Citibank v. Stok & Assoc.
(11th Cir. [FL], July 20, 2010)
In an action for breach of contract and breach of fiduciary duty by a law firm against a bank, the bank sought to compel arbitration pursuant to the terms of the contract governing their banking relationship. The law firm had deposited a client’s cashier’s check into its account with the bank. After the bank accepted the check and made the funds available, it discovered that the check was counterfeit and restricted access to the funds. The law firm subsequently filed suit in state court for its alleged damages resulting from the banks actions. Thereafter, the bank served its answer in state court which made no reference to any request for arbitration or the arbitration clause in the contract. In the week after the bank filed its answer, the law firm served the bank with an offer of judgment, made a demand for the production of documents, and filed a reply to the bank’s answer. The state court also set a trial date. Twenty-four days after serving its answer, the bank sent the law firm a letter requesting arbitration pursuant to the terms of the contract. After the request for arbitration was rejected, the bank filed a motion in federal court to compel arbitration. The trial court denied the bank’s motion. It held that the bank’s right to elect arbitration was waived when the bank filed its answer, thereby acting inconsistently with its right to compel arbitration. The 11th Circuit appellate court reversed the trial court’s decision. It held that while the bank’s participation in the state court action may have been sufficiently substantial to demonstrate that it did not intend to avail itself of the arbitration provision, the law firm failed to demonstrate that it was prejudiced by the bank’s participation during the brief twenty-four day period. The court recognized that Circuit courts have declined to find waiver in cases with similar or more extensive litigation activity and even longer delays.
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Bryan Richmond and Joanna Roberto
https://www.goldbergsegalla.com/attorneys/Richmond.html
https://www.goldbergsegalla.com/attorneys/Roberto.html
Case provided courtesy of Lexis