Kingery Constr. Co. v. 6135 O St. Car Wash

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
12/02/2022 09:06 AM CST
- 502 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502Kingery Construction Co., appellee,
v. 6135 O Street Car Wash, LLC,
a Nebraska limited liability
company, appellant.
___ N.W.2d ___
Filed September 23, 2022. No. S-21-797.
1. Arbitration and Award. Whether a stay of proceedings should be
granted and arbitration required is a question of law.
2. Judgments: Appeal and Error. When reviewing questions of law, an
appellate court has an obligation to resolve the questions independently
of the conclusion reached by the trial court.
3. Jurisdiction: Appeal and Error. Before reaching the legal issues
presented for review, it is the duty of an appellate court to determine
whether it has jurisdiction over the matter before it, and this is so even
where neither party has raised the issue.
4. Arbitration and Award: Final Orders: Appeal and Error. A court
order staying an action pending arbitration is a final, appealable
order because it affects a substantial right and is made in a special
proceeding.
5. Federal Acts: Arbitration and Award: Contracts. If arbitration arises
from a contract involving interstate commerce, it is governed by the
Federal Arbitration Act.
6. ____: ____: ____. The Federal Arbitration Act, 9 U.S.C. § 2 (2018),
preempts inconsistent state laws that apply solely to the enforceability
of arbitration provisions in contracts evidencing a transaction involving
interstate commerce.
7. ____: ____: ____. Under the Federal Arbitration Act, 9 U.S.C. § 3(2018), the court in which a suit or proceeding is pending, upon being
satisfied that the issue involved in the suit or proceeding is refer-
able to arbitration under an agreement in writing for arbitration, shall
on application of one of the parties stay the trial of the action until
- 503 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502arbitration has been had in accordance with the terms of the agree-
ment, provided the applicant for the stay is not in default in proceeding
with arbitration.
8. Arbitration and Award. Under the Federal Arbitration Act, 9 U.S.C.
§ 4 (2018), the court shall hear the parties and, upon being satisfied
that the making of the agreement for arbitration or the failure to comply
therewith is not in issue, shall make an order directing the parties to
proceed to arbitration in accordance with the terms of the agreement.
9. Judgments: Intent: Words and Phrases. While the doctrine of stare
decisis is entitled to great weight, it was never intended to indefinitely
perpetuate erroneous decisions.
10. Waiver: Words and Phrases. “Waiver” of a right is voluntary and
intentional relinquishment of a known right, privilege, or claim, and
may be demonstrated by or inferred from a person’s conduct.
Appeal from the District Court for Lancaster County:
Lori A. Maret, Judge. Reversed and remanded for further
proceedings.
Jordan W. Adam, of Fraser Stryker, P.C., L.L.O., for
appellant.
Brian S. Koerwitz, of Endacott, Peetz, Timmer & Koerwitz,
P.C., L.L.O., for appellee.
Miller-Lerman, Cassel, Stacy, Funke, Papik, and
Freudenberg, JJ., and Hall, District Judge.
Funke, J.
INTRODUCTION
Kingery Construction Co. (Kingery) sued 6135 O Street Car
Wash, LLC (OSCW), for breach of contract and later moved
to stay the case for arbitration under 9 U.S.C. § 3 (2018) of
the Federal Arbitration Act (FAA). OSCW opposed Kingery’s
motion, arguing that Kingery waived its right to arbitration by
its litigation-related conduct. The district court found that there
was no waiver because OSCW was not prejudiced by Kingery’s
conduct. In so finding, the district court relied on our decision
- 504 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502in Good Samaritan Coffee Co. v. LaRue Distributing, 1 which
adopted a three-part test of waiver based on litigation-related
conduct used by the U.S. Court of Appeals for the Eighth
Circuit. OSCW appealed. While the appeal was pending, the
U.S. Supreme Court ruled in Morgan v. Sundance, Inc., 2 that
the Eighth Circuit erred in conditioning a waiver of the right to
arbitration on a showing of prejudice. In light of Morgan, we
reverse, and remand for further proceedings.
BACKGROUND
OSCW and Kingery entered a $2,087,092 agreement for the
construction of a carwash in Lincoln, Nebraska, on March 30,
2020. They based their agreement on the 2017 version of the
American Institute of Architects’ “Standard Abbreviated Form
of Agreement Between Owner and Contractor.”
