No. _________ ================================================================

In The

Supreme Court of the United States --------------------------------- ♦ ---------------------------------

TI PNEUMOTIVE, INC. a/k/a THOMAS INDUSTRIES,

Petitioner, versus

YASUNAGA CORPORATION,

Respondent.

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On Petition For Writ Of Certiorari To The Supreme Court Of The

State Of Louisiana

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PETITION FOR WRIT OF CERTIORARI

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DEBORAH SHEA BAUKMAN, #19789 MAYER, SMITH & ROBERTS, L.L.P. 1550 Creswell Avenue Shreveport, Louisiana 71101 (318) 222-2135 (318) 222-6420 (fax) debbie@msrlaw.com

Attorneys for Petitioner Gardner Denver Thomas, (formerly TI Pneumotive, Inc. a/k/a Thomas Industries)

================================================================ COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

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QUESTIONS PRESENTED

1. Whether the Louisiana Supreme Court and lower

courts have erred in interpreting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) – in conflict with all of the federal courts of appeals and thir-teen state courts of last resort – to find that it is the province of the arbitrator to decide whether a party has waived its right to arbitration by participating in litigation.

2. Whether it should be presumed that a party has waived arbitration when it elects to proceed with litigation in lieu of arbitration or if the party raising the issue of waiver has to make a showing of prejudice.

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LIST OF PARTIES

The parties to the proceedings below are as follows:

1. Gardner Denver Thomas formerly TI Pneumotive d/b/a Thomas Indus-tries – Primary Defendant in under-lying litigation asserted by Ecological Tanks, Inc. Third Party Plaintiff against Yasunaga.

2. Ecological Tanks, Inc. – Plaintiff in underlying litigation against Gardner Denver Thomas.

3. Yasunaga Corporation – Third Party Defendant in Third Party claim asserted by Gardner Denver Thomas. Third Party Plaintiff against Employer’s Insurance Company of Wausau.

4. Employer’s Insurance Company of Wausau – Third Party Defendant in Third Party Claim asserted by Yasunaga Corporation.

CORPORATE DISCLOSURE STATEMENT

Gardner Denver Thomas, Inc., is a wholly-owned subsidiary of Thomas Industries, Inc., a Delaware cor-poration. Thomas Industries, Inc., is a wholly-owned subsidiary of Gardner Denver, Inc., a Delaware cor-poration. Gardner Denver, Inc., is a publicly traded corporation with no parent corporation.

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TABLE OF CONTENTS

Page

Opinions Below .................................................... 1

Jurisdiction .......................................................... 1

Statutes Involved ................................................. 2

Statement Of The Case ....................................... 3

Reasons For Granting The Writ .......................... 7

I. The Louisiana Supreme Court, A State Court Of Last Resort, Has Decided An Im-portant Federal Question That Substan-tially Conflicts With The Decisions Of Other State Courts Of Last Resort And All Of The United States Courts Of Appeals .... 7

A. The Majority Viewpoint: Waiver Is An Issue For The Trial Court .............. 7

B. Policy Reasons For The Courts To Determine Waiver ............................... 13

II. There Is A Conflict Among The Circuits As To Whether A Party Must Demon-strate Prejudice When Asserting The Oth-er Party Waived Its Right To Arbitrate By Participating In The Litigation ................... 19

A. The Disparity Between Courts On The Showing Of Prejudice ................... 19

B. Case In Point – When To Draw The Line ...................................................... 21

C. This Court Should Adopt A Presump-tion Of Waiver Of Arbitration ............. 29

Conclusion............................................................ 33

iv

TABLE OF AUTHORITIES

Page

CASES

Aetna Life & Cas. Co. v. Martin, 134 N.H. 90 (N.H. 1991) .............................................................. 11

American General Home Equity, Inc. v. Kestel, 253 S.W.3d 543 (Ky. 2008) ...................................... 11

Britton v. Co-op Banking Group, 916 F.2d 1405 (9th Cir. 1990) ......................................................... 20

Brothers Jurewicz, Inc. v. Atari, Inc., 296 N.W.2d 422 (Minn. 1980) ........................................ 11

Cabinetree of Wisconsin, Inc. v. Kraftmaid Cabintry, Inc., 50 F.3d 388 (7th Cir. 1995) ................................................ 20, 22, 30, 31, 32

Carbajal v. H & R Block Tax Servs., 372 F.3d 903 (7th Cir. 2004) .................................................... 8

Cargill Ferrous International v. Sea Phoenix MV, 325 F.3d 695 (5th Cir. 2004) ............................ 20

Citibank v. Stok & Associates, 387 F. Appx. 921, 2010 WL 2825491 (11th Cir. 2010) ......................... 24

Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207 (3d Cir. 2007) ............................................... 16, 18, 20

Florida Educ. Ass’n/United v. Sachs, 650 So.2d 29 (Fla. 1995) .......................................................... 11

Good Samaritan Coffee Co. v. LaRue Distrib-uting, Inc., 275 Neb. 674 (Neb. 2008) ..................... 11

Highlands Wellmont Health Network v. John Deere Health Plan, 350 F.3d 568 (6th Cir. 2003) .......................................................................... 8

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TABLE OF AUTHORITIES – Continued

Page

Home Gas Corp. of Massachusetts, Inc. v. Walter’s of Hadley, Inc., 403 Mass. 772 (Mass. 1989) ............................................................ 11

Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) ............................................................... passim

In Re Tyco International, Ltd. Securities Liti-gation, 422 F.2d 41 (1st Cir. 2005) .......................... 19

International River Center v. Johns-Manville Sales Corp., 2002-3060 (La. 12/3/03), 861 So.2d 139 ......................................................... passim

Ivax Corp. v. B. Braun of Am. Inc., 286 F.3d 1309 (11th Cir. 2002) ........................................... 8, 21

JDP, Inc. v. Chronimed Holdings, Inc., 539 F.3d 394 (6th Cir. 2008) .................................................. 16

Krinsk v. SunTrust Banks, Inc., ___ F.3d ___, 2011 WL 3902998 (11th Cir. 2011) ......................... 22

Lewallen v. Green Tree Servicing, L.L.C., 487 F.3d 1085 (8th Cir. 2007) ........................................ 20

Manasher v. NECC Telecom, 310 F. Appx. 804 (6th Cir. 2009) ......................................................... 20

Marie v. Allied Home Mortgage Corp., 402 F.3d 1 (1st Cir. 2005) ................................. 8, 13, 14, 15, 16

MS Credit Center, Inc. v. Horton, 926 So.2d 167 (Miss. 2006) ......................................................... 8, 11

National Foundation for Cancer Research v. A. G. Edwards & Sons, Inc., 821 F.2d 772 (D.C. 1987) ............................................................... 21

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TABLE OF AUTHORITIES – Continued

Page

Nicholas v. KBR, Inc., 565 F.3d 904 (5th Cir. 2009) ........................................................................ 28

Ocwen Loan Servicing, L.L.C. v. Washington, 939 So.2d 6 (Ala. 2006) ................................. 8, 11, 14

Palcko v. Airborne Express, Inc., 372 F.3d 588 (3d Cir. 2004) ............................................................. 8

Patten Grading & Paving, Inc. v. Skanska USA Building, Inc., 380 F.3d 200 (4th Cir. 2004) ....... 8, 20

Perry Homes v. Cull, 258 S.W.3d 580, 51 Tex. Sup. Ct. J. 819 (Tex. 2008), cert. denied, 129 S.Ct. 952 (2009) ............................................... passim

Petroleum Pipe Americas Corporation v. Jindal Saw, Ltd., 575 F.3d 476 (5th Cir. 2009) .................... 8

