U.S. Bank National Association v. Christopher J. Klein

2024 WI App 7

COURT OF APPEALS OF WISCONSIN
PUBLISHED OPINION

Case No.: 2022AP920

Complete Title of Case:

U.S. BANK NATIONAL ASSOCIATION,

PLAINTIFF-RESPONDENT,

V.

CHRISTOPHER J. KLEIN,

DEFENDANT-APPELLANT.

Opinion Filed: January 25, 2024
Submitted on Briefs: January 20, 2023

JUDGES: Kloppenburg, P.J., Graham, and Nashold, JJ.
Concurred:
Dissented:

Appellant
ATTORNEYS: On behalf of the defendant-appellant, the cause was submitted on the
briefs of Briane F. Pagel of Lawton Cates, S.C., Madison.

Respondent
ATTORNEYS: On behalf of the plaintiff-respondent, the cause was submitted on the
brief of Marci V. Kawski, Lisa M. Lawless, and Natalia S. Kruse of
Husch Blackwell LLP, Madison.
2024 WI App 7

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
January 25, 2024
A party may file with the Supreme Court a
Samuel A. Christensen petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10 and
RULE 809.62.

Appeal No. 2022AP920 Cir. Ct. No. 2021CV148

STATE OF WISCONSIN IN COURT OF APPEALS

U.S. BANK NATIONAL ASSOCIATION,

PLAINTIFF-RESPONDENT,

V.

CHRISTOPHER J. KLEIN,

DEFENDANT-APPELLANT.

APPEAL from an order of the circuit court for Jefferson County:
BENNETT J. BRANTMEIER, Judge. Reversed and cause remanded with
directions.

Before Kloppenburg, P.J., Graham, and Nashold, JJ.

¶1 NASHOLD, J. U.S. Bank National Association (“U.S. Bank”) sued
Christopher Klein to collect a debt owed pursuant to a contract that contains an
arbitration provision. After litigating the case for a year in circuit court, U.S. Bank
No. 2022AP920

moved to compel arbitration. Klein countered that U.S. Bank waived its right to
arbitrate through its litigation conduct, an issue that the circuit court concluded must
be decided in arbitration.

¶2 On appeal, Klein argues that the circuit court should have decided the
waiver-by-litigation-conduct issue, while U.S. Bank argues that the court properly
referred the issue to the arbitrator. Although there is not any Wisconsin case law
regarding the proper forum for deciding whether a party has waived the right to
arbitrate through its litigation conduct, we find persuasive the overwhelming weight
of authority from other jurisdictions, which we construe to be consistent with
Wisconsin law. We thus conclude that, unless the parties’ arbitration agreement
clearly and unmistakably provides otherwise, the waiver-by-litigation-conduct issue
is for the court to decide. In other words, there is a presumption that this issue will
be resolved in court. Here, because the arbitration provision does not express an
intention that an arbitrator decide the issue, we reverse and remand to the circuit
court to determine whether U.S. Bank waived its right to arbitrate through its
litigation conduct.

BACKGROUND

¶3 The following facts are undisputed unless otherwise noted.

¶4 In 2008, Klein purchased a boat and trailer1 and signed a Retail
Installment Contract and Security Agreement (the “Contract”), which required him
to make monthly payments. At some point, Klein stopped making those payments.

1
U.S. Bank’s complaint states that Klein purchased a trailer, and now on appeal, U.S.
Bank states that Klein purchased a boat. From our review of the record, it appears that Klein
purchased a boat and trailer as a package. However, what exactly Klein purchased is not legally
relevant for purposes of this appeal.

2
No. 2022AP920

¶5 The Contract was assigned to U.S. Bank. The Contract contains an
arbitration provision, which states:

Any claim, dispute or controversy … arising from or
relating to (a) the credit or services offered or provided to
you, (b) the actions of you, us or third parties or (c) the
validity of this arbitration provision … must, after an
election by you or us, be resolved by binding arbitration ….

¶6 The parties dispute whether U.S. Bank repossessed the boat and trailer
or Klein voluntarily surrendered them, but in any event, U.S. Bank sold the boat and
trailer at private sale in 2015.