Section 5.1 of the agreement provides, “Arbitration pursu-
ant to Section 21.6 of this Agreement” shall be the method of
binding dispute resolution “[f]or any claim subject to, but not
resolved by, mediation pursuant to Section 21.5.”
Section 21.6, in turn, requires that arbitration be admin-
istered by the American Arbitration Association (AAA) in
accordance with the “Construction Industry Arbitration Rules”
in effect on the date of the agreement, unless the parties agree
otherwise. Section 19.2 further prescribes that the FAA “shall
govern Section 21.6” if the parties select arbitration as their
method of binding dispute resolution.
In addition, § 21.3, captioned “Time Limits on Claims,”
requires that the parties commence all claims and causes of
action against each other arising out of or related to the agree-
ment “in accordance with the requirements of the final dispute
resolution method selected in this Agreement . . . within the
1
Good Samaritan Coffee Co. v. LaRue Distributing, 275 Neb. 674, 748
N.W.2d 367 (2008).
2
Morgan v. Sundance, Inc., ___ U.S.___, 142 S. Ct. 1708, 212 L. Ed. 2d
753 (2022).
- 505 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502period specified by applicable law, but in any case not more
than 10 years after the date of Substantial Completion of the
Work.” Section 21.3 also provides that the parties “waive all
claims and causes of action not commenced in accordance with
[the agreement’s] Section 21.3.”
Kingery sued OSCW for breach of contract on April 16,
2021, seeking recovery of $41,698.57 allegedly owed to
Kingery for work performed under the agreement, as well as
attorney fees and interest under the Nebraska Construction
Prompt Payment Act, codified at Neb. Rev. Stat. § 45-1201 et
seq. (Reissue 2021).
OSCW moved to dismiss Kingery’s complaint with preju-
dice on May 19, 2021, arguing that Kingery waived its breach
of contract claim under § 21.3 of the agreement by filing suit
on the claim, rather than commencing it in arbitration. Kingery
responded by filing a demand for arbitration with the AAA on
June 8 and a motion to stay the case for arbitration with the
district court on June 9.
The AAA contacted OSCW and Kingery on June 23, 2021,
to inform them that the matter was being administered under
the “Fast Track Procedures” of the Construction Industry
Arbitration Rules and that OSCW had until June 30 to make
any answer or counterclaim.
The district court held a hearing on June 29, 2021, to con-
sider Kingery’s motion to stay and motion to compel arbitra-
tion, as well as OSCW’s motion to dismiss. At the hearing,
OSCW reiterated its argument that Kingery waived its breach
of contract claim under § 21.3 of the parties’ agreement.
OSCW also argued that Kingery waived its right to stay the
case for arbitration under § 3 of the FAA by its litigation-
related conduct based on the three-part test of waiver set
forth in LaRue Distributing. 3 Specifically, OSCW asserted
that Kingery’s knowledge of its right to arbitration cannot be
disputed, given that “it’s now trying to initiate an arbitration
3
See Good Samaritan Coffee Co. v. LaRue Distributing, supra note 1.
- 506 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502action”; that Kingery acted inconsistently with this right by
filing suit; and that Kingery’s litigation-related conduct preju-
diced OSCW because there have been “hearing[s] on . . . a
couple motions, travel time, time, and [the] expense of brief-
ing this and so forth.” OSCW further maintained that the
motion to arbitrate was “prejudicial in and of itself” because
Kingery filed it to avoid a court ruling “here, now at this
time” dismissing its claim with prejudice. OSCW also asked
the district court to stay the AAA arbitration case pending the
court’s decision.
Kingery disputed OSCW’s interpretation of § 21.3 of the
parties’ agreement, arguing that it provides for waiver only
of claims not brought within the prescribed time, rather than
claims not commenced in arbitration. As to waiver under the
FAA, Kingery did not dispute its awareness of its right to
arbitration, but asserted “[n]o Court has ever held” that filing
a lawsuit is inconsistent with the right to arbitration. Kingery
also disputed OSCW’s claim of prejudice because less than 2
months passed between when Kingery filed suit and when it
moved for a stay and because OSCW had not yet briefed the
issue. Kingery asserted this fell short of the litigation-related
conduct seen in LaRue Distributing.
