   09-2904-cv, 09-2986-cv
   National Union Fire Ins. v. NCR Corp.



                             UNITED STATES COURT OF APPEALS
                                 FOR THE SECOND CIRCUIT

                                      SUMMARY ORDER
RULINGS BY SUM M ARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUM M ARY ORDER
FILED AFTER JANUARY 1, 2007, IS PERM ITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
PROCEDURE 32.1. WHEN CITING A SUM M ARY ORDER IN A DOCUM ENT FILED WITH THIS COURT, A PARTY
M UST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUM M ARY ORDER”). A PARTY CITING A SUM M ARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY
NOT REPRESENTED BY COUNSEL.

         At a stated term of the United States Court of Appeals for the Second Circuit, held at
   the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New
   York, on the 7 th day of May, two thousand and ten.

   PRESENT:         PETER W. HALL,
                    GERARD E. LYNCH,                 Circuit Judges,
                    TIMOTHY C. STANCEU*              Judge, U.S. Court of International Trade.

   --------------------------------------------------------------------x
   NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, P.A.,

                                                     Petitioner-Appellant,

           -v.-
                                                                                 Nos. 09-2904-cv(L);
                                                                                  09-2986-cv(CON)

   NCR CORPORATION.

                                                          Respondent-Appellee.
   -------------------------------------------------------------------x




           *
             The Honorable Timothy C. Stanceu, of the United States Court of International Trade,
   sitting by designation.

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APPEARING FOR THE APPELLANT:                   STEVEN J. AHMUTY , JR., (Christopher Simone and
                                               Juan C. Gonzalez on brief) Shaub, Ahmuty, Citrin
                                               & Spratt, LLP, Lake Success, New York.

APPEARING FOR THE APPELLEE:                    P. BENJAMIN DUKE , (John G. Buchanan III, Mari K.
                                               Bonthuis, and Charles Fischette on brief),
                                               Covington & Burling LLP, New York, New York.

       This is an appeal from the judgment of the United States District Court for the Southern

District of New York (Jones, J.) denying petitioner-appellant’s motion to compel arbitration.

UPON DUE CONSIDERATION, it is hereby ORDERED, ADJUDGED, AND DECREED

that the judgment of the district court is AFFIRMED.

       Petitioner-appellant National Union Fire Insurance Company of Pittsburgh, P.A.,

(“National Union”) appeals from the judgment, dated June 11, 2009, of the United States District

Court for the Southern District of New York (Jones, J.), effectuating its May 28, 2009 order

denying petitioner’s motion to compel arbitration. The district court denied the motion on the

ground that National Union waived its right to arbitration. National Union Fire Ins. Co. of

Pittsburgh, P.A. v. NCR Corp., 09-civ-3868 (S.D.N.Y. June 11, 2009). We assume the parties’

familiarity with the facts of the case, its procedural history, and the scope of the issues on appeal.

For the following reasons, we affirm the judgment.

       “[A] party waives its right to arbitration when it engages in protracted litigation that

prejudices the opposing party. . . . [I]n determining whether a party has waived its right to

arbitration, we will consider such factors as (1) the time elapsed from commencement of

litigation to the request for arbitration, (2) the amount of litigation (including any substantive

motions and discovery), and (3) proof of prejudice. There is no bright-line rule, however, for



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determining when a party has waived its right to arbitration: the determination of waiver depends

on the particular facts of each case.” In re Crysen/Montenay Energy Co., 226 F.3d 160, 162-63

(2d Cir. 2000) (quoting PPG Industries, Inc. v. Webster Auto Parts Inc., 128 F.3d 103, 107-08

(2d Cir. 1997)) (brackets omitted). “The key to a waiver analysis is prejudice.” Thyssen, Inc. v.

Calypso Shipping Corp., S.A., 310 F.3d 102, 105 (2d Cir. 2002) (per curiam). “Prejudice as

defined by our cases refers to the inherent unfairness—in terms of delay, expense, or damage to a

party’s legal position—that occurs when the party’s opponent forces it to litigate an issue and

later seeks to arbitrate that same issue.” In re Crysen, 226 F.3d at 162-63 (quoting PPG, 128

F.3d at 107) (brackets omitted). This Court reviews de novo a district court’s decision regarding

whether a party has waived its right to arbitrate, but we review for clear error the factual findings

on which the district court relied. PPG, 128 F.3d at 107.

       First, we agree with the district court’s finding that the issues National Union seeks to

arbitrate were at the heart of the Wisconsin state court action—an action the parties have been

litigating for more than three years. Notwithstanding its exclusion of issues that have been

previously substantively ruled on by the state court, even National Union’s amended motion to

compel arbitration makes plain that National Union seeks to arbitrate a broad array of issues

including those at issue in the state court action. We also agree with the district court’s finding

that National Union’s three-year delay between the commencement of litigation and filing of the

motion to compel arbitration is significant. The amount of litigation, including, inter alia,

discovery and scheduling conferences, motions addressing choice-of-law and various defenses,




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and several motions for summary judgment, demonstrates a substantial commitment to the

judicial forum.