¶7 In April 2021, U.S. Bank sued to recover the balance on Klein’s
account. U.S. Bank alleges that after the sale of the boat and trailer, there was a
deficiency of $10,277.50.

¶8 Klein initially appeared pro se and submitted a letter in response to
the complaint. By August 2021, he had retained counsel, and in November 2021,
he moved to amend his responsive pleading. Klein’s amended pleading includes
affirmative defenses: that U.S. Bank’s claim may be barred by U.S. Bank’s
unreasonable noncommercial actions, by the statute of limitations, and by laches;
that U.S. Bank opted into the Wisconsin Consumer Act; and that U.S. Bank failed
to mitigate its damages. Klein’s amended pleading also includes counterclaims:
that U.S. Bank illegally repossessed the boat and trailer; that U.S. Bank violated
WIS. STAT. § 421.108’s obligation of good faith; and that U.S. Bank illegally
attempted to collect the alleged debt in violation of WIS. STAT. § 427.104 (2021-

3
No. 2022AP920

22).2 At a hearing in January 2022, the circuit court granted Klein’s motion to
amend his responsive pleading.3

¶9 In April 2022, a year after commencing litigation, U.S. Bank moved
to compel arbitration. Klein objected and argued that, through its litigation conduct,
U.S. Bank waived its right to arbitrate. The circuit court granted U.S. Bank’s motion
to compel arbitration and dismissed the case without prejudice. The court concluded
that under First Weber Group, Inc. v. Synergy Real Estate Group, LLC, 2015 WI
34, 361 Wis. 2d 496, 860 N.W.2d 498, the question of whether U.S. Bank had
waived its right to arbitrate was for the arbitrator to decide.

¶10 Klein appeals.

DISCUSSION

I. Standard of review.

¶11 U.S. Bank’s motion to compel arbitration involves contract
interpretation, which we review de novo. See Cirilli v. Country Ins. & Fin. Servs.,
2009 WI App 167, ¶10, 322 Wis. 2d 238, 776 N.W.2d 272. Which forum—court
or arbitrator—should decide the waiver-by-litigation-conduct issue is likewise a
question of law that we review de novo. See Ball v. District No. 4, Area Bd. of

2
All references to the Wisconsin Statutes are to the 2021-22 version.
3
Klein did not submit a proposed written order following the January 7, 2022 hearing,
neither party requested a transcript, and there is thus no document in the record that reflects what
the circuit court decided at the hearing. However, the parties do not dispute that the court granted
Klein’s motion to amend his responsive pleadings.

4
No. 2022AP920

Vocational, Tech. & Adult Educ., 117 Wis. 2d 529, 537, 345 N.W.2d 389 (1984)
(stating that questions of law must be reviewed independently).

II. Whether U.S. Bank waived its right to arbitrate through its litigation conduct
must be decided by the circuit court.

¶12 The Wisconsin Arbitration Act reflects Wisconsin’s “policy of
encouraging arbitration as an alternative to litigation.” Kemp v. Fisher, 89 Wis. 2d
94, 100, 277 N.W.2d 859 (1979).4 In relevant part, the Act provides:

If any suit or proceeding be brought upon any issue referable
to arbitration under an agreement in writing for such
arbitration, the court in which such suit is pending, upon
being satisfied that the issue involved in such suit or
proceeding is referable to arbitration under such an
agreement, shall on application of one of the parties stay the
trial of the action until such arbitration has been had in
accordance with the terms of the agreement, providing the
applicant for the stay is not in default in proceeding with
such arbitration.

