MicroStrategy, Inc. v. Lauricia

Filed: October 19, 2001
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
Nos. 00-2297(L)
(CA-00-985-A, CA-00-990-A)
MicroStrategy, Incorporated,
Plaintiff - Appellant,
versus
Betty J. Lauricia,
Defendant - Appellee.
O R D E R
The court amends its opinion filed September 27, 2001, as
follows:
On page 3, second full paragraph, line 7 -- the spelling of
Jonathan Klein’s name is corrected.
For the Court - By Direction
/s/ Patricia S. Connor
Clerk
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
MICROSTRATEGY, INCORPORATED,
Plaintiff-Appellant,
v.
BETTY J. LAURICIA,
Defendant-Appellee,
and
No. 00-2297
CLAUDE DAVID CONVISSER; STACEY
A. SPOLTORE; JOHN DOE,
Defendants.
EQUAL EMPLOYMENT OPPORTUNITY
COMMISSION,
Amicus Curiae.
BETTY J. LAURICIA,
Plaintiff-Appellee,
v.
MICROSTRATEGY, INCORPORATED,
Defendant-Appellant,
No. 00-2434
and
STACEY A. SPOLTORE; JOHN DOE,
Defendants.
EQUAL EMPLOYMENT OPPORTUNITY
COMMISSION,
Amicus Curiae.
Appeals from the United States District Court
for the Eastern District of Virginia, at Alexandria.
T. S. Ellis III, District Judge.
(CA-00-985-A, CA-00-990-A)
Argued: June 4, 2001
Decided: September 27, 2001
Before WIDENER, TRAXLER, and GREGORY, Circuit Judges.
_________________________________________________________________
Vacated and remanded with instructions by published opinion. Judge
Traxler wrote the opinion, in which Judge Widener and Judge Greg-
ory joined.
_________________________________________________________________
COUNSEL
ARGUED: Daniel Meron, SIDLEY & AUSTIN, Washington, D.C.,
for Appellant. Claude David Convisser, LAW OFFICE OF CLAUDE
D. CONVISSER, Alexandria, Virginia, for Appellee. John Foster
Suhre, EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,
Washington, D.C., for Amicus Curiae. ON BRIEF: Carter G. Phil-
lips, Amanda L. Tyler, SIDLEY & AUSTIN, Washington, D.C., for
Appellant. Gwendolyn Young Reams, Associate General Counsel,
Philip B. Sklover, Associate General Counsel, Vincent J. Blackwood,
Assistant General Counsel, EQUAL EMPLOYMENT OPPORTU-
NITY COMMISSION, Washington, D.C., for Amicus Curiae.
_________________________________________________________________
OPINION
TRAXLER, Circuit Judge:
Betty Lauricia brought an action against her employer, Micro-
Strategy, Incorporated, alleging that MicroStrategy retaliated against
her after she filed complaints with the Equal Employment Opportu-
2
nity Commission and the Department of Labor. MicroStrategy moved
to dismiss the action, contending that the lawsuit was premature
because the EEOC issued Lauricia a "right-to-sue" letter fewer than
180 days after Lauricia filed her EEOC complaint. MicroStrategy also
sought to stay the action and compel Lauricia to submit her claims to
arbitration. The district court denied both motions, and MicroStrategy
appeals.1
1 We vacate the district court's order and remand with instruc-
tions to compel arbitration.
I.
Lauricia was the head of MicroStrategy's Human Resources
Department. During her employment, Lauricia signed a document
entitled "Employee Acknowledgment Form and Agreement to Arbi-
trate" in which she acknowledged receipt of MicroStrategy's
employee handbook. J.A. 63. The acknowledgment included a para-
graph requiring Lauricia to arbitrate "[a]ny controversy or claim aris-
ing out of or relating to this Employee Handbook, procedures
delineated in it, or the employment relationship otherwise cognizable
at law and that could be the subject of legal action." J.A. 63.
