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Asking a court to compel arbitration after a lawsuit is pending often results in arguments over the issue of waiver. Once the parties have actively engaged in litigation, courts generally examine the facts of a case to see whether a party has waived its arbitration rights by the extent of its litigation activities. This article focuses on recent cases under the Federal Arbitration Act addressing the issue of waiver of arbitration rights in the Eighth Circuit, which includes Arkansas. The U.S. Supreme Court’s 2022 decision in Morgan v. Sundance, Inc. altered the test courts use for evaluating if a waiver occurred, and is not as sympathetic to parties seeking to enforce arbitration rights.[i]
Prior test. Before Morgan, the Eighth Circuit examined three factors in determining if a party had waived the right to compel the case to arbitration (1) if the movant knew of the right to arbitration, (2) if the movant had acted inconsistently with the right of arbitration, and (3) if the actions prejudiced the nonmovant through the inconsistent acts.[ii] The Eighth Circuit had traditionally applied this three factor test to determine if a waiver had occurred.
Morgan. In Morgan, the United States Supreme Court examined one issue: whether a requirement that a party asserting waiver of arbitration rights show prejudice violated the Court’s requirement that arbitration agreements be placed on the same footing as other contracts.
There, Morgan had sued her employer, Sundance, Inc., asserting Sundance had failed to properly pay her overtime and had violated the Fair Labor Standards Act. Sundance moved to dismiss her claim. The district court denied her motion. Sundance answered, but did not seek to compel arbitration. Sundance and Morgan then participated in the mediation of a similar case in another state. While the other case settled, Morgan’s case proceeded. About eight months after the complaint was filed, Sundance finally moved to compel arbitration. Morgan argued that by litigating the case Sundance had waived its right to arbitration. The district court agreed and denied the motion to compel arbitration. On appeal, the Eighth Circuit reversed, finding that Morgan had failed to show she was prejudiced by the litigation.
The U.S. Supreme Court then agreed to review the case. Justice Kagen, writing for the unanimous Court, stated that in other contexts, federal courts applied the traditional common law definition of “waiver,” i.e., the “intentional relinquishment or abandonment of a known right.” Waiver thus focuses on the acts of the holder of the right, not on the impact of any acts on others. The Court thus held that federal courts could not adopt a rule specific to arbitration conditioning a finding of a waiver of the right to arbitrate on a finding of prejudice. It reversed the Eighth Circuit’s decision.
Revised test. Last year, in Thomas v. Pawn America, Minnesota, LLC (In re Pawn America Consumer Data Breach Litigation), the Eighth Circuit noted that prejudice is no longer an appropriate consideration.[iii] It concluded that after the Morgan decision, prejudice could not be considered and to look at whether a party waived, i.e., intentionally relinquished or abandoned, its right to arbitration, courts must determine instead whether the movant (1) knew of the right to arbitrate and (2) acted inconsistently with it. In other words, what was formerly a three-factor test is now only a two-factor test, with the prejudice factor omitted.
Application. Recent cases build on the Thomas decision and apply the two-factor test left after Morgan.[iv] So far, these decisions are not particularly favorable to parties seeking to compel arbitration, after significant litigation.
In Parker v. Kearney School District, the Eighth Circuit determined that just applying the three-factor test is not necessarily reversible error, if the two appropriately considered elements of the test support a finding of waiver.[v] Examining the two elements left after Morgan, the Eighth Circuit held that waiver was indeed appropriate. First, it noted the movant had a copy of the contract, so it knew of the right to arbitration. Second, it noted the movant had conducted discovery and sought summary judgment before filing a motion to compel arbitration.[vi] The Eighth Circuit thus affirmed the district court’s judgment finding waiver but rejected claims that the movant’s appeal was frivolous and that plaintiff should be entitled to a recovery of costs.
In Lackie Drug Store, Inc. v. OptumRx, Inc., issued earlier this month, the Eighth Circuit engaged in a similar analysis noting that the first factor was met because the movant had in its possession copies of the network agreement and provider manual, which included the arbitration provision.[vii] It noted the movant had even alleged arbitration in its answer as a defense, so it knew of the right to arbitrate. Yet, the movant did not seek to compel arbitration until two years after it had moved to dismiss. During that time, it had answered asserting arbitration as a defense, had sought a 9-month extension of deadlines, and had actively participated in discovery.[viii] The court held its acts did not promptly seek arbitration of the claims, and established a waiver.
Interestingly, in Lackey, the Eighth Circuit addressed two arguments that the movant made to avoid any waiver. There, the court first noted that the amendment of the pleadings by the plaintiff to add new claims meant that the right to arbitrate the new claims did not exist until the new claims were actually pleaded.[ix] Any prior waiver did not apply to the claims newly pleaded in the amended complaint. The amendment, however, didn’t reinstate the right to arbitrate the original claims pleaded, but only applied to the newly added claims. Similarly, the court noted that an amended complaint that materially and “unexpectedly changes the scope or theory of the plaintiff’s claims” may revive a right to compel arbitration that was previously waived.[x] It, however, held that the plaintiff’s amendments were not material and unexpected changes in scope or theory, but actually narrowed the class and the claims, so the amendments did not revive the arbitration rights previously waived. So, the Eighth Circuit affirmed the conclusion that the defendant had waived the right to arbitrate the claims, except the new claims added by amendment in two counts, so it reversed and remanded with instructions to compel arbitration on the newly added claims in those two counts (but not the remainder).[xi] The defendant was left to arbitrate part, but not all, of the claims and litigate the rest.
TL;DR – As the use of arbitration provisions by financial services providers has increased, courts have had to more frequently resolve issues arising under them. Recent cases by the Eighth Circuit offer a good reminder of the need to check any contract for an arbitration provision when you are deciding whether to answer or move to dismiss. One construction of the cases is if a financial institution has a copy of the arbitration agreement, it knew of the right to arbitration. If it decides to file a motion to dismiss or to answer, if the financial institution wants to pursue arbitration, a motion to compel arbitration should be filed at that time, or as quickly thereafter as circumstances allow. Whether in state or federal court, the cases suggest the longer a party litigates, the more likely it is the court will find it waived its right to compel arbitration. While some arguments exists that might salvage the right to compel arbitration, in whole or in part, courts in the Eighth Circuit have been reluctant to apply them.
[i] Morgan v. Sundance, Inc., 596 U.S. 411 (2022).
[ii] See, e.g., McCoy v. Walmart, Inc., 13 F.4th 702, 703-04 (8th Cir. 2021).
[iii] 108 F.4th 610, 614 (8th Cir. 2024).
[iv] See, e.g., Lackie Drug Store, Inc. v. OptumRx, Inc., 24-1231, 2025 WL 1948449, –F.4th–, *3 (8th Cir. July 16, 2025); Parker v. Kearney Sch. Dist., 130 F.4th 649, 653-54 (8th Cir. 2025).
[v] 130 F.4th at 654.
[vi] 130 F.4th at 655.
[vii] 2025 WL 1948449 at 8.
[viii] 2025 WL 1948449 at 9.
[ix] 2025 WL 1948449 at 11.
[x] 2025 WL 1948449 at 13-15.
[xi] 2025 WL 1948449 at 16-17.