Radil v. National Union Fire Insurance Com-pany of Pittsburgh, PA, 233 P.3d 688 (Colo. 2010) .................................................. 8, 11, 14, 15, 18

Reid Burton Construction, Inc. v. Carpenters District Council of So. Colo., 614 F.2d 698 (10th Cir. 1980) ....................................................... 20

Republic Insurance Company v. Paico Receiva-bles, L.L.C., 383 F.3d 341 (5th Cir. 2004) ..... 8, 10, 23

Stok & Associates v. Citibank, 131 S.Ct. 1556 (2011) ....................................................................... 12

The Redemptorists v. Coulthard Services, Inc., 145 Md. App. 116 (Md. App. 2002) ......................... 11

Thyssen Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102 (2d Cir. 2002) ..................................... 20

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TABLE OF AUTHORITIES – Continued

Page

TI Pneumotive, Inc. a/k/a Thomas Industries v. Ecological Tanks, 2011-1159 (La. 9/2/11), ___ So.3d ___, 2011 WL 4055608 .................................... 1

Toler’s Cove Homeowners Ass’n v. Trident Constr. Co., 586 S.E.2d 581 (S.C. 2003).............. 8, 11

Wagner Const. Co. v. Pacific Mechanical Corp., 41 Cal. 4th 19 (Cal. 2007) ........................................ 11

Zirger v. General Accident Ins. Co., 676 A.2d 1065 (1996) .............................................................. 31

STATUTORY AUTHORITY

FEDERAL

Fed. R. Civ. P. 12(h)(1) ................................................ 23

9 U.S.C. § 1, et seq. ....................................................... 2

9 U.S.C. § 3 ................................................................... 9

28 U.S.C. § 1257(a) ....................................................... 2

STATE

La. R.S. 9:4201, et seq. ................................................. 2

La. R.S. 9:4202 .......................................................... 3, 9

RULES

UNCITRAL, United Nations Commission on International Trade........................................... 26, 27

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Gardner Denver Thomas (formerly TI Pneumotive, Inc. a/k/a Thomas Industries), (herein-after referred to as “Petitioner”), respectfully prays that a writ of certiorari issue to review the order denying discretionary review of the Supreme Court of the State of Louisiana entered in the above entitled proceeding on September 2, 2011.

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OPINIONS BELOW

The opinion of the Supreme Court of the State of Louisiana is reported as TI Pneumotive, Inc. a/k/a Thomas Industries v. Ecological Tanks, 2011-1159 (La. 9/2/11), ___ So.3d ___, 2011 WL 4055608, and is reprinted in the Appendix (“App.”) at 1. The opinion of the Second Circuit Court of Appeal, State of Loui-siana (App. 2) is unreported. The Second Circuit cites the opinion of the Supreme Court of the State of Louisiana (App. 3), International River Center v. Johns-Manville Sales Corp., 2002-3060 (La. 12/3/03), 861 So.2d 139, which is reported. The opinion of the Fourth Judicial District Court in and for the Parish of Ouachita, State of Louisiana (App. 7) is unreported.

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JURISDICTION

Following Louisiana jurisprudence, the trial court granted Respondent Yasunaga Corporation’s motion to compel arbitration, finding it was the province of the arbitrator to determine whether

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arbitration had been waived by Yasunaga’s litigation-related activity. The Louisiana Second Circuit Court of Appeal, relying on the Louisiana Supreme Court’s precedent of International River Center v. Johns-Manville Sales Corp., 2002-3060 (La. 12/3/03), 861 So.2d 139, denied supervisory review, which was also denied by the Louisiana Supreme Court. The jurisdic-tion of this Court to review the orders of the Louisi-ana Supreme Court and the Louisiana Second Circuit Court of Appeal is invoked under 28 U.S.C. § 1257(a).

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STATUTES INVOLVED

The Federal Arbitration Act, 9 U.S.C. § 1, et seq., provides in pertinent part:

If any suit or proceeding be brought in any of the courts of the United States upon any is-sue referable to arbitration under an agree-ment in writing for such arbitration, the court in which such suit is pending, upon be-ing satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on applica-tion 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.

9 U.S.C. § 3.

The Louisiana Arbitration Act, La. R.S. 9:4201, et seq., provides in pertinent part:

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

La. R.S. 9:4202.

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STATEMENT OF THE CASE

Presently at issue is whether courts have author-ity to determine whether litigation-related activity before them constitutes a waiver of arbitration, or whether this Court’s decision in Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002), requires courts to refer such claims to arbitrators. While contrary to the majority of United States courts, Louisiana courts, such as in the case at bar and in International River Center v. Johns-Manville Sales Corp., 2002-3060 (La. 12/3/03), 861 So.2d 139, have interpreted Howsam to hold that a claim of waiver of arbitration through litigation-related conduct must be decided by an arbitrator.

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Gardner Denver Thomas (formerly TI Pneumotive, Inc. a/k/a Thomas Industries; referred to herein as “Thomas”1) files this petition for writ of certiorari on grounds that the trial court improperly granted Yasunaga Corporation, Inc.’s (hereinafter referred to as “Yasunaga”) motion to compel arbitra-tion, referring the matter to an arbitrator to deter-mine whether Yasunaga waived arbitration through its litigation-related activity. Petitioner shows Yasunaga undoubtedly waived arbitration to the prejudice of Thomas by its substantial invocation of the litigation process, which included not only the completion of discovery but also its participation in four (4) trial depositions.

This matter arises out of the sale of linear com-pressor pumps by Thomas to Ecological Tanks, Inc. from 1999 to 2003. The pumps were to be used as a component part of Ecological Tanks’ residential sewerage aeration systems, and were manufactured by Yasunaga in Japan. Thomas sold the pumps in the United States, and elsewhere, pursuant to an exclu-sive distributorship agreement. A written agreement existed between Thomas and Yasunaga from 1989 to 2002, which contained the subject arbitration clause.

Litigation commenced in 2004 when Thomas sued Ecological Tanks on open account.2 Ecological

1 TI Pneumotive, Inc. a/k/a Thomas Industries was pur-chased during the course of these proceedings. As a result, the name was changed to Gardner Denver Thomas. 2 Thomas subsequently dismissed its claim against Ecologi-cal Tanks. The plaintiff in these proceedings is now Ecological

(Continued on following page)

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Tanks reconvened seeking compensatory damages for economic losses it claims it sustained as the result of the failure of some of the pumps in the field during the years of 2000 to 2002. The basis of these allega-tions was that the products were defective.

On June 9, 2009, Thomas notified Yasunaga of its intent to bring Yasunaga into the litigation with Ecological Tanks. On June 18, 2009, Thomas filed a third party demand against Yasunaga seeking in-demnification and legal subrogation. On December 8, 2009, service of process was perfected upon Yasunaga in Japan through the Hague Convention.

On December 15, 2009, Yasunaga filed an answer to Thomas’ third party demand pleading several exceptions including a declinatory exception to per-sonal jurisdiction, an exception of prematurity, and motion to stay and compel arbitration. On March 9, 2010, Yasunaga moved for a hearing only on its personal jurisdiction exception, which was heard and denied on April 6, 2010. With the denial of the per-sonal jurisdiction exception, litigation between the parties followed full tilt.

Extensive discovery was then undertaken and completed between the parties, including voluminous written discovery, expert witness discovery, and seven (7) discovery depositions noticed and taken by Yasunaga.

Tanks, although the caption still indicates that Thomas is the plaintiff.

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Yasunaga even sought a continuance of the trial from November 29, 2010 to February 28, 2011, to allow Yasunaga to “respond to this voluminous discovery and complete trial preparations” as well as for “addi-tional time . . . needed to fully develop YC’s defense to the claims of both other parties, ETI and TI Pneumotive, Inc., a/k/a Thomas Industries.” Trial depositions of three of its out-of-state witnesses were noticed and taken by Thomas in Texas and Kentucky beginning in October 2010, and concluding the first week of January 2011. Yasunaga participated fully in these depositions. Even the trial deposition of an economist, hired jointly by Thomas and Yasunaga, was taken in New Orleans on January 24, 2011.