On June 30, 2021, 1 day after the hearing and the day
OSCW’s answer and counterclaim were due to the AAA, the
district court granted OSCW’s motion to stay the arbitra-
tion case.
Subsequently, on September 1, 2001, the district court
reversed that order and granted Kingery’s motion to stay
the district court case under § 3 of the FAA. In so doing,
the court adopted OSCW’s arguments regarding Kingery’s
knowledge of its right to arbitration and action inconsistent
with that right. However, the court agreed with Kingery that
OSCW suffered no prejudice because of Kingery’s litigation-
related conduct. In so finding, it noted that it had not decided
any substantive issue, that “less than 2 months” had passed
between the lawsuit’s filing and the motion for a stay, and
- 507 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502that “minimal litigation . . . ha[d] occurred to this point.” The
district court also noted that it did not reach the merits of
OSCW’s motion to dismiss with prejudice due to Kingery’s
alleged waiver of its claim under § 21.3 of the parties’
agreement.
OSCW appealed to the Nebraska Court of Appeals, and
we moved the matter to our docket. After oral argument in
this court, we requested supplemental briefing by the parties
addressing what constitutes default in proceeding with arbitra-
tion under § 3 of the FAA after the U.S. Supreme Court’s deci-
sion in Morgan. 4 The parties promptly submitted supplemental
briefs, which we have considered.
ASSIGNMENTS OF ERROR
OSCW assigns, restated, that the district court erred in (1)
requiring a showing of prejudice to prove a party waived its
right to arbitration under the FAA, given that § 2 of the FAA
calls for state law to be applied when determining whether
agreements to arbitrate are valid and enforceable and that prej-
udice is not otherwise required to show waiver under Nebraska
contract law, and, alternatively, (2) concluding OSCW was
not prejudiced under the three-part test of waiver set forth in
LaRue Distributing. 5
STANDARD OF REVIEW
[1,2] Whether a stay of proceedings should be granted and
arbitration required is a question of law. 6 When reviewing
questions of law, this court has an obligation to resolve the
questions independently of the conclusion reached by the trial
court. 7
4
See Morgan v. Sundance, Inc., supra note 2.
5
See Good Samaritan Coffee Co. v. LaRue Distributing, supra note 1.
6
Noah’s Ark Processors v. UniFirst Corp., 310 Neb. 896, 970 N.W.2d 72(2022).
7
Id.- 508 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502ANALYSIS
The district court granted Kingery’s motion to stay its
breach of contract case against OSCW based on the three-
part test of waiver that we adopted in LaRue Distributing. 8
Under this test, a party seeking arbitration may be found to
have waived its right to arbitration if it (1) knew of an exist-
ing right to arbitration; (2) acted inconsistently with that right;
and (3) prejudiced the other party by these inconsistent acts. 9
As relevant here, OSCW was required to show it was preju-
diced by Kingery’s litigation-related conduct. OSCW argued
before the district court that it suffered such prejudice because
of “hearing[s] on . . . a couple motions, travel time, time,
and [the] expense of briefing this and so forth.” However, on
appeal, it also argued that prejudice should not be required
when determining whether a party has waived its right to stay
a case for arbitration.
It is generally true that when a party raises an issue for
the first time in an appellate court, the court will disregard
it because a lower court cannot commit error in resolving an
issue never presented and submitted to it for disposition. 10
However, we have previously found that this rationale does not
apply in cases, like this one, where the party would have had
to ask a lower court not to follow a controlling decision from
this court in order to preserve for appeal an issue that the party
claims we incorrectly decided. 11
As such, in light of the U.S. Supreme Court’s decision
in Morgan, 12 we agree and overrule our decision in LaRue
8
See Good Samaritan Coffee Co. v. LaRue Distributing, supra note 1.
9
Id.10
Eletech, Inc. v. Conveyance Consulting Group, 308 Neb. 733, 956 N.W.2d
692 (2021).
11
See, e.g., State v. Vann, 306 Neb. 91, 944 N.W.2d 503 (2020); Bassinger v.
Nebraska Heart Hosp., 282 Neb. 835, 806 N.W.2d 395 (2011).
12
Morgan v. Sundance, Inc., supra note 2.
- 509 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502Distributing 13 and cases relying on it to the extent they can be
read to hold that prejudice is necessary for a waiver based on
litigation-related conduct.
