Village of Schaumburg v. Permasteelisa North America

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 24-1168
VILLAGE OF SCHAUMBURG, ILLINOIS,
Plaintiff-Appellant,
v.
P
ERMASTEELISA NORTH AMERICA CORP.,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 22 CV 601 — Manish S. Shah, Judge.
____________________
ARGUED SEPTEMBER 26, 2024 — DECIDED AUGUST 18, 2026
____________________
Before EASTERBROOK, ST. EVE, and PRYOR, Circuit Judges.
EASTERBROOK, Circuit Judge. The Village of Schaumburg
owns the Renaissance Schaumburg Hotel and Convention
Center. Schaumburg believes that the convention center’s ex-
terior walls are defective. In February 2022 it sued several en-
tities for fraud, breach of warranty, and products liability. In
November 2022 it added Permasteelisa North America, one of
the subcontractors, as an additional defendant. Eight months
later the Village told the court that it wants to arbitrate its

2 No. 24-1168
dispute with Permasteelisa. It had not asked for that relief in
its complaint, nor had it told Permasteelisa before filing suit
that it wanted to arbitrate. Its belated request for arbitration
brought the suit to a halt.
The district court denied the motion to order arbitration.
It concluded that, by filing suit against Permasteelisa, the Vil-
lage presumptively surrendered whatever right to arbitrate it
may have possessed. See Smith v. GC Services L.P., 907 F.3d
495, 499 (7th Cir. 2018). (It is not clear that the Village ever had
such a right. The arbitration clause is in a contract between
Permasteelisa and Walsh Construction, the general contrac-
tor. The Village contends that it can take advantage of this
clause as assignee of Permasteelisa’s warranties to Walsh.)
The presumption of waiver became a holding of waiver
because the Village waited many months after filing suit. It
asserted that suit was necessary to avoid the running of the
statute of limitations, to which the district court replied, in es-
sence, that, if this supplied the need for suit, then the Village
should have requested arbitration at the same time and cer-
tainly no later than January 2023, when Permasteelisa filed a
motion to dismiss. The combination of suit plus delay meant
that the Village “has acted inconsistently with the right to ar-
bitrate”, waiving whatever entitlement it might have had.
Brickstructures, Inc. v. Coaster Dynamics, Inc., 952 F.3d 887, 891
(7th Cir. 2020).
The first question we must address on the Village’s appeal,
see 9 U.S.C. §16(a)(1), is the standard of appellate review. The
Village maintains that our review is plenary (de novo), while
Permasteelisa contends that it is deferential. Both positions
find support in this court’s decisions. The court recently re-
solved the intra-circuit conflict in favor of deferential review

No. 24-1168 3
(unless legal issues predominate). See Moore v. Club Exploria,
LLC, No. 25-2721 (7th Cir. Aug. 18, 2026). We review today’s
dispute for abuse of discretion under Moore’s approach.
The district court did not commit clear error in concluding
that the Village waived whatever right it possessed to arbi-
trate with Permasteelisa. The Village filed suit without asking
that the dispute be sent to arbitration. Two months later Per-
masteelisa moved to dismiss the complaint. The Village still
did not seek arbitration, perhaps hoping that it would receive
a favorable ruling on the merits. Only after letting the district
judge spend six months working on Permasteelisa’s motion
did Schaumburg then declare that the dispute does not belong
in court. The judge understandably thought that the Village
was playing games. Although the Village did not wait until
after receiving an adverse decision before asking to opt out—
that’s one common situation in which courts find waiver by
delay—it may have concluded that, as time passed, Per-
masteelisa’s motion to dismiss seemed more likely to prevail.
Morgan v. Sundance, Inc., 596 U.S. 411 (2022), holds that
prejudice from delay is not essential to waiver by conduct.
Still, the Village insists, “the law’s overwhelming policy fa-
voring arbitration” (Br. 6) compels a district court to resolve
any doubt in favor of arbitration. But where can we find this
“overwhelming policy”? Not in the Federal Arbitration Act,
which requires courts to treat arbitration agreements just like
other contracts. 9 U.S.C. §2. “[A] court must hold a party to its
arbitration contract just as the court would to any other kind.
But a court may not devise novel rules to favor arbitration
over litigation. If an ordinary procedural rule—whether of
waiver or forfeiture or what-have-you—would counsel
against enforcement of an arbitration contract, then so be it.

4 No. 24-1168
The federal policy is about treating arbitration contracts like
all others, not about fostering arbitration.” Morgan, 596 U.S. at
418 (citation omitted). The Supreme Court has dashed any
contention that district judges must favor arbitration when
making decisions about waiver by conduct.
Schaumburg has one final argument, based on §12.2 of the
contract between Permasteelisa and Walsh:
Severability and Waiver. The partial or complete invalidity of any
one or more provisions of this Agreement shall not affect the va-
lidity or continuing force and effect of any other provision. The
failure of either party hereto to insist, in any one or more in-
stances, upon the performance of any of the terms, covenants or
conditions of this Agreement, or to exercise any right herein, shall
not be construed as a waiver or relinquishment of such term, cov-
enant, condition or right as respects further performance.
As the Village sees things, delay in asking the court to refer a
dispute to arbitration is a “failure to insist” on enforcing part
of the contract and “shall not be construed as a waiver or re-
linquishment” of arbitration.
Ye t the effects of conduct (or absence of conduct) in federal
court are decided under federal procedural law and not under
a state’s law of contract. This is an application of the norm
that, in cases under the diversity jurisdiction, federal rules
and practices govern conduct of the litigation while state law
governs substance. See, e.g., Shady Grove Orthopedic Associates,
P.A. v. Allstate Insurance Co., 559 U.S. 393 (2010); Gasperini v.
Center for Humanities, Inc., 518 U.S. 415 (1996); Mayer v. Gary
Partners & Co., 29 F.3d 330 (7th Cir. 1994). Morgan is among
the many decisions applying federal procedural norms to de-
cide whether conduct in federal court waives a right.

No. 24-1168 5
Federal judges are entitled to protect themselves, and liti-
gants in the many other cases awaiting judicial attention, from
manipulation. People cannot by contract create a privilege to
delay federal suits or ignore generally applicable procedures,
such as the need to make timely requests to arbitrate. Likewise
parties cannot agree by contract to replace notice-pleading
standards under Fed. R. Civ. P. 8 with code pleading. At least
four courts of appeals have held that an anti-waiver clause in
a contract does not limit a federal judge’s discretion about
how to respond to delay or other strategic behavior in litiga-
tion. See Johnson Associates Corp. v. HL Operating Corp., 680
F.3d 713, 717 (6th Cir. 2012); Gray Holdco, Inc. v. Cassady, 654
F.3d 444, 452–54 (3d Cir. 2011); Republic Insurance Co. v. PAICO
Receivables, LLC, 383 F.3d 341, 348 (5th Cir. 2004); S&R Co. of
Kingston v. Latona Trucking, Inc., 159 F.3d 80, 85–86 (2d Cir.
1998). We agree with those decisions.
A
FFIRMED