Yasunaga filed a motion to stay and compel arbitration on exception of prematurity on January 24, 2011 – the last day for filing motions, and one month before the trial date of February 28, 2011. In its supplemental supporting brief, Yasunaga admit-ted, “Based upon the discovery that was ascertained, YC decided it is in its best interest to pursue arbitra-tion.”

Thomas opposed the motion filed by Yasunaga based primarily upon its contention that Yasunaga had waived arbitration by its substantial invocation of the litigation process.

The motion to stay and compel arbitration on exception of prematurity was heard on February 16, 2011. Although the trial judge found jurisprudence of the United States Fifth Circuit Court of Appeals,

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cited by Thomas, persuasive on the issue of whether it is the province of the arbitrator or trial judge to decide whether litigation related activity constitutes a waiver of arbitration, he ruled that he was bound by the Louisiana Supreme Court decision of Interna-tional River Center v. Johns-Manville Sales Corp., 2002-3060 (La. 12/3/03), 861 So.2d 139. Therefore, he referred the issue of waiver, along with the dispute between Thomas and Yasunaga, to arbitration.

It is from this ruling that writ applications were made to the Louisiana Second Circuit Court of Appeal and Louisiana Supreme Court, which both denied supervisory review. The Supreme Court of Louisiana denied supervisory review on September 2, 2011.

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REASONS FOR GRANTING THE WRIT

I. THE LOUISIANA SUPREME COURT, A STATE COURT OF LAST RESORT, HAS DECIDED AN IMPORTANT FEDERAL QUESTION THAT SUBSTANTIALLY CON-FLICTS WITH THE DECISIONS OF OTH-ER STATE COURTS OF LAST RESORT AND ALL OF THE UNITED STATES COURTS OF APPEALS

A. The Majority Viewpoint: Waiver Is An Issue For The Trial Court

Louisiana courts in the case at bar have ad-dressed this issue and based their decisions on the

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Louisiana Supreme Court’s ruling in International River to require the waiver issue to be referred to the arbitrator. This clearly conflicts with all of the federal appellate courts and most state courts of last resort which have interpreted the Federal Arbitration Act, upon which the Louisiana Arbitration law is pat-terned, to allow the court – not an arbitrator – to determine issues of waiver of arbitration when those issues concern a litigant’s conduct during the course of litigation before the court.3

In International River, the Louisiana Supreme Court interpreted Louisiana Arbitration Law in accord with its interpretation of this Court’s decision in Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002), to find this Court “apparently” agreed with the Louisiana Supreme

3 Republic Insurance Company v. Paico Receivables, L.L.C., 383 F.3d 341 (5th Cir. 2004); Petroleum Pipe Americas Corpora-tion v. Jindal Saw, Ltd., 575 F.3d 476 (5th Cir. 2009); Marie v. Allied Home Mortgage Corp., 402 F.3d 1 (1st Cir. 2005); Patten Grading & Paving, Inc. v. Skanska USA Building, Inc., 380 F.3d 200 (4th Cir. 2004); Ivax Corp. v. B. Braun of Am. Inc., 286 F.3d 1309 (11th Cir. 2002); Ocwen Loan Servicing, L.L.C. v. Washing-ton, 939 So.2d 6 (Ala. 2006); Perry Homes v. Cull, 258 S.W.3d 580, 51 Tex. Sup. Ct. J. 819 (Tex. 2008), cert. denied, 129 S.Ct. 952 (2009); Radil v. National Union Fire Insurance Company of Pittsburgh, PA, 233 P.3d 688 (Colo. 2010); and MS Credit Center, Inc. v. Horton, 926 So.2d 167 (Miss. 2006). See also, Palcko v. Airborne Express, Inc., 372 F.3d 588, 598 (3d Cir. 2004); High-lands Wellmont Health Network v. John Deere Health Plan, 350 F.3d 568, 574 (6th Cir. 2003); Carbajal v. H &R Block Tax Servs., 372 F.3d 903 (7th Cir. 2004); and Toler’s Cove Homeowners Ass’n v. Trident Constr. Co., 586 S.E.2d 581, 585-586 (S.C. 2003).

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Court’s interpretation of the applicable arbitration law to require issues of waiver of arbitration by litigation conduct are reserved for the arbitrator. International River, 861 So.2d at 144. The Louisiana Supreme Court found the issue of waiver of arbitra-tion by litigation-based activity to be an issue of “procedural arbitrability” and that a strict construction of the applicable arbitration statute4 does not allow a trial court to determine waiver issues.

Respectfully, this Court should take this oppor-tunity to clarify that Howsam does not apply to claims of waiver of arbitration by litigation conduct, but rather is limited to true “gateway” issues. This Court should also respectfully adopt and follow the traditional rule that waiver by litigation-based activi-ty is presumptively an issue for the court. Providing the courts of this Nation with a uniform rule when faced with a waiver claim would help prevent forum-shopping, prevent litigants from seeking a second forum after dissatisfaction with the first, and promote principles of federal-state comity.

The Louisiana Supreme Court’s decision in the case at bar regarding the determination of waiver claims is in direct conflict with the holdings of all federal district courts of Louisiana as well as the United States Fifth Circuit Court of Appeals. The federal courts in Louisiana have held it is the prov-ince of the court to determine litigation waiver. All

4 La. R.S. 9:4202, which is patterned upon 9 U.S.C. § 3.

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apply the two-prong standard for determining waiver as set forth by the United States Fifth Circuit Court of Appeals in Republic Insurance Company v. Paico Receivables, L.L.C., 383 F.3d 341 (5th Cir. 2004). In contrast, however, Louisiana state courts are bound by the Louisiana Supreme Court decision in Interna-tional River, requiring a referral to an arbitrator to determine a litigation waiver. Not only does this contrary decision invite forum-shopping, but it also promotes inconsistent outcomes on a significant issue of federal law.

Notwithstanding the federal jurisprudence interpreting Howsam, which includes jurisprudence of the federal courts sitting in the State of Louisiana, the Louisiana Supreme Court declined supervisory review of the lower courts’ findings that they were bound by its decision in International River in refer-ring the issue of waiver of arbitration to an arbitrator for determination. An action by this Honorable Court on this issue would serve not only as a rule of law for state courts of high resort that are otherwise not inclined to be bound by the decisions of the federal courts when interpreting the meaning of federal law, but also serve as guidance for the lower courts on the limited application of this Court’s ruling in Howsam. Although thirteen (13) of the state courts of high resort have followed the federal jurisprudence inter-preting Howsam, thirty-four (34) have not ruled on the issue. The Louisiana Supreme Court is alone in its interpretation of Howsam as requiring the issue of

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waiver of arbitration by litigation conduct to be referred to an arbitrator.5

Demanding arbitration after engaging in litiga-tion is very much a form of forum shopping. As stated by the Texas Supreme Court, “By the same token, a party who enjoys substantial direct benefits by gain-ing an advantage in the pretrial litigation process should be barred from turning around and seeking arbitration with the spoils.” Perry Homes, 258 S.W.3d at 593. The courts are undoubtedly in the best posi-tion to police thinly veiled attempts to forum shop during the course of litigation before them. This Court should make a bright line rule supporting the authority of the courts to reject abusive forum