Jurisdiction
[3] Before reaching the legal issues presented for review,
it is the duty of an appellate court to determine whether it
has jurisdiction over the matter before it. 14 This is so even
where, as here, neither party has raised the issue. 15 Under Neb.
Rev. Stat. § 25-1911 (Reissue 2016), for an appellate court to
acquire jurisdiction of an appeal, there must be a final judg-
ment or final order entered by the tribunal from which the
appeal is taken. 16
[4] We have previously found that a court order staying an
action pending arbitration is a final, appealable order under
Neb. Rev. Stat. § 25-1902 (Cum. Supp. 2020) because it affects
a substantial right and is made in a special proceeding. 17 In
this context, a stay has the same effect as a dismissal, because
the “‘parties cannot litigate their dispute in state courts.’” 18
Accordingly, this court has jurisdiction to consider this appeal
of the district court’s order granting Kingery’s motion to stay
the pending case in district court.
Prejudice as Requirement for Waiver
[5,6] Congress enacted the FAA 19 nearly a century ago, in
1925, with the stated goal of placing arbitration agreements
13
Good Samaritan Coffee Co. v. LaRue Distributing, supra note 1.
14
Cullinane v. Beverly Enters. - Neb., 300 Neb. 210, 912 N.W.2d 774(2018).
15
Id.16
In re Estate of Anderson, 311 Neb. 758, 974 N.W.2d 847 (2022).
17
Citizens of Humanity v. Applied Underwriters, 299 Neb. 545, 909 N.W.2d
614 (2018).
18
Id. at 555, 909 N.W.2d at 624.
19
9 U.S.C. §§ 1 through 16 (2018).
- 510 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502“‘upon the same footing as other contracts, where [they]
belong[],’” and overcoming courts’ “longstanding refusal”
to enforce such agreements. 20 Section 2 of the FAA, some-
times described as its “key provision,” provides that written
arbitration agreements in contracts involving interstate com-
merce are “‘valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any
contract.’” 21 The U.S. Supreme Court has held that state law
applies when determining whether an arbitration agreement is
valid and enforceable under § 2, 22 and we have found that the
FAA preempts inconsistent state laws that apply solely to the
enforceability of arbitration provisions in contracts involving
interstate commerce. 23
[7,8] Sections 3 and 4 of the FAA, in turn, “establish[] pro-
cedures” by which the “substantive rule” of § 2 may be imple-
mented. 24 Specifically, they prescribe that “any . . . court[] of
the United States” in which a suit or proceeding is brought on
an issue that may be referred to arbitration shall stay the case
for arbitration upon a party’s application so long as the “appli-
cant . . . is not in default in proceeding with . . . arbitration.” 25
20
Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219, 105 S. Ct. 1238,
84 L. Ed. 2d 158 (1985), quoting H.R. Rep. No. 96, 68th Cong., 1st Sess.
(1924).
21
Prima Paint v. Flood & Conklin, 388 U.S. 395, 400, 87 S. Ct. 1801, 18 L.
Ed. 2d 1270 (1967), quoting 9 U.S.C. § 2.
22
See, e.g., Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-31, 125 S.
Ct. 2129, 161 L. Ed. 2d 1008 (2009) (“‘[s]tate law’ . . . is applicable to
determine which contracts are binding under § 2 . . . ‘if that law arose to
govern issues concerning the validity, revocability, and enforceability of
contracts generally’”).
23
See, e.g., Aramark Uniform & Career Apparel v. Hunan, Inc., 276 Neb.
700, 757 N.W.2d 205 (2008); Dowd v. First Omaha Sec. Corp., 242 Neb.
347, 495 N.W.2d 36 (1993).