4
We note that, in his opening brief, Klein states that “[b]oth federal and state decisions
are applicable to this matter, as Wisconsin’s rules regarding arbitration waiver are identical to those
applied by federal courts.” He also argues that, under both state and federal law, courts should
decide waiver-by-litigation-conduct issues, and he extensively argues that the Wisconsin case
relied upon by the circuit court—First Weber Group, Inc. v. Synergy Real Estate Group, LLC,
2015 WI 34, 361 Wis. 2d 496, 860 N.W.2d 498—is distinguishable. However, Klein switches
gears in his reply brief, arguing for the first time that, pursuant to the arbitration provision, federal
law applies and, therefore, First Weber does not. We do not consider this argument because it was
not raised before the circuit court and because on appeal it was raised for the first time in Klein’s
reply brief. See Northbrook Wis., LLC v. City of Niagara, 2014 WI App 22, ¶20, 352 Wis. 2d
657, 843 N.W.2d 851 (“Arguments raised for the first time on appeal are generally deemed
forfeited.”); State v. Mata, 230 Wis. 2d 567, 576 n.4, 602 N.W.2d 158 (Ct. App. 1999) (“We do
not address issues raised for the first time in a reply brief.”). Accordingly, we apply Wisconsin law
to the issues before us on appeal. However, we further note that the Wisconsin Arbitration Act and
the Federal Arbitration Act are substantively identical, and Wisconsin courts, when interpreting the
Wisconsin Arbitration Act, routinely rely on federal cases interpreting the Federal Arbitration Act.
Riley v. Extendicare Health Facs., Inc., 2013 WI App 9, ¶18 n.4, 345 Wis. 2d 804, 826 N.W.2d
398.

5
No. 2022AP920

WIS. STAT. § 788.02.5

¶13 A party may waive the right to arbitrate recognized by WIS. STAT.
§ 788.02. Meyer v. Classified Ins. Corp. of Wis., 179 Wis. 2d 386, 392, 507
N.W.2d 149 (Ct. App. 1993). “[A]ny conduct of the parties inconsistent with the
notion that they treated the arbitration provision as in effect, or any conduct which
might be reasonably construed as showing that they did not intend to avail
themselves of such provision, may amount to a waiver thereof.” City of Madison
v. Frank Lloyd Wright Found., 20 Wis. 2d 361, 387, 122 N.W.2d 409 (1963)
(quoting Annotation, Waiver of Arbitration Provision in Contract, 117 A.L.R. 301,
II.a. (1938) (emphasis omitted)).

¶14 The parties do not dispute that U.S. Bank’s claims and Klein’s
counterclaims fall under the Contract’s arbitration provision. Rather, they dispute
whether U.S. Bank, through its litigation conduct, waived its right to arbitrate, and

5
Klein assumes that WIS. STAT. § 788.03 applies. It does not. “Sections 788.02 and
788.03, Stats., address two different circumstances.” J.J. Andrews, Inc. v. Midland, 164 Wis. 2d
215, 224-25, 474 N.W.2d 756 (Ct. App. 1991). Whereas § 788.02 “allows one of the parties to
move to stay a pending trial to permit arbitration,” § 788.03 “addresses the circumstance where a
lawsuit has not been commenced” by “allow[ing] a party aggrieved by an alleged failure, neglect
or refusal of another to perform arbitration to petition any court for an order to arbitrate.” Id.
(emphasis omitted). We have interpreted J.J. Andrews to say that “the special procedure for
compelling arbitration contained in § 788.03 is not available when a lawsuit has already been
commenced.” Payday Loan Store of Wis. Inc. v. Krueger, 2013 WI App 25, ¶9, 346 Wis. 2d 237,
828 N.W.2d 587. Here, because an action had already been commenced in the circuit court,
§ 778.03 does not apply.

We further note that although WIS. STAT. § 788.02 appears to contemplate that proceedings
will be stayed while the parties arbitrate, here, the circuit court dismissed the action without
prejudice. The federal circuit courts of appeals are divided on the issue of whether, under the
Federal Arbitration Act’s analogue to § 788.02, district courts retain discretion to dismiss actions
after all claims have been referred to arbitration. See generally Katz v. Cellco P’ship, 794 F.3d
341, 344-45 (2d Cir. 2015) (explaining the circuit split). Citing federal case law, U.S. Bank argued
before the circuit court that the proceedings should be dismissed because all of the claims in the
action were referable to arbitration. The circuit court dismissed the action without stating its
reasoning for doing so, but presumably the court agreed with U.S. Bank. We need not address the
propriety of dismissing the action rather than staying the proceedings, and we only mention that
the action was dismissed rather than stayed to say that § 788.02 applies notwithstanding.

6
No. 2022AP920

whether the waiver-by-litigation-conduct issue should be determined by the circuit
court or by an arbitrator. Klein argues that the court should decide the waiver-by-
litigation-conduct issue. U.S. Bank argues that the court correctly concluded that
the arbitrator should decide the issue, relying primarily on First Weber, 361 Wis. 2d
496, the same precedent upon which the circuit court relied.