5 Thirteen state courts of high resort have ruled that waiver of arbitration by litigation conduct is an issue to be decided by the courts. Ocwen Loan Servicing, L.L.C. v. Washington, 939 So.2d 6 (Ala. 2006); Perry Homes v. Cull, 258 S.W.3d 580, 51 Tex. Sup. Ct. J. 819 (Tex. 2008), cert. denied, 129 S.Ct. 952 (2009); Radil v. National Union Fire Insurance Company of Pittsburgh, PA, 233 P.3d 688 (Colo. 2010); MS Credit Center, Inc. v. Horton, 926 So.2d 167 (Miss. 2006); Toler’s Cove Homeowners Ass’n v. Trident Constr. Co., 586 S.E.2d 581, 585-586 (S.C. 2003); Wagner Const. Co. v. Pacific Mechanical Corp., 41 Cal.4th 19 (Cal. 2007); Florida Educ. Ass’n/United v. Sachs, 650 So.2d 29 (Fla. 1995); American General Home Equity, Inc. v. Kestel, 253 S.W.3d 543 (Ky. 2008); The Redemptorists v. Coulthard Services, Inc., 145 Md. App. 116 (Md. App. 2002); Home Gas Corp. of Massachu-setts, Inc. v. Walter’s of Hadley, Inc., 403 Mass. 772 (Mass. 1989); Brothers Jurewicz, Inc. v. Atari, Inc., 296 N.W.2d 422 (Minn. 1980); Good Samaritan Coffee Co. v. LaRue Distributing, Inc., 275 Neb. 674 (Neb. 2008); and Aetna Life & Cas. Co. v. Martin, 134 N.H. 90 (N.H. 1991).

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shopping in the first instance by holding it is the province of the courts to determine whether or not a litigation-based waiver has occurred.

Additionally, as will be shown, there is a split in the federal circuit courts on whether a single-prong or two-prong standard should be applied in determining whether arbitration has been waived by litigation conduct. Two of the circuits do not require a showing of prejudice while the others require varying show-ings of prejudice. This Court should resolve the conflict between the circuits by setting a presumptive standard for finding a waiver of arbitration any time the parties make the election to proceed with litiga-tion in lieu of proceeding straight to arbitration.6

A review of the disparity in jurisprudence on what litigation conduct results in a waiver of arbitra-tion evidences the lack of a uniform rule of law for the courts to follow when a party demands arbitration after electing to litigate. This Court should hold that the issue of waiver of arbitration by litigation conduct is an issue for the trial court before which the claim is made, and should hold that an election to litigate is a presumptive waiver of arbitration in the first in-stance. To do so would prevent parties like Yasunaga from taking advantage of a judicial system which

6 This is the issue that was presented in the petition for writ of certiorari in Stok & Associates v. Citibank, 131 S.Ct. 1556 (2011), wherein this Court granted certiorari in February 2011, but the parties settled before the matter was to be orally argued.

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strongly discourages forum shopping by preventing them from being able to undertake considerable steps toward litigation only to prejudicially abandon them in hopes of pursuing more desirable redress once a need to do so becomes apparent.

B. Policy Reasons For The Courts To De-

termine Waiver

The majority of courts in this country have reasoned that an important public policy considera-tion justifies that a court determine claims of waiver by litigation-based activity because courts, not arbi-trators, are better positioned to assess litigation-based activity and its effects on claims once raised by litigation waiver issues. Marie v. Allied Home Mort-gage Corp., 402 F.3d 1, 12-14 (1st Cir. 2005). Even the Louisiana Supreme Court conceded that “we do not believe that the arbitrator is necessarily in the best position to determine if waiver has occurred.” Inter-national River, 861 So.2d at 144.

As observed by the United States First Circuit Court of Appeals:

As expressed in the commentary to the RUAA and elsewhere, there are important policy reasons why a court and not an arbi-trator should decide waiver issues, at least where the waiver, as has generally been true in our cases, is due to litigation-related activ-ity. Where the alleged waiver arises out of conduct within the very same litigation in which the party attempts to compel arbitra-tion or stay proceedings, then the district

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court has power to control the course of pro-ceedings before it and to correct abuses of those proceedings.

Marie, 402 F.3d at 13.

The United States First Circuit Court of Appeals further correctly observed:

Finally, sending waiver claims to the arbitra-tor would be exceptionally inefficient. A waiv-er defense is raised by one party to a lawsuit in response to another party’s motion to com-pel arbitration or stay judicial proceedings on the basis of an arbitration agreement signed by the parties. If the arbitrator were to find that the defendant had waived its right to ar-bitrate, then the case would inevitably end up back before the district court with the plain-tiff again pressing his claims. The case would be bounced back and forth between tribunals without making any progress.

Id., 402 F.3d at 13-14.

The United States First Circuit Court of Appeals then held “the Supreme Court in Howsam and Green Tree did not intend to disturb the traditional rule that waiver by conduct, at least due to litigation-related activity, is presumptively an issue for the court.” Marie v. Allied Home Mortgage Corp., 402 F.3d 1, 12-14 (1st Cir. 2005). See also, Ocwen Loan Servicing v. Washington, 939 So.2d 6, 12-14 (Ala. 2006) (in which the Alabama Supreme Court adopted the rationale of the United States First Circuit Court of Appeals, and held that “issues dealing with Ocwen’s conduct

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during the course of litigation, while arguably classi-fiable as ‘procedural arbitrability,’ involve matters occurring in the judicial forum and are thus best suited for resolution by the court, as opposed to the arbitrator”).

Most recently, the Colorado Supreme Court sided with the majority of courts in finding a litigation-based waiver is properly determined by the trial court. Radil v. National Union Fire Insurance Com-pany of Pittsburgh, 233 P.3d 688, 694 (Colo. 2010). In discussing the Howsam decision, the court found:

The United States Supreme Court has artic-ulated a presumption that procedural de-fenses to compelled arbitration are properly determined by an arbitrator. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002), (de-cided in the context of waiver via limitations period). Although this presumption could be construed to apply to claims of litigation-based waiver, federal and state courts ad-dressing the arbitrability of litigation-based waiver both before and after Howsam uni-formly have found that a defense of litiga-tion-based waiver is properly determined by the trial court.

Radil, 233 P.3d at 694.

The Court also found:

First, trial courts are better-suited than arbi-trators to decide claims of litigation-based waiver, given that such waiver depends upon the parties’ conduct before that court and

16

implicates trial court procedures with which arbitrators may have less familiarity. Ehleiter, 482 F.3d at 218; Marie, 402 F.3d at 13. In other words, trial courts are ‘better posi-tioned to determine whether the belated re-quest for arbitration is a thinly veiled attempt to forum shop,’ Ehleiter, 482 F.3d at 218, and are ‘more adept at policing proce-dure-abusing conduct,’ JPD, 539 F.3d at 394. Second, sending waiver claims to an arbitra-tor is inefficient, given that a determination by the arbitrator that a party waived its right to arbitrate sends the proceedings back to the trial court without having made any progress with respect to the merits of the dispute. Marie, 402 F.3d at 13. Finally, the procedural question of litigation-based waiv-er is unrelated to the merits of the dispute, which the parties intended to be decided by an arbitrator. JPD, 539 F.3d at 394; Marie, 402 F.3d at 13.

Id. at 694-695.

In Perry Homes v. Cull, 258 S.W.3d 580, 51 Tex. Sup. Ct. J. 819 (Tex. 2008), cert. denied, 129 S.Ct. 952 (2009), the Texas Supreme Court vacated an arbitra-tion award and remanded the matter to the trial court upon finding the plaintiffs had waived arbitra-tion by their litigation-based activity. The court held that waiver of arbitration by litigation-based activity is a question of law for the court, not an arbitrator, stating “rather than referring such claims to arbitra-tors, we have decided them ourselves at least eight times, as does every federal court.” Perry Homes, 258

17

S.W.3d at 587. The court then went on to explain why it disagreed with the idea that Howsam requires the arbitrator to decide waiver issues.