24
Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 68, 130 S. Ct. 2772, 177
L. Ed. 2d 403 (2010).
25
9 U.S.C. § 3.
- 511 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502They similarly provide for a party aggrieved by another’s
“alleged failure, neglect, or refusal . . . to arbitrate” to ask the
court for an order compelling arbitration. 26 We have noted that
the U.S. Supreme Court has never held that these “procedural
sections” of the FAA apply to state courts. 27 However, we have
previously taken the view that § 3 applies to state court pro-
ceedings 28 and have ruled on motions to stay and compel made
under §§ 3 and 4. 29
In our 2008 decision in LaRue Distributing, we relied
upon a test of waiver used by the Eighth Circuit that included
prejudice when considering whether the district court erred
in denying the defendants’ motion to stay trial and compel
arbitration under §§ 3 and 4 of the FAA. 30 Their agreement
with the complainant required that “‘[a]ll controversies relat-
ing to, in connection with, or arising out of this contract’”
be settled by arbitration. 31 However, when the complainant
sued for breach of contract and tortious interference with a
business relationship, the defendants did not initially seek
arbitration. 32 Instead, over a 3-year period, they served sev-
eral sets of written discovery requests on the complainant,
26
9 U.S.C. § 4.
27
See, e.g., Kremer v. Rural Community Ins. Co., 280 Neb. 591, 599, 788
N.W.2d 538, 547 (2010).
28
Dowd v. First Omaha Sec. Corp., supra note 23, 242 Neb. at 350, 495
N.W.2d at 39 (“[t]he U.S. Supreme Court has held that the FAA requires
state courts, as well as federal courts, to grant stays pending arbitration”),
citing Moses H. Cone Hospital v. Mercury Constr. Corp., 460 U.S. 1, 26,
103 S. Ct. 927, 74 L. Ed. 2d 765 (1983) (“state courts, as much as federal
courts, are obliged to grant stays . . . under § 3 of the [FAA]”).
29
See, e.g., Cullinane v. Beverly Enters. - Neb., supra note 14; Good
Samaritan Coffee Co. v. LaRue Distributing, supra note 1; Dowd v. First
Omaha Sec. Corp., supra note 23.
30
See Good Samaritan Coffee Co. v. LaRue Distributing, supra note 1.
31
Id. at 676, 748 N.W.2d at 370.
32
Good Samaritan Coffee Co. v. LaRue Distributing, supra note 1.
- 512 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502exchanged pleadings, filed a counterclaim, and filed and
received a ruling on a motion for summary judgment. 33 Only
then did they move to stay the case and compel arbitration. 34
The district court denied the motion, the defendants appealed,
and we affirmed. 35
In so doing, we first noted that § 3 of the FAA requires a
court case to be stayed for arbitration only if the party seeking
the stay “‘is not in default in proceeding with . . . arbitration’”
and that “‘default’” has been interpreted to “include” waiver. 36
We next applied the Eighth Circuit’s test for waiver, without
expressly holding that this test is required to be used. 37 In
doing so, we found that all three factors “weigh[ed] in favor”
of waiver in the LaRue Distributing defendants’ case 38: There
was no contention or evidence that they were unaware of their
right to arbitration, that they acted inconsistently with this right
with their litigation-related conduct over 3 years, and that their
conduct “had the inevitable effect of causing [the complainant]
to expend substantial time and resources in connection with
this case.” 39
The same Eighth Circuit test that we adopted in LaRue
Distributing—and that the district court relied upon when
granting Kingery’s motion to stay this case—was at issue in the
U.S. Supreme Court’s decision on May 23, 2022, in Morgan. 40
Robyn Morgan had sued her former employer, Sundance,
Inc., for alleged violations of federal labor law. As part of her
job application, Morgan agreed to “‘use confidential binding
33
Id.
34
Id.
35
Id.
36
Id. at 682, 748 N.W.2d at 374.
37
Good Samaritan Coffee Co. v. LaRue Distributing, supra note 1.
38
Id. at 684, 748 N.W.2d at 375.
39
Id. at 686, 748 N.W.2d at 377.
40
Morgan v. Sundance, Inc., supra note 2.
- 513 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502arbitration, instead of going to court.’” 41 However, when
Morgan sued, Sundance did not initially move to stay the case
and compel arbitration. Instead, over a period of 8 months, it
filed a motion to dismiss and an answer and engaged in media-
tion, before invoking arbitration.
The district court found that Sundance had waived its right
to arbitration with its litigation-related conduct, but the Eighth
Circuit disagreed on the grounds that Morgan suffered no prej-
udice because 4 of the 8 months were spent waiting for a deci-
sion from the court on a “quasi-jurisdictional” issue, no discov-
ery was conducted, and Morgan would not need to “duplicate
her efforts during arbitration.” 42 Morgan sought review from
the U.S. Supreme Court, which agreed to hear the case because
the federal courts of appeals took different views as to whether
prejudice is required to show a waiver of the right to arbitration
under the FAA. 43 Morgan argued, like OSCW did on appeal
before this court, that prejudice should not be required, because
§ 2 of the FAA calls for state law to be used in determining
whether an agreement to arbitrate is enforceable and because
state contract law generally does not require prejudice for a
waiver. Sundance countered that waiver involves § 3, not § 2,
and that thus, federal rules govern and impose no deadline for
seeking arbitration.