On March 8, 2000, Lauricia filed a charge with the EEOC alleging
age and sex discrimination. On March 10, Lauricia filed a complaint
with the Department of Labor's Wage and Hour Division alleging that
MicroStrategy was violating the Fair Labor Standards Act by failing
to pay overtime. On March 13, Lauricia, through counsel, notified
MicroStrategy of the filing of the charges. The next day, Lauricia met
with Jonathan Klein, MicroStrategy's vice president and general
counsel, at Klein's request. Although Lauricia alleges that Micro-
Strategy knew about the charges at the time of this meeting, there
apparently was no discussion of the charges at that time.
Later that day, MicroStrategy delivered to Lauricia a letter placing
her on paid administrative leave "due to the conflict inherent to your
_________________________________________________________________
1 The district court's order refusing to compel arbitration is immedi-
ately appealable under 9 U.S.C.A. § 16(a)(1) (West 1999). The district
court certified its right-to-sue ruling as appropriate for immediate appeal
under 28 U.S.C.A. § 1292(b) (West 1993), and we granted Micro-
Strategy permission to file an interlocutory appeal of that ruling.
3
continued active status . . . while pursuing discrimination and wage
and hour claims against the Company." J.A. 330. The letter also stated
that the company "view[ed] your conduct this afternoon, in engaging
in discussions with counsel for the Company without informing them
of the pendency of these claims, as a breach of your duty of loyalty
to the Company," and reminded Lauricia that disclosure of any confi-
dential information to anyone outside the company would be a breach
of her "continuing obligations and duty of loyalty to the Company."
J.A. 330. Lauricia remained on administrative leave until she was ter-
minated on August 4, 2000.
On March 16, two days after it suspended Lauricia, MicroStrategy
filed in federal district court an action against Lauricia and her attor-
ney ("MicroStrategy I"). In that action MicroStrategy sought a decla-
ration that it did not violate the Fair Labor Standards Act by placing
Lauricia on paid leave and that terminating Lauricia would not violate
the Act, and MicroStrategy alleged that Lauricia and her attorney
should be held liable for stealing and disclosing trade secrets and
other confidential information. The district court allowed Micro-
Strategy to depose Lauricia for the limited purpose of identifying doc-
uments and records in Lauricia's possession.
On April 24, the district court dismissed the action for lack of juris-
diction, concluding that there was no case or controversy because
Lauricia had not filed suit against MicroStrategy. That same day,
MicroStrategy appealed the decision to this court and sought emer-
gency injunctive relief, which we denied. Before any briefs were
filed, MicroStrategy moved to dismiss its appeal. The motion was
granted, and the appeal was dismissed without prejudice.
On April 27, three days after the district court dismissed Micro-
Strategy I, MicroStrategy filed an action in Virginia state court
against Lauricia and her attorney ("MicroStrategy II"), which
included the same state-law claims as alleged in the previous action.
MicroStrategy obtained an "Order for Writ of Possession" requiring
Lauricia and her attorney to turn over various documents that Micro-
Strategy believed were confidential, and the sheriff seized the docu-
ments from Lauricia's attorney. Lauricia subsequently responded to
a set of interrogatories and requests to produce submitted by Micro-
Strategy. See J.A. 382-418.
4
On May 9, 2000, Lauricia filed a second charge with the EEOC
(the charge giving rise to this action), alleging that MicroStrategy had
retaliated against her by placing her on administrative leave after she
filed the initial charges. On May 11, the EEOC sent a letter to the par-
ties stating that it had reasonable cause to believe a violation had
occurred and inviting the parties to participate in the conciliation pro-
cess. On May 19, the EEOC sent MicroStrategy a letter about possi-
ble conciliation remedies and gave the company until May 31 to
respond. Lauricia, however, informed the EEOC that she did not wish
to participate in the conciliation process and she requested that she
immediately be issued her right-to-sue letter. The EEOC issued the
letter on May 25, 2000.