Specifically, the Texas Supreme Court found that Howsam did not address waiver by litigation conduct, but rather addressed the issue of the application of a limitations period. The court found that “Although the federal courts do not defer to arbitrators when waiver is a question of litigation conduct, they consistently do so when waiver concerns limitations periods or waiver of particular claims or defenses. As Howsam involved the latter rather than the former, its reference to waiver must be read in that context.” Id. at 588.

The Perry Homes court also found:

Second, the Howsam court specifically stated that “parties to an arbitration contract would normally expect a forum-based decision maker to decide forum-specific procedural gateway matters . . . By contrast, when waiver turns on conduct in court, the court is obviously in a better position to decide whether it amounts to waiver. ‘Contracting parties would expect the court to decide whether one party’s conduct before the court waived the right to arbitrate.’

Id.

As a third basis, the court found that the parties generally intend courts to decide gateway matters, such as whether there has been a waiver of arbitra-tion, and finally, because the issue of waiver by litigation conduct relates solely to the arbitration

18

clause, and not to the contract as a whole, it is an issue for the courts. Id. The Texas Supreme Court then concluded in holding, “Every federal circuit court that has addressed this issue since Howsam has continued to hold that substantial invocation of the litigation process is a question for the court rather than the arbitrator – including the First, Third, Fifth, and Eighth Circuits. Legal commentators appear to agree. So do we.” Id. at 589. Notably, this Court denied the petitioners’ petition for a writ of certiorari following the Texas Supreme Court’s decision.

The Louisiana Supreme Court made its decision in International River without any discussion of the strong policy reasons weighing in favor of an inter-pretation of the law allowing the trial courts to de-termine issues of litigation-based waiver. In fact, International River was decided before the majority of jurisprudence came to an opposite conclusion finding Howsam to be limited “only to waiver, delay, or like defenses arising from non-compliance with contractu-al conditions precedent to arbitration, such as the time limit rule . . . and not to claims of waiver based on active litigation in court.” Radil, 233 P.3d at 694, n. 3, citing Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 217-219 (3d Cir. 2007).

In order to prevent forum shopping and procedure-abusing conduct, this Court should make clear what the rule of law is on this very important issue of public policy and reverse the decision of the Louisiana courts in this matter, holding the issue of waiver of arbitra-tion by litigation-based activity is to be determined by the courts before which the claim is made.

19

II. THERE IS A CONFLICT AMONG THE CIR-CUITS AS TO WHETHER A PARTY MUST DEMONSTRATE PREJUDICE WHEN AS-SERTING THE OTHER PARTY WAIVED ITS RIGHT TO ARBITRATE BY PARTICIPAT-ING IN THE LITIGATION

A. The Disparity Between Courts On The Showing Of Prejudice

It is in the interest of justice that once a party elects to litigate rather than arbitrate then that election should be irrevocable to not only prevent forum shopping, but also to avoid any prejudice to the other party. However, because of the strong presump-tion in favor of arbitration, courts across this Nation are in disarray concerning the establishment of a uniform standard for determining whether there has been a waiver of arbitration by litigation-based activity. The majority of federal circuit courts of appeals require a showing of prejudice while the minority requires no showing of prejudice at all. Because Louisiana state courts punt the issue of waiver of arbitration to the arbitrator, Louisiana state courts have no standard for a litigation waiver determination, leaving the matter to an arbitrator’s sole discretion.

The federal circuit courts of appeals are split as follows:

• The First Circuit requires a “modicum of prejudice.” In Re Tyco International, Ltd. Se-curities Litigation, 422 F.2d 41, 46 (1st Cir. 2005).

20

• The Second Circuit requires a showing of prejudice. Thyssen Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 105 (2d Cir. 2002).

• The Third Circuit requires a showing of prejudice and the application of a six part test. Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 223 (3d Cir. 2007).

• The Fourth Circuit places a heavy burden on showing prejudice. Patten Grading & Paving, Inc. v. Skanska USA Building, Inc., 380 F.3d 200, 206 (4th Cir. 2004).

• The Fifth Circuit also places a heavy burden on showing prejudice. Cargill Ferrous Inter-national v. Sea Phoenix MV, 325 F.3d 695, 700 (5th Cir. 2004).

• The Sixth Circuit requires a showing of prej-udice. Manasher v. NECC Telecom, 310 F. Appx. 804, 806 (6th Cir. 2009).

• The Seventh Circuit requires no showing of prejudice. Cabinetree of Wisconsin, Inc. v. Kraftmaid Cabintry, Inc., 50 F.3d 388, 390 (7th Cir. 1995).

• The Eighth Circuit requires a showing of prejudice. Lewallen v. Green Tree Servicing, L.L.C., 487 F.3d 1085, 1090 (8th Cir. 2007).

• The Ninth Circuit requires a showing of prejudice. Britton v. Co-op Banking Group, 916 F.2d 1405, 1412 (9th Cir. 1990).

• The Tenth Circuit requires no showing of prejudice. Reid Burton Construction Inc. v.

21

Carpenters District Council of So. Colo., 614 F.2d 698, 701-702 (10th Cir. 1980).

• The Eleventh Circuit requires a showing of prejudice. Ivax Corp. v. B. Braun of Am., Inc., 286 F.3d 1309, 1315-1316 (11th Cir. 2002).

• The D.C. Circuit requires no showing of prejudice. National Foundation for Cancer Research v. A. G. Edwards & Sons, Inc., 821 F.2d 772, 777 (D.C. Cir. 1987).

Due to this great disparity among the above courts regarding the standards applied for finding a waiver, there is no rule for a litigant to know how much litigation-based activity is too much. This dis-parity and lack of rule also creates an opportunity to forum shop and choose a jurisdiction which requires a higher showing of prejudice so that one maintains the option of opting out of litigation when things become unfavorable. If an arbitrator were to decide the issue, as the present Louisiana Supreme Court ruling would mandate, there would be no requisite standard to apply unless the parties expressly state the governing standard in the contract.

B. Case In Point – When To Draw The Line

The case at bar presents a factual scenario where the party demanding arbitration participated in ex-tensive litigation until the eve of trial. In this matter, Yasunaga more than substantially invoked the judi-cial process by participating in full-fledged discovery demonstrated by its extensive and comprehensive

22

written discovery, its taking of seven (7) discovery depositions, its participation in two (2) other discov-ery depositions, including that of its own liability expert witness, and also by its full participation in four (4) trial depositions. Yasunaga then waited until the last possible day to file motions to attempt to compel arbitration and stay the proceedings. One should conclude that this substantial invocation of the litigation process would more than satisfy any standard for determining a waiver of arbitration. Unfortunately, however, under the standards set by jurisdictions requiring prejudice, even more must be shown.

Courts that require a showing of prejudice gener-ally consider the delay in demanding arbitration and the expense incurred by that party from participating in the litigation process. Krinsk v. SunTrust Banks, Inc., ___ F.3d ___, 2011 WL 3902998 (11th Cir. 2011). By comparison, however, the United States Seventh Circuit in Cabinetree of Wisconsin, Inc. v. Kraftmaid Cabintry, Inc., 50 F.3d 388, 390 (7th Cir. 1995) found that an election to proceed before a non-arbitral tribunal for the resolution of a contractual dispute is a presumptive waiver of the right to arbitrate. In not insisting on evidence of prejudice, the Seventh Circuit found that the inherent prejudice to the party oppos-ing arbitration after the invocation of the litigation process manifests itself very early:

Selection of a forum in which to resolve a legal dispute should be made at the earliest possible opportunity in order to economize

23

on the resources, both public and private, consumed in dispute resolution. This policy is reflected not only in the thirty-day dead-line for removing a suit from state to federal court but also in the provision for waiving objections to venue if not raised at the earli-est opportunity. Fed. R. Civ. P. 12 (h)(1). Par-ties know how important it is to settle on a forum at the earliest possible opportunity, and the failure of either of them to move promptly for arbitration is powerful evidence that they made their election against arbi-tration. Except in extraordinary circum-stances not here presented, they should be bound by their election.

