Court: South Dakota Supreme Court; February 26, 1991; South Dakota; State Supreme Court
Dale Tjeerdsma, a South Dakota farmer, entered into a sales agreement with Global Steel Buildings and Miracle Steel Corporation for a steel building, which included an arbitration clause stipulating that disputes would be settled in Fargo, North Dakota. After the building collapsed post-assembly, Tjeerdsma initiated a breach of warranty lawsuit against both companies in June 1989. The defendants did not assert the arbitration clause as a defense in their initial pleadings, focusing instead on other defenses. Extensive pretrial discovery took place, including interrogatories and depositions, with no mention of arbitration from the defendants until January 1990, when they filed a motion to compel arbitration. The trial court then heard the motion and subsequently denied it, determining that the defendants had waived their right to arbitration due to their failure to invoke it in a timely manner amidst the ongoing litigation process. The defendants contended that the Federal Arbitration Act should enforce the arbitration clause, but the court upheld the denial of their motion.
SDCL ch. 21-25A allows for the enforcement of arbitration agreements, even if arbitration is to occur outside South Dakota. However, the court upheld the trial court's ruling that the defendants waived their right to arbitration. Waiver of arbitration can occur through actions that are inconsistent with the right to arbitrate, coupled with prejudice to the party claiming waiver. Mere delay in seeking a stay of litigation does not constitute waiver without resulting prejudice. The court emphasized that the decision of waiver is determined by the significance of the party's actions in a judicial forum, and that delay and trial-oriented activities are key factors in assessing claims of prejudice.
In this case, the defendants did not assert their right to arbitrate when responding to the complaint, engaged in discovery, and filed a certificate of readiness for trial without raising the arbitration defense. This conduct was deemed inconsistent with maintaining an arbitration claim, and the resulting prejudice to Tjeerdsma was clear. Therefore, the court affirmed the trial court's determination that the defendants waived their arbitration rights. Additionally, a note mentioned that an issue regarding the requirement to plead "arbitration and award" as an affirmative defense was not addressed due to it being raised for the first time at oral argument. The case was distinguished from a previous case where a motion to compel arbitration was made after discovery but before trial, which did not involve a waiver discussion.
