James V. Kelly; v. Public Utility District No. 2 of Grant County

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JAMES V. KELLY; et al.,
Plaintiffs - Appellees,
v.
PUBLIC UTILITY DISTRICT NO. 2 OF
GRANT COUNTY,
Defendant - Appellant,
And
PORT OF QUINCY, PORT OF
DISTRICT NO. 1 OF GRANT COUNTY;
et al.,
Defendants.
No. 12-35639
D.C. No. 2:11-cv-023-JLQ
MEMORANDUM*
JAMES v. KELLY; et al.,
Plaintiffs - Appellees,
V.
PUBLIC UTILITY DISTRICT NO. 2 OF
GRANT COUNTY and CRESCENT
BAR INC.,
Defendants,
No. 12-35700
D.C. No. 2:11-cv-023-JLQ
FILED
JAN 13 2014
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.

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And
PORT OF QUINCY, PORT OF
DISTRICT NO. 1 OF GRANT COUNTY,
Defendant - Appellant.
Appeal from the United States District Court
for the Eastern District of Washington
Justin L. Quackenbush, Senior District Judge, Presiding
Argued and Submitted November 6, 2013
Seattle, Washington
Before: SCHROEDER and PAEZ, Circuit Judges, and BENITEZ, District Judge.**
The Public Utility District No. 2 of Grant County (PUD) and Port of Quincy,
Port District No. 1 of Grant County (Port) filed an interlocutory appeal of the
district court’s denial of their joint Motion to Compel Arbitration. We have
jurisdiction pursuant to 28 U.S.C. § 1291 and 9 U.S.C. § 16(a), and we affirm.1
The district court properly determined that both PUD and Port waived their
right to compel arbitration. A party seeking to prove a waiver of arbitration must
demonstrate: (1) knowledge of an existing right to compel arbitration; (2) acts
** The Honorable Roger T. Benitez, United States District Judge for the
Southern District of California, sitting by designation.
1 Because the parties are familiar with the facts and procedural history, we
do not restate them here except as necessary to explain our disposition.
2

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inconsistent with that existing right; and (3) prejudice to the party opposing
arbitration resulting from such inconsistent acts. Fisher v. A.G. Becker Paribus
Inc., 791 F.2d 691, 694 (9th Cir. 1986).
PUD and Port were aware of the arbitration clause, and could have
compelled arbitration of this dispute at the outset of this litigation. Plaintiffs
clearly raised claims under the 1979 lease containing the arbitration clause, both
directly and as third party beneficiaries. Particularly given the broad language of
the lease, it was not necessary for a dispute to arise between signatories to allow
PUD and Port to demand arbitration of this matter. There is no reason to
distinguish between Plaintiffs and Crescent Bar Inc., which Plaintiffs own and
control.
PUD and Port waited eleven months after the lawsuit was filed to demand
arbitration, actively litigating the case in district court. The parties conducted
discovery and litigated motions, including a preliminary injunction and a motion to
dismiss. Such activity is inconsistent with preserving the right to compel
arbitration. See Van Ness Townhouses v. Mar Indus. Corp., 862 F.2d 754, 759 (9th
Cir. 1988) (holding that a party’s extended silence and much-delayed demand for
arbitration indicated a conscious decision to seek judicial judgment of the merits of
arbitrable claims) (internal citation omitted).
3

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We agree with the district court that appellees would be prejudiced by
compelling them to arbitrate their claims. A late shift to an arbitrator would force
the parties to bear the expense of educating arbitrators and threaten to require the
appellees to relitigate matters decided by the district judge. It would waste the
time and money spent by the appellees in federal court.
A party that is aware that it has a right to compel arbitration of a dispute
cannot wait to exercise that right until the parties have expended a significant
amount of time and money to litigate that dispute in federal court. This is
especially true where the untimely exercise of an arbitration clause would allow a
party to evade future rulings of a federal judge which it fears will be unfavorable.
AFFIRMED.
4

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