Arbitration clause can be waived

Arbitration clauses in contracts are becoming increasingly popular, and they often place consumers at a disadvantage,  a subject we covered  in “The ‘fine print’ and arbitration clauses.” Like most contract provisions, however, an arbitration clause can be waived, as a Columbus vendor recently learned in Minkin v. Ohio State Home Services, 2016-Ohio-5804.

A homeowner filed suit concerning a contract for waterproofing services. When the vendor failed to answer the complaint, the homeowners asked the court to enter a default judgment.  After a default judgment for $58,000 was entered, the homeowners initiated garnishment procedures, which apparently alerted the vendor to the judgment.

The vendor asked the court to vacate the judgment, arguing the court lacked jurisdiction over the matter because of the arbitration clause. The trial disagreed, as did the appellate court. Because the vendor took no action after being served with the complaint—the vendor failed to offer any reasonable grounds for not having responded to the complaint—the appellate court held that the vendor had waived its right to arbitration.

“In this case, the trial court determined that, even assuming the existence of an arbitration clause in the contract between the parties, OSHS waived any right to arbitrate. We agree. As outlined above, OSHS took no steps to respond to the claims against it in this litigation until the Minkins initiated garnishments proceedings. … Thus, insofar as the contract between the parties contained an arbitration provision, OSHS waived any right to arbitrate by not timely seeking to enforce that right.”

There’s a second learning point to this case. When a summons arrives, it merits your full attention. A court will find your inaction upon receipt of a summons to be inexcusable. This is a management issue that cannot be neglected.

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