¶15 First Weber does not specifically address which forum should decide
the waiver-by-litigation-conduct issue. There, the arbitration agreement at issue
imposed a 180-day time limit for filing arbitration requests. Id., ¶¶9, 18. First
Weber filed a petition to compel arbitration under WIS. STAT. § 788.03, which the
circuit court denied because it found that First Weber had filed its request to arbitrate
outside the 180-day limit. Id., ¶18. The issue raised on appeal was “whether the
timeliness of the arbitration request should be decided by a court or in arbitration.”
Id., ¶21.

¶16 However, First Weber does address generally which issues should
presumptively be decided by circuit courts, and which should presumptively be
decided by arbitrators. Id., ¶¶34-46. In addressing this issue, the First Weber court
distinguished between “substantive arbitrability” and “procedural arbitrability.” Id.
“‘Substantive arbitrability refers to whether the dispute involves a subject matter
which the parties have contracted to submit to arbitration’”; in contrast,
“‘[p]rocedural arbitrability concerns issues such as whether certain procedures
apply to a particular dispute, whether such procedures were followed or excused,
and whether unexcused failure to follow procedure avoids the duty to arbitrate.’”
Id., ¶34 (quoting 1 LARRY EDMONSON, DOMKE ON COMMERCIAL ARBITRATION
§ 15:4 (3d ed. 2014)). The distinction is significant because “[i]n an action to
compel arbitration, a court’s role generally is limited to determining the question of
substantive arbitrability, unless the parties specifically agreed otherwise.” Id., ¶36.

7
No. 2022AP920

Conversely, “[i]ssues of procedural arbitrability are to be resolved during
arbitration, rather than by a court, unless the parties agreed otherwise.” Id., ¶37.

¶17 The First Weber court, quoting language from U.S. Supreme Court
decisions, listed “waiver” as a matter of procedural arbitrability: “Issues of
procedural arbitrability include claims of waiver, delay, or a like defense to
arbitrability.” Id. (internal quotation marks omitted). U.S. Bank contends that this
language controls the outcome here, and this language is presumably what the
circuit court relied on in referring the waiver-by-litigation-conduct issue to
arbitration.

¶18 For several reasons, we conclude that this language does not refer to
waiver by litigation conduct, which is an issue that should presumptively be decided
by courts rather than in arbitration.

¶19 At the outset, we note that several federal courts of appeals have
addressed whether the waiver-by-litigation-conduct issue should be decided by the
court or by the arbitrator when the parties have not expressly agreed to resolve the
issue in a particular forum. As we explain in detail below, the U.S. Supreme Court
has generally listed “waiver” as an issue that is presumptively for an arbitrator to
decide. However, the vast majority of federal courts addressing the issue more
specifically have concluded that the court should presumptively decide whether a
party has waived the right to arbitrate through its litigation conduct. See, e.g., Marie
v. Allied Home Mortg. Corp., 402 F.3d 1, 9-15 (1st Cir. 2005) (“The proper
presumption … is that the waiver[-by-litigation-conduct] issue is for the court and
not the arbitrator .… A shifting of the issue to the arbitrator will only be found
where there is ‘clear and unmistakable’ evidence of such an intent in the arbitration
agreement.” (quoted source omitted)); see also Ehleiter v. Grapetree Shores, Inc.,

8
No. 2022AP920

482 F.3d 207, 215-22 (3d Cir. 2007); Vine v. PLS Fin. Servs., Inc., 689 F. App’x
800, 802-03 (5th Cir. 2017) (per curiam); International Energy Ventures Mgmt.,
L.L.C. v. United Energy Grp., Ltd., 999 F.3d 257, 263-64 (5th Cir. 2021) (endorsing
Vine’s reasoning); JPD, Inc. v. Chronimed Holdings, Inc., 539 F.3d 388, 393-94
(6th Cir. 2008); Martin v. Yasuda, 829 F.3d 1118, 1122-24 (9th Cir. 2016); Grigsby
& Assocs., Inc. v. M Sec. Inv., 664 F.3d 1350, 1352-54 (11th Cir. 2011).6 We are
persuaded by these courts’ reasoning and reach the same conclusion, which, as we
now explain, is consistent with Wisconsin law.7