On June 15, after receiving from Lauricia a courtesy copy of the
lawsuit she intended to file, MicroStrategy filed in federal district
court a third action ("MicroStrategy III"; MicroStrategy I, Micro-
Strategy II, and MicroStrategy III are sometimes collectively referred
to as the "prior actions"). In MicroStrategy III, MicroStrategy named
Lauricia and her attorney as defendants, sought a declaration that its
conduct did not and would not violate Title VII, the ADEA, or the
Fair Labor Standards Act, and reasserted its state-law claims. Lauricia
filed her action against MicroStrategy the next day.
In August 2000, the district court consolidated the actions filed by
MicroStrategy and Lauricia. The court also dismissed the state-law
claims asserted by MicroStrategy, which had the effect of dismissing
Lauricia's attorney as a defendant. MicroStrategy thereafter subpoe-
naed Lauricia's employment records from her former employers.
MicroStrategy first sought to compel arbitration in its motion to
dismiss filed on July 12, 2000. MicroStrategy also contended in that
motion that the district court lacked jurisdiction because the right-to-
sue letter issued by the EEOC was premature and thus invalid. The
district court denied the motions. The court first concluded that by
virtue of its "remarkably aggressive" course of litigation against
Lauricia, MicroStrategy had waived its right to insist on arbitration.
Lauricia v. MicroStrategy, Inc., 114 F. Supp. 2d 489, 492 (E.D. Va.
2000). The court next concluded that the EEOC properly issued the
right-to-sue letter upon Lauricia's request even though the letter was
5
issued fewer than 180 days after Lauricia filed her charge. See id. at
496.
While we agree with the district court that MicroStrategy's litiga-
tion strategy against Lauricia was "remarkably aggressive," we con-
clude that Lauricia has failed to establish that MicroStrategy's
litigation activities were sufficient to amount to a waiver of its right
to insist on arbitration. Our resolution of the arbitration question
makes it unnecessary for us to consider the validity of the right-to-sue
notice.
II.
A.
Before considering the merits of the waiver question, we must first
address Lauricia's claim that no binding agreement to arbitrate exists.
According to Lauricia, the document containing the arbitration
requirement is not binding because it was signed only by her, and not
by the president of MicroStrategy.
The arbitration clause is found in the "Employee Acknowledgment
Form and Agreement to Arbitrate," which Lauricia signed to
acknowledge receipt of MicroStrategy's employee handbook. The
portion of the acknowledgment requiring arbitration, however, does
not include a requirement that the president of MicroStrategy sign the
acknowledgment. That language appears only in the third paragraph
of the acknowledgment, which states:
I acknowledge that the policies and practices set out in this
Handbook are not a contract of employment, and are not
intended to imply a contractual relationship. I also agree that
my employment is "at-will." I am free to terminate my
employment at any time, with or without reason, and the
Company has the right to terminate my employment at any
time, with or without reason. The only person authorized to
enter into employment agreements on behalf of the Com-
pany is the President, and any such contract shall be in
writing. . ..
6
J.A. 63 (emphasis added). Lauricia argues that because the underlined
language requires the president of MicroStrategy to sign all employ-
ment agreements, the agreement to arbitrate is not valid because it
was not signed by MicroStrategy's president.
The problem with this argument, of course, is that the "Employee
Acknowledgment Form and Agreement to Arbitrate" is not an
employment agreement as contemplated by the above-quoted para-
graph. That paragraph is an effort to emphasize the at-will nature of
employment with MicroStrategy and to forestall claims by employees
that, by virtue of certain handbook provisions or oral promises of
employment for a definite term, they could only be discharged for
cause. The paragraph makes clear that the only official authorized to
enter into a contract for something other than at-will employment is
the president and that such a contract must be in writing. Reading the
language focused upon by Lauricia in context, it is apparent that the
writing and signature requirement applies only to contracts for other-
than-at-will employment. The "Employee Acknowledgment Form and
Agreement to Arbitrate" itself is quite obviously not such a contract
and thus need not be executed by the president of MicroStrategy to
be enforceable. See generally O'Neil v. Hilton Head Hosp., 115 F.3d
272, 275 (4th Cir. 1997) (concluding that arbitration clause included
in form signed by employee acknowledging receipt of employee
handbook was valid and enforceable because "[a] mutual promise to
arbitrate constitutes sufficient consideration for this arbitration agree-
ment").
