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One deposition taken in matter designated for arbitration may waive right to arbitration

In the matter of HCW, et al v HCW et al, the NC Court of Appeals has ruled that the taking of a deposition (utilization of discovery) in a matter where the legal dispute can be arbitrated works as a waiver of the arbitration process.

The HCW opinion

  "As a result, North Carolina’s
waiver-related jurisprudence generally establishes that, in the
event that a party makes material use of discovery procedures
available in ordinary civil litigation that are not available in
arbitration, that party has waived the right to insist that
claims that were addressed during the discovery process be
submitted to arbitration.

The record in this case clearly establishes that, during
the deposition of Plaintiff Drake, Defendants questioned him for
approximately one hour concerning the matters that underlie the
relevant claims. The questioning of Plaintiff Drake concerning
the claims which Defendants now seek to have arbitrated occupied
some 48 pages of the deposition transcript. During the course
of this portion of Plaintiff Drake’s deposition, Defendants
“prompted [Mr. Drake] to admit certain facts regarding the
[claims].” Capps, 184 N.C. App. at 272, 645 S.E.2d at 829.
Although the exact amount of monetary cost that Plaintiff Drake -24-
incurred during the portion of the deposition that addressed the
relevant claims is not spelled out in the record, the Supreme
Court’s description of the showing needed in order to establish
the right to arbitration by engaging in discovery does not
include a cost-related component. Servomation Corp., 316 N.C. at
544, 342 S.E.2d at 854 (stating that a waiver of the right to
have a claim submitted to arbitration can be waived if the party
seeking arbitration “makes use of judicial discovery procedures
not available in arbitration”).
Thus, we conclude that the
trial court’s determination that Defendants waived their right
to have the relevant claims submitted to arbitration by engaging
in discovery that would not have been available as a matter of
right during the arbitration process has adequate support in
both the trial court’s findings and the record..."

If you have a matter that has to be filed in court, you should immediately seek a stay of proceedings and an order for arbitration. Further, you should not engage in formal discovery and if your opposing party attempts to do so, you should seek an order of protection.

Chris Nichols 1.800.906.5984