¶20 We start by explaining where the language that our supreme court
quoted in First Weber originates. In First Weber, the court found two U.S. Supreme
Court cases “highly persuasive.” First Weber, 361 Wis. 2d 496, ¶45. The First

6
A qualification to what otherwise appears to be a consensus among the federal circuit
courts of appeals is the Eighth Circuit’s decision in National American Insurance Co. v.
Transamerica Occidental Life Insurance Co., 328 F.3d 462 (8th Cir. 2003). There, however, the
alleged waiver was based on conduct in prior arbitration, rather than in litigation, id. at 463, and
courts have distinguished it on that basis, see, e.g., Sitzer v. National Association of Realtors, 12
F.4th 853, 856 (8th Cir. 2021); Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 219-21 (3d Cir.
2007); Parler v. KFC Corp., 529 F. Supp. 2d 1009, 1014 (D. Minn. 2008).

At least one federal circuit court of appeals has concluded that the waiver-by-litigation-
conduct issue is presumptively for a court to decide without addressing language from the U.S.
Supreme Court decisions that generally identifies “waiver” as a matter of procedural arbitrability.
See Meyer v. Uber Techs., Inc., 868 F.3d 66, 80-81 (2d Cir. 2017).
7
We note that the vast majority of state courts that have addressed the issue have also
concluded that the issue belongs in court, and that this is consistent with the U.S. Supreme Court
opinions that generally identify “waiver” as a matter of procedural arbitrability. See, e.g., Ocwen
Loan Servicing, LLC v. Washington, 939 So. 2d 6, 11-15 (Ala. 2006); Radil v. National Union
Fire Ins. Co. of Pittsburg, PA, 233 P.3d 688, 693-95 (Colo. 2010); Principal Invs. Inc. v.
Harrison, 366 P.3d 688, 693-95 (Nev. 2016); American Gen. Home Equity, Inc. v. Kestel, 253
S.W.3d 543, 550-53 (Ky. 2008); Perry Homes v. Cull, 258 S.W.3d 580, 587-89 (Tex. 2008); Good
Samaritan Coffee Co. v. LaRue Distrib., Inc., 748 N.W.2d 367, 372-75 (Neb. 2008), overruled on
other grounds by Kingery Constr. Co. v. 6135 O St. Car Wash, LLC, 979 N.W.2d 762 (Neb. 2022);
Hong v. CJ CGV Am. Holdings, Inc., 166 Cal. Rptr. 3d 100, 107-15 (Ct. App. 2013); Palmcrest
Homes of Tampa Bay, LLC v. Bank of Am., N.A., 67 So. 3d 1169, 1173 (Fla. Dist. Ct. App. 2011).

9
No. 2022AP920

Weber court relied on those cases—Howsam v. Dean Witter Reynolds, Inc., 537
U.S. 79 (2002), and BG Group PLC v. Republic of Argentina, 572 U.S. 25
(2014)—to distinguish issues of procedural arbitrability from issues of substantive
arbitrability. First Weber, 361 Wis. 2d 496, ¶37. The language in First Weber that
U.S. Bank highlights, and that the circuit court presumably relied on, quotes BG
Group as saying that “waiver” is an issue of procedural arbitrability that is
presumptively for an arbitrator to decide. First Weber, 361 Wis. 2d 496, ¶37.8 The
U.S. Supreme Court said the same thing in Howsam twelve years earlier.9 Howsam,
537 U.S. at 84. In both instances, the Court relies on the same authority: Moses H.
Cone Memorial Hosp. v. Mercury Construction Corp., 460 U.S. 1 (1983). There,
the Court stated that “as a matter of federal law, any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration, whether the problem at
hand is the construction of the contract language itself or an allegation of waiver,
delay, or a like defense to arbitrability.” Id. at 24-25. Understood in context, the
language from these cases does not refer to the specific issue of whether a party has
waived its contractual right to enforce an arbitration agreement based on its
litigation conduct.