Id.

Following the Texas Supreme Court’s holding in Perry Homes, the United States Supreme Court denied the plaintiffs’ application for a writ of certiora-ri. Originally, the trial judge found no prejudice to the defendants who complained that they may have engaged in litigation activities not required of them in arbitration. The Texas Supreme Court, in evaluat-ing prejudice, held “in the context of waiver under the FAA it [prejudice] relates to inherent unfairness – that is, a party’s attempt to have it both ways by switching between litigation and arbitration to its own advantage.” Perry Homes, 258 S.W.3d at 597. The Texas Supreme Court then adopted the standard set forth by the United States Fifth Circuit Court of Appeals in Republic Ins. that “for purposes of a waiver of an arbitration agreement, prejudice refers to the inherent unfairness in terms of delay, expense,

24

or damage to a party’s legal position that occurs when the party’s opponent forces it to litigate an issue and later seeks to arbitrate that same issue.” Id. The Texas Supreme Court, in finding prejudice to the defendants in Perry Homes, found:

Here, the record before the trial court showed that the Culls objected to arbitration initially, and then insisted on it after the Defendants acquiesced in litigation. They got extensive discovery under one set of rules and then sought to arbitrate the case under another. They delayed disposition by switching to arbi-tration when trial was imminent and arbitra-tion was not. They got the court to order discovery for them and then limited their opponent’s rights to appellate review. Such manipulation of litigation for one party’s ad-vantage and another’s detriment is precisely the kind of inherent unfairness that consti-tutes prejudice under federal and state law.

Id.

Compare Perry Homes to the United States Eleventh Circuit Court of Appeals’ holding in Citi-bank v. Stok & Associates, 387 Fed. Appx. 921, 2010 WL 2825491 (11th Cir. 2010). In Citibank, the court found an insufficient showing of prejudice in the face of blatant forum shopping between state and federal courts despite the small law firm opposing arbitration because they could not demonstrate the amount of expenses incurred as a result of the offending party’s litigation-based activity. This activity included con-ducting litigation-specific discovery and preparation

25

of litigation-specific documents, all after a one month delay in demanding arbitration. While the Court was sympathetic to the small law firm having to dedicate “significant human resources” to research and discov-ery tasks particular to litigation, it found it was compelled to find the firm had not carried its burden by demonstrating prejudice sufficient to warrant a waiver determination.

The comparison of the foregoing cases to the one at bar illustrates that the determination of prejudice is very subjective. Where does a court draw the line in finding a demand for arbitration arises too late in the litigation process? Did Yasunaga cross this line when it chose to have its personal jurisdiction excep-tion heard instead of its exception of prematurity and motion to stay and compel arbitration at the outset of litigation? Is participation in the discovery process a presumptive waiver of arbitration when that discov-ery is not allowed to be considered under an agreed set of arbitration rules? Is participation in discovery prejudicial in and of itself to constitute a waiver in every instance? Did participation in trial depositions tip the scales in preponderance of finding prejudice; and therefore, a waiver? Is it never too late to de-mand arbitration during the course of litigation short of trial? These questions are somewhat fact intensive and peculiar to the case at bar. However, they beg the question: what should be the applicable standard for determining a litigation waiver of arbitration.

Yasunaga took unfair advantage of the Louisiana state court discovery process and the parties to the litigation, Thomas and Ecological Tanks, by deliberately

26

postponing its demand of arbitration until after undertaking extensive, voluminous and, arguably, “scorched earth” discovery that Yasunaga may not have otherwise obtained in arbitration. The Agree-ment between Thomas and Yasunaga provides that the arbitration take place under the UNCITRAL rules.7 The UNCITRAL rules provide that it is within the arbitral tribunal’s discretion whether to even allow discovery. Art. 19.2 UNCITRAL-ML. Perhaps this is why Yasunaga stated that, “Based upon the discovery that was ascertained, YC decided it is in its best interest to pursue arbitration.” Yasunaga used the state court system to learn all it could about Thomas’ claim against Yasunaga, as well as all it could about Ecological Tanks’ claim against Thomas. As noted by the Texas Supreme Court, “arbitrators have almost unbridled discretion regarding discovery, so no one can predict what they might do in advance.” Perry Homes, 258 S.W.3d at 599. The case at bar clearly illustrates that any participation in discovery by a party demanding arbitration is prejudicial to the other party, particularly where the discovery provi-sions under arbitration rules may not be as liberal.

Thomas may be further prejudiced by not being able to introduce trial depositions of its witnesses at arbitration because, under the UNCITRAL rules, it is discretionary whether the oral testimony of witnesses

7 UNCITRAL is the United Nations Commission on Inter-national Trade. http://www.uncitral.org/uncitral/en/index.html.

27

may be heard. Art. 28, UNCITRAL-ML. Essentially, Yasunaga may be able to avoid the trial testimony adduced by Thomas through trial depositions by abruptly switching to an arbitration strategy after obtaining the benefits of a litigation strategy. This may also allow Yasunaga to develop a familiarity with Thomas’ trial strategy to the disadvantage of Thomas, who may then be forced to offer its evidence in anoth-er format in an international arbitral tribunal.

The International Centre for Dispute Resolu-tion’s own guidelines address the difficulty created by different jurisdictions’ interpretations of these issues and the extent of discovery allowed in arbitration:

While arbitration must be a fair process, care must also be taken to prevent the importa-tion of procedural measures and devices from different court systems, which may be con-sidered conducive to fairness within those systems, but which are not appropriate to the conduct of arbitrations in an interna-tional context and which are inconsistent with an alternative form of dispute resolu-tion that is simpler, less expensive and more expeditious. One of the factors contributing to complexity, expense and delay in recent years has been the migration from court sys-tems into arbitration of procedural devices that allow one party to a court proceeding access to information in the possession of the

28

other, without full consideration of the dif-ferences between arbitration and litigation.8

Additionally, the parties have incurred signifi-cant legal fees in responding to Yasunaga’s discovery, which include travel expenses associated with discov-ery depositions taken in Wisconsin, Kentucky and Texas. This also includes expert witness discovery undertaken by Thomas of Yasunaga’s liability expert witness – the only liability expert witness named in the case. Except for the cost of actually trying the case, no additional litigation cost was left to be in-curred in this dispute. These are the very litigation expenses a timely demand for arbitration is designed to avoid. Nicholas v. KBR, Inc., 565 F.3d 904, 910-911 (5th Cir. 2009). Thomas is unquestionably prejudiced by having to incur these expenses, which would not have been incurred had Yasunaga timely demanded arbitration.

Putting aside Thomas’ ability to show substan-tive and substantial prejudice, this Court cannot ignore the inherent prejudice to the parties in having been misled to believe Yasunaga had consented to the judicial forum by its participation in litigation only to have the rug pulled out from under them. Yasunaga determined after discovery and on the eve of trial that it would be in its “best interest” to have its

8 International Centre for Dispute Resolution, ICDR Guidelines for Arbitrators Concerning Exchanges of Information, Introduction.

29

dispute with Thomas determined in an arbitral forum rather than in the non-arbitral one. There can be no other explanation for this behavior than Yasunaga’s attempt to find a more favorable forum after as-sessing the likely outcome of litigation following extensive, costly, and time-consuming discovery and litigation-based activity.