B.
Having concluded that the agreement to arbitrate is valid and bind-
ing, we now proceed to the question of whether MicroStrategy
waived its right to insist on arbitration of Lauricia's discrimination
claims. The district court concluded that MicroStrategy's actions
caused Lauricia to suffer actual prejudice in that MicroStrategy was
able to obtain discovery that was unavailable in arbitration. On
appeal, MicroStrategy contends that most of the information it
obtained could be obtained in arbitration and that Lauricia failed to
carry her burden of establishing that she suffered sufficient prejudice
to support a finding of waiver. We agree.
7
"Under the Federal Arbitration Act, a party may demand a stay of
federal judicial proceedings pending exercise of a contractual right to
have the subject matter of the federal action decided by arbitration,
unless the party seeking arbitration is `in default' of that right."
Maxum Founds., Inc. v. Salus Corp., 779 F.2d 974, 981 (4th Cir.
1985); see 9 U.S.C.A. § 3 (West 1999). "Although this principle of
`default' is akin to waiver, the circumstances giving rise to a statutory
default are limited and, in light of the federal policy favoring arbitra-
tion, are not to be lightly inferred." Maxum, 779 F.2d at 981; see also
American Recovery Corp. v. Computerized Thermal Imaging, Inc., 96
F.3d 88, 95 (4th Cir. 1996) ("Because of the strong federal policy
favoring arbitration, . . . we will not lightly infer the circumstances
constituting waiver."). "[A]ny doubts concerning the scope of arbitra-
ble issues should be resolved in favor of arbitration, whether the prob-
lem at hand is the construction of the contract language itself or an
allegation of waiver, delay, or a like defense to arbitrability." Moses
H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25
(1983).
A party may waive its right to insist on arbitration if the party "so
substantially utiliz[es] the litigation machinery that to subsequently
permit arbitration would prejudice the party opposing the stay."
Maxum, 779 F.2d at 981. But even in cases where the party seeking
arbitration has invoked the "litigation machinery" to some degree,
"[t]he dispositive question is whether the party objecting to arbitration
has suffered actual prejudice." Fraser v. Merrill Lynch Pierce, Fen-
ner & Smith, Inc., 817 F.2d 250, 252 (4th Cir. 1987) (emphasis
added). "Neither delay nor the filing of pleadings by the party seeking
a stay will suffice, without more, to establish waiver of arbitration.
However, delay and the extent of the moving party's trial-oriented
activity are material factors in assessing a plea of prejudice." Id. (cita-
tion omitted).
We review de novo a district court's conclusion that a party's con-
duct amounts to waiver of the right to arbitrate, although the court's
factual determinations upon which the waiver finding was based are
entitled to deference. See id. at 251-52 & n.2. The party opposing
arbitration "bears the heavy burden of proving waiver." American
Recovery, 96 F.3d at 95.
8
As noted above, delay in seeking arbitration is a factor to be con-
sidered when determining waiver. In this case, however, Micro-
Strategy's delay in seeking arbitration was relatively short. Although
MicroStrategy filed three separate actions against Lauricia before
seeking arbitration, it requested arbitration approximately one month
after Lauricia filed her complaint, and the time between the filing of
the first action and the arbitration request was less than six months.
Nothing in the record suggests that this delay, in and of itself, caused
Lauricia to suffer actual prejudice. See, e.g., Maxum, 779 F.2d at 982
("[M]ere delay, without more, will not suffice to constitute waiver.");
In re Mercury Constr. Co., 656 F.2d 933, 939 (4th Cir. 1981) (en
banc) ("[I]t is only when . . . delay results in actual prejudice that it
may amount to `default' within the [Federal Arbitration] Act."), aff'd
sub nom. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460
U.S. 1 (1983). Any delay by MicroStrategy in asserting its right to
arbitration, therefore, is insufficient to support a finding of waiver.
