluntarily dismissed their action; at no point before the action was dismissed did SunTrust demand arbitration. On June 19, 2015, Lilliston and LTA filed a renewal action, pursuant to OCGA § 9-2-61 (a), in the Superior Court of Fulton County SunTrust answered the complaint and moved to compel arbitration based on the provision in the Swap Agreement.

In denying the motion, the trial court concluded that SunTrust had waived the otherwise valid and enforceable arbitration provision by actively participating in the original litigation. The trial court noted that SunTrust had participated in the original litigation for more than a year and a half without raising the issue of arbitration, which included engaging in discovery and moving for summary judgment. Thus, the trial court concluded, SunTrust had “acted inconsistently with the right to arbitrate,” and “[t]he delay and cost associated with conducting discovery prejudiced the Plaintiffs.” The Court of Appeals affirmed the trial court, concluding that the motion to compel was properly considered in light of SunTrust’s conduct in the original action, which was inconsistent with the right to arbitrate. SunTrust Bank, 338 Ga. App. at 741-742. This Court subsequently granted certiorari review, posing the following question: Did the Court of [842]*842Appeals err in holding that a defendant may be deemed to have waived its right to assert an agreement to arbitrate as an affirmative defense in a renewal action filed under OCGA § 9-2-61 based on that party’s conduct in the original action? For the reasons discussed below, we conclude that the Court of Appeals erred in affirming the trial court’s determination that SunTrust had waived its right to demand arbitration.

The Federal Arbitration Act (“FAA”) “applies in state and federal courts to all contracts containing an arbitration clause that involves or affects interstate commerce.” See American Gen. Financial Svcs. v. Jape, 291 Ga. 637, 638 (732 SE2d 746) (2012). When the FAAapplies, as it does here, “it must be applied using federal substantive law.” Wisev. Tidal Constr. Co., 261 Ga. App. 670, 676 (583 SE2d 466) (2003). See also American Gen. Financial Svcs., 291 Ga. at 640. Relevant here, Section 2 of the FAA states as follows:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9USC§ 2. As the Supreme Court of the United States has recognized, this provision reflects a “liberal federal policy favoring arbitration,” and “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U. S. 1, 24-25 (IV) (B) (103 SCt 927, 74 LE2d 765) (1983).

Though there is a strong presumption against waiver under the FAA, see, e.g., Subway Equip. Leasing Corp. v. Forte, 169 F3d 324 (II) (5th Cir. 1999), that presumption is not without bounds, and “the right to arbitration, like any contractual right, may be waived,” Price v. Drexel Burnham Lambert, Inc., 791 F2d 1156, 1158 (5th Cir. 1986). As the Eleventh Circuit Court of Appeals has explained,

despite the strong policy in favor of arbitration, a party may, by its conduct, waive its right to arbitration. Thus, a party that substantially invokes the litigation machinery prior to [843]*843demanding arbitration may waive its right to arbitrate. A party has waived its right to arbitrate if, under the totality of the circumstances, the party has acted inconsistently with the arbitration right, and in so acting, has in some way prejudiced the other party

(Citations and punctuation omitted.) S & H Con tractors, 906 F2d at 1514. In the appeal below, the Court of Appeals — relying on SunTrust’s conduct before the initial action was dismissed — determined that the trial court had properly applied this waiver-by-conduct standard to conclude that SunTrust had waived its right to demand arbitration. SunTrust Bank, 338 Ga. App. at 741-742. However, we agree with SunTrust that the Court of Appeals’ focus on the original action is misplaced where the arbitration demand was made in a renewal action.

The statute governing renewal actions, OCGA § 9-2-61 (a), states, in relevant part:

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Bluebook (online)
809 S.E.2d 819, 302 Ga. 840, Counsel Stack Legal Research, https://law.counselstack.com/opinion/suntrust-bank-v-lilliston-ga-2018.