Forum shopping as Yasunaga has attempted here, should be strongly discouraged at the outset of litigation, and most certainly should be forbidden on the eve of trial. No one party should be given a se-verely prejudicial advantage of strategically opting out of litigation after they have actively engaged in it, simply because they are dissuaded by an unfavorable outcome at trial. The only way to eliminate this evil is to abolish the prejudice requirement and hold that there is a presumption of waiver anytime a party elects to proceed with litigation in lieu of demanding arbitration.

C. This Court Should Adopt A Presump-

tion Of Waiver Of Arbitration

By adopting a presumption of a waiver of arbitra-tion when a party invokes the litigation process, this Court will eliminate the subjectivity that making a determination of prejudice presents, and would hold that the prejudice inherent in attempting to switch forums after participating in litigation to any degree is sufficient. Eliminating a prejudice inquiry would discourage forum shopping, promote principles of

30

comity, promote the economic principles of arbitra-tion, and promote the principles of contract law.

The United States Seventh Circuit Court of Appeals in Cabinetree of Wisconsin, Inc. v. Kraftsmaid Cabinetry, Inc., 50 F.3d 388, 390 (7th Cir. 1995) held that an election to proceed before a non-arbitral tribunal for the resolution of a contractual dispute is a presumptive waiver of the right to arbitrate. The Court found that a presumptive waiver of the right of arbitration existed without insisting on evidence of prejudice “beyond what is inherent in an effort to change forums in the middle (and it needn’t be the exact middle) of a litigation.” Id. The Court noted, “We add that in ordinary contract law, a waiver normally is effective without proof of consideration or detrimental reliance.” Id. The court found:

Still we think the judge was right to find a waiver. The presumption that an election to proceed judicially constitutes a waiver of the right to arbitrate has not been rebutted. There is no plausible interpretation of the reason for delay except that Kraftsmaid ini-tially decided to litigate its dispute with Cabinetree in the federal district court, and that later, for reasons unknown and with no shadow of justification, Kraftsmaid changed its mind and decided it would be better off in arbitration. Neither in its briefs nor at oral argument did Kraftsmaid give any reason for its delay in filing its stay besides needing time “to weigh its options.” That is the worst possible reason for delay. It amounts to

31

saying that Kraftsmaid wanted to see how the case was going in federal district court before deciding whether it would be better off there or in arbitration. It wanted to play heads I win, tails you lose.

Id., 50 F.3d at 391.

In the case at bar, Thomas chose litigation over arbitration for its indemnification claim against Yasunaga because Thomas was already embroiled in litigation with the buyer of the Yasunaga-manufactured product. Yasunaga was made aware of Thomas’ intent to bring Yasunaga into the litigation in June of 2009 – over a year and half before its January 2011, last-minute demand for arbitration. Yasunaga then participated in litigation without reservation, leading its contractual partner to believe it fully intended and implicitly had agreed by its litigation-based activity to try the case before a court. From that point forward, exorbitant judicial and personal resources (monetary and other) were ex-pended in pursuing litigation, which will be complete-ly wasted if Thomas is forced to arbitrate. See Zirger v. General Accident Ins. Co., 676 A.2d 1065, 1074 (1996) (“the advantages of arbitration evaporate when arbitration is used not as a substitute for litigation, but as a supplement to litigation.”). A presumption of waiver by invocation of the litigation process, at its outset and without reservation, would eliminate this waste of resources. Moreover, it would support the contract principles that ordinarily allow contracting parties to waive contract provisions at

32

their election and performance, without a showing of prejudice.

As noted by the Seventh Circuit, “in ordinary contract law, a waiver is effective without proof of consideration or detrimental reliance.” Cabinetree, 50 F.3d at 390. When there is no doubt a party has acted inconsistently with its contract right to arbitrate, the other party should be able to rely upon that failure to elect arbitration at the outset of litigation as an indicia that arbitration has been waived. There should be no additional “contract term” of prejudice imposed contrary to the contractual expectations of the parties. Just like any contractual provision, the parties should be free to agree to waive provisions and not be required to show prejudice when they seek to enforce a knowing and willing waiver, simply because the particular waived provision is an earlier agreement to arbitrate.

A writ of certiorari is warranted to avoid result-ing injustices which will surely arise should the courts fail to uniformly determine whether a party has waived its right to arbitration by invoking the litigation process. Additionally, granting a writ of certiorari to establish a presumption of waiver when a party elects to litigate will create a bright line rule preventing forum shopping and comporting with the contractual expectations of the parties. The prejudice requirement allows a party, who has been unneces-sarily slow in demanding arbitration to have its cake and to eat it too, at the inherent prejudice to the party choosing to litigate. In the case at bar, having

33

gotten what Yasunaga wanted from the litigation process, Yasunaga should not be allowed to switch to arbitration on the eve of trial.

--------------------------------- ♦ ---------------------------------

CONCLUSION

For the reasons set forth above, a writ of certio-rari should be issued to review the decisions of the Louisiana Supreme Court and the Louisiana Second Circuit Court of Appeal.

Respectfully submitted,

DEBORAH SHEA BAUKMAN, #19789 MAYER, SMITH & ROBERTS, L.L.P. 1550 Creswell Avenue Shreveport, Louisiana 71101 (318) 222-2135 (318) 222-6420 (fax) debbie@msrlaw.com

Attorneys for Petitioner Gardner Denver Thomas, (formerly TI Pneumotive, Inc. a/k/a Thomas Industries)

App. 1

The Supreme Court of the State of Louisiana

TI PNEUMOTIVE, INC., A/K/A THOMAS INDUS-TRIES

VS.

ECOLOGICAL TANKS, INC.

NO. 2011-CC-1159

-----------------------------------------------------------------------

IN RE: Gardner Denver Thomas, Inc.; T. I. Pneu-motive d/b/a Thomas Industries, Inc.; – Plaintiff(s); Applying For Supervisory and/or Remedial Writs, Parish of Ouachita, 4th Judicial District Court Div. B, No. 04-1128; to the Court of Appeal, Second Circuit, Nos. 46,502-CW, 46,507-CW;

-----------------------------------------------------------------------

September 2, 2011

Denied. BJJ

JPV

JTK

JLW

GGG

CLARK, J., recused.

Supreme Court of Louisiana September 2, 2011

/s/ [Illegible] Deputy Clerk of Court For the Court

App. 2

STATE OF LOUISIANA COURT OF APPEAL, SECOND CIRCUIT

430 Fannin Street Shreveport, LA 71101

(318) 227-3700

NO: 46,502-CW consolidated with NO: 46,507-CW

TI PNEUMOTIVE, INC., a/k/a THOMAS INDUSTRIES VERSUS ECOLOGICAL TANKS, INC.

FILED: 03/16/11 RECEIVED: BY HAND 03/16/11

On application of Gardner Denver Thomas, Inc. and Yasunaga Corporation for SUPERVISORY WRIT in No. 04-1128 on the docket of the Fourth Judicial Dis-trict, Parish of OUACHITA, Judge Frederic Charles Amman, III.

MAYER SMITH & ROBERTS Deborah Shea Baukman J. Kris Jackson

BLACKWELL CHAMBLISS ET AL Sam O. Henry, III

HAYES HARKEY SMITH & CASCIO Thomas Moore Hayes, III

Counsel for:Gardner Denver Thomas, Inc. TI Pneumotive, Inc. a/k/a Thomas Industries

Counsel for: Ecological Tanks, Inc.

Counsel for: Yasunaga

App. 3

HARRIS DUESLER & HATFIELD LLP John S. Morgan James M Harris, Jr.

Counsel for:Yasunaga

Before PEATROSS, DREW and MOORE, JJ.

APPLICATIONS CONSOLIDATED. STAY DE-NIED. WRITS DENIED.