Whether MicroStrategy waived its right to insist on arbitration by
virtue of its litigation activities is a more difficult question. When
concluding that Lauricia was prejudiced by MicroStrategy's litigation
activities, the district court took into account all of MicroStrategy's
activities in the prior actions. See Lauricia, 114 F. Supp. 2d at 492-93
n.8. Most of MicroStrategy's conduct in the prior actions, however,
was in connection with its state-law claims which sought to prevent
Lauricia from disclosing trade secrets or other confidential informa-
tion. Because these claims are distinct, both factually and legally,
from Lauricia's discrimination claims, the litigation surrounding these
claims cannot support a finding that MicroStrategy waived its right to
arbitrate the unrelated claims. See Subway Equip. Leasing Corp. v.
Forte, 169 F.3d 324, 328 (5th Cir. 1999) ("[A] party only invokes the
judicial process to the extent it litigates a specific claim it subse-
quently seeks to arbitrate."); Doctor's Assocs., Inc. v. Distajo, 107
F.3d 126, 133 (2d Cir. 1997) ("[O]nly prior litigation of the same
legal and factual issues as those the party now wants to arbitrate
results in waiver of the right to arbitrate."). Although MicroStrategy's
declaratory relief claims asserted in the prior actions involve the same
legal and factual issues underlying Lauricia's claims against Micro-
Strategy, we cannot conclude, as did the district court, that the mere
inclusion of these claims permits us to factor into the waiver analysis
MicroStrategy's actions in connection with the distinct state-law
9
claims. As noted above, the bulk of the activity in the prior actions
was directed toward the state-law claims, and no decision on the mer-
its of the declaratory relief claims was ever made in any of the
actions. Under these circumstances, we believe it was error for the
district court to rely on the litigation of the trade secret claims to sup-
port its waiver finding.
To be sure, the litigation of the prior actions did involve many
motions, responses, and other procedural maneuvers (more than 50,
according to Lauricia), including a later-dismissed appeal by Micro-
Strategy of the district court's dismissal of MicroStrategy I. And there
is no doubt that the litigation involved the expenditure of substantial
sums of money by all involved. In fact, because the state court in
MicroStrategy II refused to dismiss Lauricia's attorney as a defen-
dant, Lauricia was forced to hire another attorney to represent her in
that action. But because the prior actions were primarily directed to
claims unrelated to those asserted by Lauricia, the expense and effort
associated with those claims cannot be used in support of the argu-
ment that MicroStrategy waived its right to arbitrate the discrimina-
tion claims. See Doctor's Assocs., 107 F.3d at 134 (concluding that
legal expenses incurred in connection with litigation of unrelated
claims did not amount to prejudice sufficient to support a waiver find-
ing); cf. Rush v. Oppenheimer & Co., 779 F.2d 885, 889 (2d Cir.
1985) ("No waiver of the right to arbitrate can occur from conducting
discovery on non-arbitrable claims." (alteration and internal quotation
marks omitted)). Because neither the delay, nor the litigation sur-
rounding the trade secrets claims, nor the expense associated with that
litigation can support a finding of waiver, we are left with the district
court's conclusion that Lauricia was prejudiced because the discovery
obtained by MicroStrategy would not be available in an arbitration
proceeding.
While we agree that MicroStrategy would not have been automati-
cally entitled to discovery in an arbitration proceeding, it is incorrect
to say that discovery is completely unavailable in an arbitration pro-
ceeding. Under the rules by which the parties agreed to arbitrate, the
arbitrator may order such discovery as the arbitrator considers "neces-
sary to a full and fair exploration of the issues in dispute." Brief of
Appellant at 16. Because discovery is available, albeit under stan-
dards different from those governing discovery in federal court, the
10
relevant question is not whether MicroStrategy would have been enti-
tled to such discovery in an arbitration proceeding, but whether
MicroStrategy likely could have obtained the same information in an
arbitration proceeding. If the same information could have been
obtained in the arbitration proceeding, then Lauricia would have suf-
fered no prejudice by providing the information prior to arbitration,
thus precluding a finding of waiver. See Fraser, 817 F.2d at 252
("The dispositive question is whether the party objecting to arbitration
has suffered actual prejudice." (emphasis added)); see also Leadertex,
Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20, 26 (2d Cir.