¶21 Indeed, neither BG Group, Howsam, nor Moses H. Cone Memorial
Hospital addresses the waiver-by-litigation-conduct issue. In BG Group, at issue

8
In BG Group, the U.S. Supreme Court stated that “courts presume that the parties intend
arbitrators, not courts, to decide disputes about the meaning and application of particular procedural
preconditions for the use of arbitration. These procedural matters include claims of ‘waiver, delay,
or a like defense to arbitrability.’” BG Grp. PLC v. Republic of Argentina, 572 U.S. 25, 34-35
(2014) (citation omitted).
9
In Howsam, the U.S. Supreme Court stated that “procedural questions which grow out
of the dispute and bear on its final disposition are presumptively not for the judge, but for an
arbitrator, to decide. So, too, the presumption is that the arbitrator should decide allegation[s] of
waiver, delay, or a like defense to arbitrability.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S.
79, 84 (2002) (alteration in original; emphasis, citations, and internal quotation marks omitted).

10
No. 2022AP920

was whether the court or an arbitrator “bears primary responsibility for interpreting
and applying” a “local [court] litigation requirement” contained in an arbitration
provision. BG Grp., 572 U.S. at 29. In Howsam, the issue presented was whether
the applicability of a time limit imposed by the arbitrating forum was for an
arbitrator or a judge to decide. Howsam, 537 U.S. at 81-82. And in Moses H. Cone
Memorial Hospital, the Court was analyzing, in a federal action seeking to compel
arbitration, whether abstention was appropriate, due to parallel litigation in state
court, pursuant to Colorado River Water Conservation District v. United States,
424 U.S. 800 (1976). Moses H. Cone Mem’l Hosp., 460 U.S. at 23-24. The
“waiver” at issue in the state court proceedings was not based on litigation conduct,
but rather on delay in seeking to arbitrate claims. Id. at 5-7.

¶22 Because these cases do not involve waiver by litigation conduct, and
because “waiver” can have different meanings, federal courts have not construed
these U.S. Supreme Court cases to say that the waiver-by-litigation-conduct issue
should be decided by an arbitrator. See, e.g., Ehleiter, 482 F.3d at 217-19 (“[T]he
Supreme Court did not intend its pronouncement[] in Howsam … to upset the
‘traditional rule’ that courts, not arbitrators, should decide the question of whether
a party has waived its right to arbitrate by actively litigating the case in court.…
Properly considered within the context of the entire [Howsam] opinion, … we
believe it becomes clear that the Court was referring only to waiver, delay, or like
defenses arising from non-compliance with contractual conditions precedent to
arbitration, such as the … time limit rule at issue in that case, and not to claims of
waiver based on active litigation in court.”); see also N&D Fashions, Inc. v. DHJ
Indus., Inc., 548 F.2d 722, 728 (8th Cir. 1976) (explaining that “waiver” can mean
waiver by litigation conduct or, alternatively, be used “in the sense of ‘laches’ or

11
No. 2022AP920

‘estoppel’”); Marie, 402 F.3d at 14 n.9 (noting that “other doctrines,” “such as
laches,” “are sometimes (erroneously) referred to as waiver”).10

¶23 We similarly conclude that, understood in context, when Howsam and
BG Group identified “waiver” as a matter of procedural arbitrability to be decided
by an arbitrator, they were not referring to waiver by litigation conduct. This
conclusion is consistent with our supreme court’s reliance on these opinions in First
Weber, where defenses of timeliness and estoppel were identified as matters of
procedural arbitrability to be determined in arbitration, and where waiver by
litigation conduct was not at issue. See First Weber, 361 Wis. 2d 496, ¶49.

¶24 This conclusion is also consistent with Wisconsin law in that, both
before and after Howsam, BG Group, and First Weber, Wisconsin circuit courts
have routinely decided, and we have routinely reviewed, the waiver-by-litigation-
conduct issue. See, e.g., J.J. Andrews, Inc. v. Midland, 164 Wis. 2d 215, 221-24,
474 N.W.2d 756 (Ct. App. 1991); Meyer, 179 Wis. 2d at 392-99; Jacob v. West
Bend Mut. Ins. Co., 203 Wis. 2d 524, 539-40, 553 N.W.2d 800 (Ct. App. 1996);
Velocity Invs., LLC v. Ziegler, No. 2021AP556, unpublished slip op. ¶¶9-13 (WI
App Dec. 8, 2021). To be sure, in our review of these cases, the issue of which
forum should decide whether a party has waived its right to arbitrate through its
litigation conduct was not raised, and we do not know how frequently, if at all, the
waiver-by-litigation-conduct issue might instead have been resolved by an
arbitrator. All the same, it is noteworthy that circuit courts have routinely decided

