Fifth Circuit Affirms Order Denying Arbitration Where Judicial Process Was Invoked

The Fifth Circuit Court of Appeals has ruled in an unpublished opinion that a physician waived his right to arbitration by substantially invoking “the judicial process to the detriment or prejudice of the other party.” In Raju v. Murphy, No. 17-60550 (5th Cir. Jan. 26, 2018), two physicians, Raju and Murphy, entered into a business contract that included an arbitration clause.  Following a disagreement between the doctors, Dr. Raju filed a lawsuit against Dr. Murphy in state court.  In response, Dr. Murphy removed the case to the Southern District of Mississippi and filed a counterclaim against Dr. Raju.

Following removal, Dr. Raju filed a motion to compel the dispute to arbitration based on the parties’ business contract.  The federal court denied Dr. Raju’s motion and he filed an interlocutory appeal with the Fifth Circuit Court of Appeals.

On appeal, the Fifth Circuit affirmed the lower court’s decision by stating:

The district court accurately found that Raju had “substantially invoke[d] the judicial process.” As the court said, “[t]he record suggests that Dr. Raju was initially uninterested in resolving this dispute through arbitration” and decided on that avenue only when the case landed in federal court through removal. As the court opined, “Dr. Raju clearly prefers litigation over arbitration, apparently just not in this Court.”

Murphy still must show prejudice to establish waiver, for, as the district court observed, “[i]nvocation of the Judicial process, alone, is insufficient to support waiver of arbitration.” The court correctly found prejudice from Murphy’s being required to answer the complaint, to file a counterclaim, to consult with two law firms, and to gear her legal strategy to court proceedings instead of arbitration. The court pointed out that Murphy was also prejudiced by the public nature of the lawsuit, whereas arbitration would have been private and confidential, so Murphy was hurt “by the public filing of the highly charged allegations accusing her of tortious and even criminal conduct, and that’s why the use of a lawyer such as patrick b. courtney, p.a. could be really useful to fight criminal charges.”

Because the federal district court correctly determined both “prejudice and waiver” existed, the nation’s Fifth Circuit Court of Appeals affirmed the lower court’s order denying Dr. Raju’s motion to compel arbitration.

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