1995) (explaining that "[a]lthough [the defendant] did pursue various
avenues of discovery [before seeking arbitration], it does not follow
that [the plaintiff] was prejudiced"); Stifel, Nicolaus & Co. v. Free-
man, 924 F.2d 157, 158-59 (8th Cir. 1991) (agreeing that brokerage
firm "acted inconsistently with its right to arbitration by initiating liti-
gation and participating in discovery on arbitrable claims," but revers-
ing waiver determination because the parties opposing arbitration
were not prejudiced); J&S Constr. Co. v. Travelers Indem. Co., 520
F.2d 809, 809-10 (1st Cir. 1975) (affirming district court's conclusion
that the defendant did not waive its right to arbitration by answering
complaint and participating in discovery because the plaintiff did not
establish prejudice).
Lauricia, however, has made no effort to establish what discovery
would or would not be available to MicroStrategy in an arbitration
proceeding. Instead, Lauricia simply asserts that discovery is unavail-
able in arbitration and that she was therefore prejudiced by that fact
that MicroStrategy obtained some discovery before seeking arbitra-
tion. In our view, such an approach is insufficient to establish waiver
of the right to arbitrate. As noted above, the party opposing arbitration
bears a "heavy burden of proving waiver." American Recovery, 96
F.3d at 95. And, as demonstrated by the Supreme Court's recent deci-
sion in Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S.
79 (2000), that proof must be concrete, not merely speculative.
In Green Tree, the buyer of a mobile home sought to avoid the
arbitration clause contained in the installment contract, arguing that
she could not effectively vindicate her claims under the Truth in
Lending Act because the arbitration agreement did not address how
the costs of the arbitration proceeding would be allocated. The buyer
11
contended that "the arbitration agreement's silence with respect to
costs and fees creates a `risk' that she will be required to bear prohibi-
tive arbitration costs if she pursues her claims in an arbitral forum,
and thereby forces her to forgo any claims she may have against peti-
tioners." Id. at 90. The Supreme Court rejected this argument:
It may well be that the existence of large arbitration costs
could preclude a litigant . . . from effectively vindicating her
federal statutory rights in the arbitral forum. But the record
does not show that [the buyer] will bear such costs if she
goes to arbitration. Indeed, it contains hardly any informa-
tion on the matter. . . . The "risk" that[the buyer] will be
saddled with prohibitive costs is too speculative to justify
the invalidation of an arbitration agreement.
Id. at 90-91. The Court believed that to invalidate an arbitration
agreement on such a showing "would undermine the liberal federal
policy favoring arbitration agreements . . . [and] would also conflict
with our prior holdings that the party resisting arbitration bears the
burden of proving that the claims at issue are unsuitable for arbitra-
tion." Id. at 91 (citation and internal quotation marks omitted)). The
Court held that if "a party seeks to invalidate an arbitration agreement
on the ground that arbitration would be prohibitively expensive, that
party bears the burden of showing the likelihood of incurring such
costs." Id. at 92. Because the buyer failed to carry that burden, the
Supreme Court reversed the circuit court's conclusion that the arbitra-
tion agreement was unenforceable. See id.
Although Green Tree involved a question of the validity of an arbi-
tration agreement rather than the waiver of the right to arbitrate, we
believe that its approach is nonetheless applicable here. Lauricia
offered nothing to show the likelihood of MicroStrategy obtaining
similar discovery in an arbitration proceeding. That is, she offered no
evidence generally showing how often discovery is permitted by arbi-
trators conducting proceedings under the rules to which she agreed or
the extent of discovery that typically is permitted by such arbitrators.