10
Because Howsam preceded BG Group by twelve years, many decisions addressing the
proper forum for deciding the waiver-by-litigation-conduct issue consider only Howsam. The
reasoning of those decisions is equally applicable to BG Group, as the relevant language in
Howsam and BG Group is substantively the same. See Vine v. PLS Fin. Servs., Inc., 689 F. App’x
800, 803 (5th Cir. 2017) (per curiam).

12
No. 2022AP920

that issue, and that we have routinely reviewed those decisions, without any
comment as to the propriety of doing so.

¶25 In fact, it makes good sense for a court, rather than an arbitrator, to
decide whether a party has waived its right to arbitrate through its litigation conduct.

¶26 First, courts “are well-trained to recognize abusive forum shopping.”
Marie, 402 F.3d at 13; see also Ehleiter, 482 F.3d at 218 (“[T]he trial judge, having
been directly involved in the entire course of the legal proceedings, is better
positioned to determine whether the belated request for arbitration is a thinly veiled
attempt to forum shop.”). Because courts are better qualified to determine when a
party has waived the right to arbitrate through its litigation conduct, parties would
expect courts to decide the waiver-by-litigation-conduct issue. Marie, 402 F.3d at
13; see Howsam, 537 U.S. at 85; First Weber, 361 Wis. 2d 496, ¶27.

¶27 Second, because the inquiry into whether a party has waived its right
to arbitrate by litigating the case in court “heavily implicates judicial procedures,
… the court should remain free to control the course of proceedings before it and to
correct abuses of those proceedings, rather than being required to defer to the
findings [of] an arbitrator with no previous involvement in the case.” Ehleiter, 482
F. 3d at 218 (internal quotation marks and quoted sources omitted).

¶28 Third, “sending waiver[-by-litigation-conduct] claims to the arbitrator
would be exceptionally inefficient.” Marie, 402 F.3d at 13. If a circuit court refers
the waiver-by-litigation-conduct issue to arbitration and the arbitrator decides that
a party waived its right to arbitrate, the merits of the dispute could then end up right
back before the court. In other words, “[t]he case would have bounced back and
forth between tribunals without making any progress.” Id. at 14. In contrast,
normally when an arbitrator determines that a “gateway issue” precludes arbitration,

13
No. 2022AP920

there is no possibility that the merits of the underlying dispute would then be
referred back to the court—if an arbitrator’s decision bars arbitration, it will also bar
litigation. Id. (“[N]ormally, the resolution of … a[] [gateway] issue would bar not
only arbitration but any sort of litigation on the issues by either side.”). Having the
court decide the waiver-by-litigation-conduct issue thus promotes “arbitration’s
goal of speedy dispute resolution.” First Weber, 361 Wis. 2d 496, ¶45.

¶29 Relatedly, the distinction between substantive and procedural
arbitrability “prevents courts from ruling on the merits of an underlying claim when
determining whether to compel arbitration.” Id.; see also id., ¶32 (“‘When the court
determines arbitrability it … has no business weighing the merits of the grievance.
It is the arbitrators’ decision for which the parties bargained.’” (quoting Joint Sch.
Dist. No. 10, City of Jefferson v. Jefferson Educ. Ass’n, 78 Wis. 2d 94, 111, 253
N.W.2d 536 (1977))). But whether a party has waived arbitration by pursuing
litigation is not likely to implicate the merits of the dispute. See Marie, 402 F.3d at
13.