On its own motion, this Court hereby consoli-dates the above-captioned writ applications for dispo-sition. The application of Gardner Denver Thomas, Inc. for supervisory review of the trial court’s order compelling arbitration is denied. By referring the waiver issue to the arbitrator, the trial court followed the Louisiana Supreme Court’s holding in Interna-tional River Center v. Johns-Manville Sales Corp., 2002-3060 (La. 12/3/03), 861 So. 2d 139. The trial court, like this Court, is bound by the decisions of the Louisiana Supreme Court. Pelican State Asso., Inc. v. Winder, 253 La. 697, 219 So. 2d 500 (1969).

The application of Yasunaga Corporation for supervisory review of the ruling denying their request to include the claims by and against Ecological Tanks, Inc. in arbitration is denied on the showing made. Because the trial court is managing its docket to avoid conflict with the arbitration proceeding, Yasunaga’s application for a stay of the lawsuit is denied.

App. 4

Shreveport, Louisiana, this 13th day of May , 2011.

/s/ [Illegible] /s/ [Illegible] /s/ [Illegible]

FILED: May 13, 2011

/s/ [Illegible] [Illegible] CLERK SECOND CIRCUIT COURT OF APPEAL STATE OF LOUISIANA

Endorsed Filed May 13, 2011

/s/ Lillian Evans Richie LILLIAN EVANS RICHIE, CLERK OF COURT A TRUE COPY – Attest

App. 5

STATE OF LOUISIANA PARISH OF OUACHITA

4TH JUDICIAL DISTRICT COURT

TI PNEUMOTIVE, INC., aka THOMAS INDUSTRIES

VERSUS NO. 04-1128

ECOLOGICAL TANKS, INC.

JUDGMENT

(Filed Feb. 24, 2011)

This matter having come before the court for hearing on the Motion to Compel Arbitration, Motion to Stay, Motion for Leave to Amend and Supplement Answer, to File Reconventional Demand, and to File Third Party Demand filed by Yasunaga Corporation, Inc. and the Motion to Sever filed by Ecological Tanks, Inc.; and after consideration of the briefs, exhibits, and arguments of counsel:

IT IS HEREBY ORDERED:

1. The Motion to Compel Arbitration is GRANTED in part, and DENIED in part and IT IS ORDERED that . . . the third Party demand of Gard-ner Denver Thomas, Inc., formerly T.I. Pneumotive, Inc. a/k/a Thomas Industries against Yasunaga Corpo-ration and the reconventional demand of Yasunaga Corporation against Gardner Denver Thomas, Inc. are hereby referred to arbitration; the Motion to Compel Arbitration is denied with respect to the claims of Eco-logical Tanks, Inc. against Gardner Denver Thomas,

App. 6

Inc.; IT IS FURTHER ORDERED that the arbitration be completed by November 28, 2011;

2. The Motion to Stay is denied;

3. The Motion to Sever is denied;

4. The Motion for Leave to Amend and Supple-ment Answer, to File Reconventional Demand and to file Third Party Demand filed by Yasunaga Corpora-tion is granted; and

5. The Motion to Continue the Trial made in Open Court by Gardner Denver Thomas, Inc. is granted and the trial is reset for November 28, 2011.

So ordered this 24 day of February, 2011, Monroe, Ouachita Parish, Louisiana.

/s/ [Illegible] Frederic C. Amman, III,

District Judge

App. 7

TI PNEUMOTIVE, ET AL

VERSUS NUMBER 04-1128

ECOLOGICAL TANKS, INC.

STATE OF LOUISIANA

PARISH OF OUACHITA

FOURTH JUDICIAL DISTRICT

******************

JUDGE FREDERIC AMMAN, III

SECTION “2”

******************

BE IT KNOWN AND REMEMBERED that upon the hearing held in the above styled and numbered case in the Fourth District Court, Parish of Ouachita, State of Louisiana, on the 16th Day of February, A.D., 2011, before Honorable Frederic Amman, III, Judge, at Monroe, Louisiana, the following proceedings were had, to wit:

APPEARANCES: Ms. Deborah Baukman and Mr. Kris Jackson, Attorneys at Law, Shreveport, Louisiana Attorneys for Gardner Denver Thomas

Mr. Thomas M. Hayes, III, Attorney at Law, Monroe, Louisiana and Mr. John Morgan, Attorney at Law, Beaumont, Texas Attorneys for Yasunaga Corporation

Susan Traylor, CDR #2582010 Fourth Judicial District Court

App. 8

Mr. Sam Henry, III, Attorney at Law, West Monroe, Louisiana Attorney for Ecological Tanks, Inc.

* * *

doesn’t want to do that. Secondly, one of the indi-cations that the cases are – or the two claims are so interrelated is the fact that it’s going to be the same witnesses on both claims. And that’s one of the primary factors to be looked at is whether it’s going to be the same witnesses. And it will be the same evidence because it is an indemnification claim. Essentially – or a legal subrogation claim. Essentially, you know, we stand in the shoes of ETI vis-à-vis Yasunaga and that’s kind of why the claims are so interrelated and ought to be tried together or determined together, not severed.

BY THE COURT:

Mr. Henry, anything else?

BY MR. HENRY:

My argument would only be –

BY THE COURT:

I’ve read your brief too, sir. Y’all have any further argument, Mr. Hayes?

BY MR. HAYES:

Only one point, Your Honor, there was a – it goes back to something said before the last point

App. 9

and that had to do with the contractual indemni-ty claim. And I simply point out that Louisiana law to my recollection is very clear that there is no right to contractual indemnity unless the con-tract expressly provides for it. Thomas pleaded contractual indemnity. The contract provides for contractual indemnity. So the argument that, well, it was just sort of a general sort of indemni-ty, contractual indenmity claim, is really not a well supported argument,

BY THE COURT:

I’ve read through all this and I’ve looked at it and thought about it, woke up thinking about it last night. But I have to say, Ms. Baukman, some of the cases that you presented to me concerning the Fifth Circuit and the federal cases make a tremendous amount of sense to me concerning waiver. The only problem I run into is what Jus-tice Traylor wrote. When he states in there, “Al-though we do not believe that the arbitrator is necessarily in the best position to determine if waiver has occurred, the legislature has deter-mined that this is – it is the arbitrator who will make that decision and it’s not the providence of the court to second guess such policy decision.” And basically saying that to determine – the waiver is to be determined by the arbitrator. And so I don’t know how I can – I can take that on as a cause, I guess, and I can be like Justice Hardy over in the left turn cases when all seven of the justices wrote against him when he talked about a left turn case where he said, “You’re not always wrong when you turn left and there’s an acci-dent.” Well, all seven of the justices took a shot at

App. 10

him on that one because he took part of the Charge of the Light Brigade where he says, “Ours is not to ask why, just to do or die.” I don’t think I’m going to take that on today. I think that that whole issue is to be decided by an arbitrator whether the waiver did occur or didn’t occur ac-cording to what Justice Traylor wrote in the Su-preme Court in International River Center and I think that the clause is there. And as much as I think the court ought to determine the issue if it’s the way when you’re trying to determine have they waived it through their actions in court, it ought to be determined by a judge. But I’ll have to defer to what Justice Traylor wrote and order that there be arbitration. And that the waiver is-sue be brought up in front of the arbitrator. I’ve also have read the Joseph case as it affects ETI and I just don’t feel that those three factors have been met by Yasunaga and therefore I’m not go-ing to require that ETI be a part of that arbitra-tion. As far as that goes, I’m going to stay the case subject – until arbitration is completed. And I’m not going to grant the Motion to Sever it be-cause I don’t want to hear it twice, have two jury trials on this matter. I will tell you this, I do have two weeks available in November that I’ll give to y’all. You said it would take six weeks – six months to arbitrate it. That would put you back on the calendar before the end of the year.

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