Thus, Lauricia's assertion that MicroStrategy would not have been
able to obtain similar discovery in an arbitration proceeding is just as
speculative as the buyer's claim in Green Tree that arbitration would
be prohibitively expensive. And just as the Supreme Court in Green
12
Tree concluded that the buyer's speculative and unsubstantiated asser-
tions were insufficient to carry the buyer's burden, we must likewise
conclude that Lauricia's speculative and unsubstantiated claims about
the unavailability of discovery is insufficient to carry her heavy bur-
den of proving waiver.
To the extent that the district court based its waiver determination
on a conclusion that Lauricia suffered actual prejudice simply by vir-
tue of the difference in the standards governing the availability of dis-
covery in arbitration and in federal court, the district court committed
an error of law. To the extent the waiver determination rested on a
factual conclusion that similar discovery would not be available to
MicroStrategy in an arbitration proceeding, that conclusion is without
evidentiary support. In either case, the error is one that we may cor-
rect on appeal. See, e.g., Mayhew v. Wells, 125 F.3d 216, 218 (4th
Cir. 1997) (explaining that a district court's legal conclusions are
reviewed de novo); Consolidation Coal Co. v. Local 1643, United
Mine Workers of America, 48 F.3d 125, 128 (4th Cir. 1995) ("A [fac-
tual] finding is clearly erroneous if no evidence in the record supports
it . . . .").
We recognize that even though the parties' arbitration agreement
specifically prohibits "[t]he taking of depositions, except to perpetuate
the testimony of unavailable witnesses," J.A. 63, MicroStrategy took
Lauricia's deposition in MicroStrategy I. This fact, however, is insuf-
ficient to support the district court's waiver determination. In the prior
actions, MicroStrategy contended that Lauricia was in possession of
trade secrets and other confidential information, and MicroStrategy
sought an injunction to prevent her from disclosing the protected
information. The trial court in MicroStrategy I authorized Micro-
Strategy to depose Lauricia for the limited purpose of identifying any
protected documents in her possession. Thus, the deposition took
place in conjunction with MicroStrategy's state-law claims, which, as
discussed above, are legally and factually distinct from the discrimi-
nation claims it now seeks to arbitrate.22 Under these circumstances,
_________________________________________________________________
2 Lauricia contends that she has a protected right to gather and turn
over information necessary to support her claims of discrimination, thus
suggesting that MicroStrategy's state-law claims are related to her dis-
13
the mere occurrence of the deposition cannot support a waiver find-
ing, notwithstanding the arbitration agreement's general prohibition
against the taking of depositions.33 See Doctor's Assocs., 107 F.3d at
133 (concluding that prior litigation waives the right to arbitrate only
"when a party has previously litigated the same claims it now seeks
to arbitrate," and noting that "[f]inding waiver where a party has pre-
viously litigated an unrelated yet arbitrable dispute would effectively
abrogate an arbitration clause once a party had litigated any issue
relating to the underlying contract containing the arbitration clause");
cf. Rush, 779 F.2d at 889 ("No waiver of the right to arbitrate can
occur from conducting discovery on non-arbitrable claims." (alter-
ation and internal quotation marks omitted)).
Even if the deposition strayed from the limited subject matter
authorized by the district court in MicroStrategy I, as Lauricia con-
tends it did, that fact alone, without a showing of actual prejudice, is
an insufficient basis upon which to ground a finding of waiver. Dur-
ing the deposition, MicroStrategy did not inquire about the substance
of Lauricia's claims or her litigation strategy. While Lauricia identi-
fies several areas of inquiry that she believes were outside the scope
of the deposition, she offers no concrete argument as to how her
responses to any improper inquiry prejudiced her ability to arbitrate
_________________________________________________________________
crimination claims. We disagree. The consideration of such a privilege
as a defense to MicroStrategy's state-law claims would not require an
inquiry into the merits of Lauricia's discrimination claims. That is, even
if MicroStrategy did not discriminate against Lauricia, she could still
argue that any disclosure to the EEOC or other officials was protected.