¶30 Finally, requiring a court to decide the waiver-by-litigation-conduct
issue comports with WIS. STAT. § 788.02. If an issue is “referable to arbitration
under an [arbitration] agreement,” § 788.02 requires that a court refer the matter to
arbitration “in accordance with the terms of the agreement, providing the applicant
for the stay is not in default in proceeding with such arbitration.” (Emphasis
added.) Federal courts, interpreting identical language in the Federal Arbitration
Act, 9 U.S.C. § 3, have interpreted “default” to include the waiver-by-litigation-
conduct issue. See, e.g., Marie, 402 F.3d at 12-13. We have similarly “read the
‘waiver by conduct’ rule and the sec. 788.02, Stats., ‘default in proceeding’
language as being synonymous.” Meyer, 179 Wis. 2d at 395 n.1. Thus, when a
party has waived the right to arbitrate by pursuing litigation, § 788.02 recognizes an

14
No. 2022AP920

exception to the requirement that a court refer the matter to arbitration. See Marie,
402 F.3d at 12-13 (stating that 9 U.S.C. § 3 “would seem to place a statutory
command on courts, in cases where a stay is sought, to decide the waiver issue
themselves”).

¶31 For these reasons, we conclude that, unless the parties’ arbitration
agreement clearly and unmistakably provides otherwise, a court must decide
whether a party has waived the right to arbitration through its litigation conduct.
See Marie, 402 F.3d at 9; see also Howsam, 537 U.S. at 83 (adopting this standard
to determine when presumptions regarding substantive and procedural arbitrability
apply); First Weber, 361 Wis. 2d 496, ¶45 (finding Howsam’s presumptions
persuasive). Here, the arbitration provision does not express a clear and
unmistakable intent that the waiver-by-litigation-conduct issue should be
determined by an arbitrator; therefore, the circuit court must decide the issue.

¶32 Accordingly, we remand to the circuit court to determine whether U.S.
Bank waived, through its litigation conduct, its right to arbitrate. Although U.S.
Bank invites us to decide the issue ourselves in the first instance, “[w]hether conduct
amounts to a waiver of the right to arbitrate is a mixed question of fact and law.”
Meyer, 179 Wis. 2d at 396. Because the court has not made any findings of fact on
the issue, remand is appropriate.11

11
Although we have decided in Klein’s favor the question of which forum decides the
waiver-by-litigation-conduct issue, he raises two other arguments that we briefly address. First,
Klein argues that he is entitled to a jury trial on the issue of whether U.S. Bank “fail[ed],
neglect[ed], or refus[ed]” to comply with the arbitration clause pursuant to WIS. STAT. § 788.03.
As noted above, however, § 788.03 does not apply; because the issues were being litigated, WIS.
STAT. § 788.02 applies. See J.J. Andrews, 164 Wis. 2d at 224-25.

15
No. 2022AP920

CONCLUSION

¶33 We conclude, consistent with extensive and virtually uniform
persuasive authority from other jurisdictions, and consistent with Wisconsin law,
that, unless an arbitration agreement clearly and unmistakably provides otherwise,
whether a party has waived the right to arbitrate through its litigation conduct is an
issue for a court, not an arbitrator, to decide. Because the parties here did not agree
that the waiver-by-litigation-conduct issue would be decided in arbitration, we
remand for the circuit court to determine whether U.S. Bank waived its right to
arbitrate through its litigation conduct.

By the Court.—Order reversed and cause remanded with directions.

Second, Klein argues that U.S. Bank’s conduct in seeking arbitration only after engaging
in considerable litigation renders the arbitration provision unconscionable and thus unenforceable,
which, according to Klein, is an issue to be decided by a court. U.S. Bank responds that, pursuant
to the arbitration provision, Klein’s unconscionability challenge must be decided in arbitration.
Specifically, U.S. Bank points to the following language: “Any claim, dispute, or controversy …
arising from or relating to … the validity of this arbitration provision … must, after an election by
you or us, be resolved by binding arbitration ….” Klein does not address U.S. Bank’s argument in
his reply brief.

As stated, we have already concluded that the circuit court must decide the waiver-by-
litigation-conduct issue. If the court does decide that U.S. Bank waived its right to arbitrate, then
Klein’s unconscionability argument would be moot. Regardless, we further conclude that, by
failing to address in his reply brief U.S. Bank’s argument on the issue, Klein has conceded that the
issue of unconscionability must be decided in arbitration pursuant to the terms of the arbitration
provision. See United Coop. v. Frontier FS Coop., 2007 WI App 197, ¶39, 304 Wis. 2d 750, 738
N.W.2d 578 (failure by appellant to respond in reply brief to an argument made in respondent’s
brief may be taken as a concession).

16