May 10, 2012 Articles

Waiver of Right to Compel Arbitration Does Not Bind Agent

By Nicholas K. Holmes and Cori Phillips Palmer

It is well established that a party with a contractual right to arbitration may waive that right through express words or active participation in litigation. Few courts, however, have analyzed whether a principal's waiver of its arbitration rights precludes the principal's agent from asserting a right to arbitration based on the same agreement.

Lemon Drop Properties v. Pass Marriane, LLC
Recently, the Mississippi Supreme Court addressed that issue and held that a principal's waiver of its arbitration rights had no effect on the arbitration rights of the principal's agent, even where those rights were derivative of the principal. Lemon Drop Properties v. Pass Marriane, LLC, 73 So.3d 1131 (Miss.2011), arose out of a construction-defects dispute relating to a condominium project. The contract between the purchaser and the contractor-seller required all disputes to be submitted to arbitration, and expressly recognized that the contractor-seller's real-estate broker would act as its agent. After the project was completed, the purchaser filed suit against the contractor-seller, claiming damages due to defects in the project's design and construction. In response, the contractor-seller filed an answer and a counterclaim, but failed to invoke arbitration. Six months later, the purchaser filed an amended complaint adding the real-estate broker as a defendant. The broker promptly moved to compel arbitration. The trial court granted the broker's motion, and the purchaser brought an interlocutory appeal on the grounds that the right to arbitration had been waived by the contractor-seller.

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