While such a defense may create a tangential connection between the
discrimination claims and state-law claims, we believe that the connec-
tion is tenuous and that, at least for purposes of determining whether
MicroStrategy waived its right to arbitrate, the claims remain legally and
factually distinct. See Subway Equip. Leasing, 169 F.3d at 328 ("[A]
party only invokes the judicial process to the extent it litigates a specific
claim it subsequently seeks to arbitrate.").
3 Lauricia also points out that the deposition lasted approximately four
hours, which she believes supports her argument that she was prejudiced
by the deposition. While four hours seems excessive given the limited
scope of the deposition, the length of the deposition was primarily the
result of the behavior of counsel for both parties.
14
her discrimination claims. This approach is insufficient to carry Lauri-
cia's burden of establishing prejudice and waiver. Moreover, after
reviewing the deposition, we cannot conclude that Lauricia was preju-
diced by the minimal amount of information obtained by Micro-
Strategy that arguably was not relevant to the trade secret claims. See
Coca-Cola Bottling Co. of New York, Inc. v. Soft Drink & Brewery
Workers Union Local 812, 242 F.3d 52, 57-58 (2d Cir. 2001) (holding
that a union did not waive its right to arbitrate even though the union
obtained "substantial discovery"); Tenneco Resins, Inc. v. Davy Int'l,
AG, 770 F.2d 416, 421 (5th Cir. 1985) ("[W]hen only a minimal
amount of discovery has been conducted, which may also be useful
for the purpose of arbitration, the court should not ordinarily infer
waiver based upon prejudice to the party opposing the motion to stay
litigation . . . ."); Dickinson v. Heinold Sec., Inc., 661 F.2d 638, 642
(7th Cir. 1981) ("Admittedly, Heinold's discovery[on non-arbitrable
claims] would be helpful to a presentation of the state law claims to
the arbitrator but pursuit of such discovery is not sufficient to consti-
tute a waiver in the instant case."). Because Lauricia has failed to
establish that she suffered the kind of prejudice necessary to support
a finding that MicroStrategy waived its right to insist on arbitration,
the district court erred by denying MicroStrategy's motion to compel
arbitration.
III.
In this case, MicroStrategy filed three separate actions against
Lauricia and her attorney, during the course of which MicroStrategy
deposed Lauricia, successfully sought the seizure of documents it
believed contained trade secrets, received responses from Lauricia to
interrogatories and requests to produce, and obtained Lauricia's
employment records from her former employers. Only then did
MicroStrategy assert its contractual right to arbitration of Lauricia's
discrimination claims. Although Lauricia makes a strong argument
that MicroStrategy undertook its "remarkably aggressive" course of
litigation for the sole purpose of wearing her out, both emotionally
and financially, we hold only that Lauricia failed to carry her "heavy
burden" of establishing that she suffered legally significant prejudice
from MicroStrategy's litigation activities. See Leadertex, 67 F.3d at
26 ("[H]owever unjustifiable [the] conduct [of the party seeking arbi-
tration], there can be no waiver unless that conduct has resulted in
15
prejudice to the other party."). We express no opinion as to whether
or not a similar level of litigation activity could, in another case, sup-
port a finding of waiver of the right to insist on arbitration. Accord-
ingly, we reverse the district court's conclusion that MicroStrategy
waived its right to arbitration. We remand with instructions for the
district court to enter an order compelling arbitration and, if appropri-
ate, staying other proceedings pending arbitration. 4
VACATED AND REMANDED WITH INSTRUCTIONS
_________________________________________________________________
4 MicroStrategy suggests that if this court were to conclude that it
improperly obtained information through discovery, then an order bar-
ring MicroStrategy from using that information in the arbitration pro-
ceedings would better honor the policy favoring arbitration than would
a finding of waiver. While we conclude that Lauricia has failed to estab-
lish that MicroStrategy has waived its right to arbitrate, we do not
address the appropriateness of MicroStrategy's use during arbitration of
the information it obtained. That question, as well as the related question
of whether Lauricia should be allowed to seek similar information from
MicroStrategy, is better left to the arbitrator.
16