       The remaining question is whether NCR has been prejudiced. See id. at 107-08.

Prejudice is not presumed based on the timing of National Union’s arbitration demand and its

participation in litigation—i.e., the first two prongs of the three-part waiver inquiry—standing

alone. In re Crysen, 226 F.3d at 162-63 (quoting PPG, 128 F.3d at 107-08) (“Incurring legal

expenses inherent in the litigation, without more, is insufficient evidence of prejudice to justify a

finding of waiver.”). This Court has, however, recognized “undue delay and expense” as a factor

to be considered in its prejudice analysis. See e.g., S & R Co. of Kingston v. Latona Trucking,

Inc., 159 F.3d 80, 83, 84 (2d Cir. 1998) (citing Leadertex, Inc. v. Morganton Dyeing & Finishing

Corp., 67 F.3d 20, 25-26 (2d Cir. 1995)); Kramer v. Hammond, 943 F.2d 176, 179 (2d Cir.

1991). We have, additionally, found prejudice where “a party seeking to compel arbitration

engages in discovery procedures not available in arbitration, makes motions going to the merits

of an adversary’s claims, or delays invoking arbitration rights while the adversary incurs

unnecessary delay or expense.” Cotton v. Slone, 4 F.3d 176, 179 (2d Cir.1993) (citations

omitted). Here, defendant has done all three things.

       The particular circumstances of this case show sufficient prejudice resulting from

National Union’s late attempt at initiating arbitration to cause us to conclude that National Union

has waived its right to arbitration notwithstanding the non-waiver provision in the contracts at

issue. National Union has litigated and taken pretrial discovery relating to the same contracts it

now seeks to submit to arbitration, having thereby gained tactical advantage with respect to



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issues it seeks to arbitrate. See In re Crysen, 226 F.3d at 162-63 (quoting PPG, 128 F.3d at 107-

08) (“[P]rejudice as defined by our cases refers to the inherent unfairness—in terms of delay,

expense, or damage to a party’s legal position—that occurs when the party’s opponent forces it

to litigate an issue and later seeks to arbitrate that same issue.”) (emphasis added); cf. Louis

Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d 218, 229 (2d Cir. 2001)

(concluding that the right to arbitrate was not waived where only minimal litigation was

undertaken, consisting of a court appearance and a filing of defenses and cross claims). Invoking

the judicial forum’s authority to obtain depositions, National Union has taken depositions that

likely would be unavailable during arbitration, including fact and expert witness depositions and

third-party depositions, some of which relate to issues sought to be arbitrated. See, e.g., Cotton,

4 F.3d at 180. Finally, National Union has invoked arbitration in the face of adverse rulings on

substantive motions. Id. The resulting prejudice to NCR, including in part NCR’s having

incurred at least some unnecessary delay or expense, id. at 179, compels the conclusion that the

right to arbitration has been waived.

       Regarding the non-waiver provision in the contracts at issue, under this Court’s

jurisprudence, “the presence of the ‘no waiver’ clause does not alter the ordinary analysis

undertaken to determine if a party has waived its right to arbitration.” S & R, 159 F.3d at 86.

That is to say, such a provision is not dispositive. Addressing National Union’s argument, we are

not convinced on the record before us that the district court erred in its analysis by ignoring the

non-waiver provision in the contracts. Rather, in a clear reference to S & R’s standard, the court

indicated that “[t]he Second Circuit has stated [that] the presence of a no-waiver clause doesn’t



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alter the ordinary analysis that one takes to determine if a party has waived its right to arbitration

. . ..” We read the district court as having concluded that the non-waiver clause did not otherwise

alter its determination that the defendant waived its right to arbitrate.

       Regardless, we conclude independently that, notwithstanding the non-waiver provision,

NCR would be prejudiced by National Union’s lengthy participation in multiple aspects of

litigation prior to its demand for arbitration. Cf. id. (observing that “to allow the ‘no waiver’

clause to preclude a finding of waiver would permit parties to waste scarce judicial time and

effort . . .. Further, delay in demanding arbitration until after judicial proceedings are almost

complete permits the losing party to test[ ] the water before taking the swim.”) (internal quotation

marks omitted). We conclude, therefore, that National Union has waived its right to arbitrate

through its repeated, intentional invocation of judicial process, including the use of extensive

discovery likely unavailable in an arbitral proceeding, to resolve questions about the scope of the

insurance policies at issue and the applicability of particular defenses to that insurance coverage.

       Accordingly, the judgment of the district court is AFFIRMED.



                                                       FOR THE COURT:

                                                       Catherine O’Hagan Wolfe, Clerk




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