The U.S. Supreme Court ruled in favor of Morgan, but
based its decision on § 6 of the FAA, which, it observed,
provides that “any application [to the court thereunder] ‘shall
be made and heard in the manner provided by law for the
making and hearing of motions,’” except as otherwise therein
expressly provided. 44 Specifically, the Supreme Court found
that the phrase “any application” in § 6 of the FAA includes
41
Id., 142 S. Ct. at 1711.
42
Morgan v. Sundance, Inc., 992 F.3d 711, 715 (8th Cir. 2021), vacated and
remanded, Morgan v. Sundance, Inc., supra note 2.
43
Morgan v. Sundance, Inc., supra note 2.
44
Id., 142 S. Ct. at 1714, quoting 9 U.S.C. § 6.
- 514 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502applications to stay a court case and compel arbitration under
§§ 3 and 4 of the FAA and noted that “a federal court assess-
ing waiver does not generally ask about prejudice.” 45 As such,
the Morgan Court concluded that the Eighth Circuit erred in
imposing an arbitration-specific requirement of prejudice. It
noted that the Eighth Circuit and other federal courts which
required prejudice did so based on the federal “‘policy favor-
ing arbitration,’” but found that that policy “does not authorize
federal courts to invent special, arbitration-preferring proce-
dural rules.” 46
[9] In light of the U.S. Supreme Court’s decision in Morgan,
we overrule our earlier decision in LaRue Distributing and
cases relying on it to the extent they can be read to hold that
prejudice is required for a waiver based on litigation-related
conduct. 47 While the doctrine of stare decisis is entitled to
great weight, it was never intended to indefinitely perpetuate
erroneous decisions, 48 and LaRue Distributing is erroneous
insofar as it appears to condition a waiver of the right to stay
a case for arbitration under § 3 of the FAA upon a show-
ing of prejudice. LaRue Distributing applied a three-part test
of waiver used by the Eighth Circuit that the U.S. Supreme
Court has held is erroneous. As such, continued application
of the Eighth Circuit’s test by this court would be erroneous.
However, our decision leaves untouched the central holding
of LaRue Distributing that the court, rather than the arbitrator,
should generally determine whether a party waived its right to
arbitration under the FAA based on litigation-related conduct. 49
Only the language adopting the Eighth Circuit’s prejudice
requirement is disapproved.
45
Id., 142 S. Ct. at 1713.
46
Id.
47
See, Morgan v. Sundance, Inc., supra note 2; Good Samaritan Coffee Co.
v. LaRue Distributing, supra note 1.
48
See Heckman v. Marchio, 296 Neb. 458, 894 N.W.2d 296 (2017).
49
Good Samaritan Coffee Co. v. LaRue Distributing, supra note 1.
- 515 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502In overruling this aspect of LaRue Distributing, we are
aware that Morgan was directed to the federal courts and that
questions have been raised about the application of the FAA
generally and § 3 specifically to state court proceedings. 50
However, OSCW and Kingery both acknowledge that the FAA
applies here under § 19.2 of the agreement, which calls for
the FAA to govern arbitration proceedings if the parties select
arbitration as their method of binding dispute resolution, as
they did. Moreover, even if the parties were not of this view,
we find nothing in Morgan to suggest that modifications must
be made to our earlier decisions which, directly or inferentially,
apply §§ 3 and 4 of the FAA to Nebraska state court proceed-
ings at this time in light of the facts and circumstances of this
case. OSCW asserts that the U.S. Supreme Court has “held
that Section 3 is inapplicable to state court lawsuits,” but the
cases cited in support of this proposition state only that the
U.S. Supreme Court has never held that § 3 applies to State
court proceedings. 51
Morgan also “assume[d] without deciding” that the federal
courts are correct to “resolve[] cases like this one as a mat-
ter of federal law, using the terminology of waiver,” 52 and
expressly gave the Eighth Circuit the option to determine
whether Sundance knowingly relinquished the right to arbi-
tration by acting inconsistently with that right or “determine
50
See, e.g., Badgerow v. Walters, ___ U.S. ___, 142 S. Ct. 1310, 1326, 212
L. Ed. 2d 355 (2022) (Breyer, J., dissenting) (“we cannot be sure that state
courts have the same powers under the FAA that federal courts have”);
DirectTV, Inc. v. Imburgia, 557 U.S. 47, 136 S. Ct. 463, 193 L. Ed. 2d 365(2015) (Thomas, J., dissenting) (FAA as whole inapplicable to state court
proceedings); Southland Corp. v. Keating, 465 U.S. 1, 104 S. Ct. 852, 79
L. Ed. 2d 1 (1984) (O’Connor, J., dissenting; Rehnquist, J., joins) (§§ 3
and 4 of FAA inapplicable to state court proceedings).
51
Supplemental brief for appellant at 14. See, Volt Info. Sciences v. Leland
Stanford Jr. U., 489 U.S. 468, 109 S. Ct. 1248, 103 L. Ed. 2d 488 (1989);
Southland Corp. v. Keating, supra note 50.
52
Morgan v. Sundance, Inc., supra note 2, 142 S. Ct. at 1712.
- 516 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502that a different procedural framework (such as forfeiture) is
appropriate.” 53 Nonetheless, we find that waiver remains a suit-
able term and focus for analysis for now. OSCW and Kingery
agree that the standards for default, waiver, and forfeiture are
much the same under Nebraska law, although they disagree
about the conclusions to be drawn based upon the application
of these standards in this case, and Nebraska law as to waiver
is generally consistent with federal law.
[10] Under federal and Nebraska law, “waiver” of a right
is voluntary and intentional relinquishment of a known right,
privilege, or claim, and may be demonstrated by or inferred
from person’s conduct. 54 We have noted that an agreement
to arbitrate can be waived by the parties. 55 We have further
held that state law governs the formation of contracts, as well
as the validity, revocability, and enforceability of contracts
generally, 56 and the U.S. Supreme Court has declared that state
contract law applies to contracts with arbitration agreements
governed by the FAA. 57
Since the district court here decided the matter upon a
legal framework which has since been found erroneous and
because waiver is a question of fact, 58 the matter must be
remanded back to the trial court for further proceedings.
Upon remand, the district court should apply our ordinary
53
Id., 142 S. Ct. at 1714.
54
Compare U.S. Pipeline v. Northern Natural Gas Co., 303 Neb. 444, 930
N.W.2d 460 (2019) (waiver of right under contract) with State v. Figures,
308 Neb. 801, 957 N.W.2d 161 (2021) (waiver of defendant’s right to be
present at trial) and Morgan v. Sundance, Inc., supra note 2 (similar as to
contract and other cases).
55
Boyd v. Cook, 298 Neb. 819, 906 N.W.2d 31 (2018).
56
Cullinane v. Beverly Enters. - Neb., supra note 14.
57
Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681, 116 S. Ct. 1652, 134
L. Ed. 2d 902 (1996).
58
See Siouxland Ethanol v. Sebade Bros., 290 Neb. 230, 859 N.W.2d 586(2015).
- 517 -
Nebraska Supreme Court Advance Sheets
312 Nebraska Reports
KINGERY CONSTR. CO. V. 6135 O ST. CAR WASH
Cite as 312 Neb. 502waiver standards to determine whether Kingery has waived
its right to arbitrate.
Because the order is reversed and the cause remanded to
the district court for further proceedings, we need not consider
OSCW’s other assignments of error. An appellate court is not
obligated to engage in an analysis that is not necessary to adju-
dicate the case and controversy before it. 59
CONCLUSION
Because we find prejudice is not required to prove a party
waived its right to stay a court case pending arbitration under
§ 3 of the FAA after the U.S. Supreme Court’s decision in
Morgan, 60 we reverse the order of the district court and remand
the cause for further proceedings consistent with this opinion.
Reversed and remanded for
further proceedings.
Heavican, C.J., not participating.
59
State v. Huston, 298 Neb. 323, 903 N.W.2d 907 (2017).
60
Morgan v. Sundance, Inc., supra note 2.