United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 8, 2011 Decided July 29, 2011
No. 10-7041
ZUCKERMAN SPAEDER, LLP,
APPELLEE
v.
JAMES A. AUFFENBERG, JR.,
APPELLANT
Appeal from the United States District Court
for the District of Columbia
(No. 1:09-cv-00906)
David A. Holzworth argued the cause for appellant. With
him on the briefs was Thomas A. Duckenfield, III.
Francis D. Carter argued the cause for appellee. With
him on the brief was Douglas R. Miller.
Before: GINSBURG and GARLAND, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge GINSBURG.
GINSBURG, Circuit Judge: Zuckerman Spaeder, LLP
filed this lawsuit against James Auffenberg, Jr. for recovery
2
of unpaid attorneys’ fees. Auffenberg counterclaimed for
malpractice and later petitioned for arbitration before the
District of Columbia Attorney/Client Arbitration Board
(ACAB), an arm of the District of Columbia Bar. He also
moved the district court for a stay pursuant to the Federal
Arbitration Act (FAA), 9 U.S.C. § 3, the denial of which he
now appeals. We affirm the order.
I. Background
Zuckerman Spaeder represented Auffenberg in a criminal
tax fraud case tried in the District Court for the United States
Virgin Islands. After he had been acquitted Auffenberg
refused to pay Zuckerman’s last two bills, or approximately
$834,000.
Zuckerman sued Auffenberg in the District of Columbia
Superior Court to recover the fees plus interest. Auffenberg
removed the case to federal court, answered the complaint,
and counterclaimed for legal malpractice. In the counterclaim
he alleged Zuckerman had agreed to cap its fees at $1.5
million, and the $834,000 it had charged beyond that was
unreasonable and actionable under Rule 1.5 of the District of
Columbia Rules of Professional Conduct.
One month later Auffenberg moved for leave to amend
his counterclaims to include allegations Zuckerman had
violated its duties under Rule 1.6 by discussing the dispute
with third parties, including former co-counsel and a reporter
for the Blog of the Legal Times. Auffenberg also asked for a
protective order to prevent Zuckerman from communicating
with third parties absent Auffenberg’s prior consent.
Zuckerman then filed an amended complaint seeking
relief quantum meruit. Auffenberg in turn amended his
3
answer and counterclaim, again alleging violations of both
Rule 1.5 and Rule 1.6. Zuckerman moved for various reasons
to strike or in the alternative to dismiss the amended
counterclaims. A hearing before the district court was
scheduled for October 28, 2009.
Two weeks before the scheduled hearing the parties filed
a joint statement pursuant to the district court’s standing order
that litigants meet to discuss the possibility of settlement and
the usefulness if any of alternative dispute resolution.
Although they acknowledged “the prospects of settlement are
unclear at this time” and the usefulness of mediation
“uncertain,” they requested a “rather early mediation session”
before a Magistrate Judge. They also submitted a proposed
schedule culminating in a trial to take place in January 2011.
At the October 28 hearing, the district court agreed to
refer the case to mediation for two months only. The court
also directed the parties to negotiate a protective order
allowing Zuckerman to contact its former co-counsel, denied
without prejudice Zuckerman’s motion to dismiss, and
ordered Auffenberg within two weeks to amend his
counterclaims so as to cure any defects.
The parties appeared before a Magistrate Judge for a
single day of mediation in December 2009. Little came of the
talks other than the magistrate’s suggestion the parties submit
their claims to binding arbitration before either a Magistrate
Judge or the ACAB. Although a client may invoke
mandatory arbitration of any fee dispute under D.C. Bar Rule
XIII, both attorney and client must agree to arbitrate a
malpractice claim before the ACAB.
Auffenberg claims to have engaged in a “long back and
forth” with Zuckerman in the hope of obtaining the firm’s
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consent to arbitration before the ACAB. In any event, on
January 29, 2010, he filed a unilateral petition with the ACAB
and that same day moved the district court for a stay of the
proceedings. His petition to the ACAB covered both the fee
dispute and his malpractice claims.
The district court denied Auffenberg’s request for a stay
on the ground that he had waived his right to seek arbitration
of the dispute. The court concluded Auffenberg, by
petitioning the ACAB, was trying to “get a second bite” at
alternative dispute resolution after mediation had failed. Even
if Auffenberg had not engaged substantially with Zuckerman
on the merits, he had answered the complaint and moved the
case from state to federal court, and from the court to
mediation, all before filing his petition or even indicating he
intended to arbitrate his claims before the ACAB. His
“participation” in the courts and in mediation precluded
Auffenberg from obtaining a stay to try his luck in yet another
forum, that is, the ACAB.
Auffenberg immediately appealed the district court’s
order pursuant to § 16 of the FAA, 9 U.S.C. 16(a)(1)(A) (“An
appeal may be taken from ... an order ... refusing a stay of any
action under section 3 of this title”); see Arthur Andersen LLP
v. Carlisle, 129 S. Ct. 1896, 1900 (2009).
II. Analysis
Under the FAA a litigant is entitled to a stay pending
arbitration so long as the suit in which he is a party is
“referable to arbitration” under a valid agreement and he “is
not in default in proceeding with such arbitration.” 9 U.S.C. §
3. We have held a party who has actively participated in
litigation or otherwise acted in a manner inconsistent with an
intent to arbitrate is “necessarily ‘in default,’” within the
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meaning of this provision. Cornell & Co. v. Barber & Ross
Co., 360 F.2d 512, 513 (D.C. Cir. 1966).
On appeal, Zuckerman does not dispute the claims in this
case are “referable to arbitration” before the ACAB, nor do
the parties disagree about the relevant history of this
litigation. * Therefore, the only issue before us is whether
Auffenberg is “in default” of his right to arbitrate, a question
of law we address de novo. Khan v. Parsons Global Servs.
Ltd., 521 F.3d 421, 425 (D.C. Cir. 2008).
In our caselaw, from Cornell & Co. in 1966 through
Khan in 2008, we have always referred to the question of
default exclusively in terms of waiver. 360 F.3d at 513; 521
F.3d at 425. Waiver refers to a party’s “intentional
relinquishment or abandonment of a known right,” United
States v. Olano, 507 U.S. 725, 733 (1993). In our prior cases,
therefore, we have examined the record to determine whether
the party seeking a stay has acted in a manner “inconsistent
with any intent to assert its right to arbitrate.” Nat’l Cancer
Research Found. v. A.G. Edwards & Sons, Inc., 821 F.2d 772,
775 (1987). In conducting this inherently fact-bound analysis,
we have taken account of the “totality of the circumstances,”
including any potential prejudice to the non-moving party. Id.
at 774, 777. Consequently, we have established few bright-
line rules in this area.
In Khan we held “irrespective of other indicators of
involvement in litigation, filing a motion for summary
*
The parties dispute the occurrence and import of certain extra-
record discussions described by Auffenberg’s counsel at a hearing
in the district court on March 16, 2010. Auffenberg’s unsupported
allegations he sought arbitration “early and often” are unpersuasive
and irrelevant in any event, see infra at 7.
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judgment ... is inconsistent with preserving the right to
compel arbitration.” 521 F.3d at 428. Prejudice to the party
opposing a stay, which may be treated as a function of the
litigation conduct of the party seeking the stay, is “a relevant
factor” in our analysis. See, e.g., Cancer Research, 821 F.2d
at 777 (holding party’s motion for summary judgment had
prejudiced non-moving party, which was “forced to litigate
the substantive issues in the case”). We have only once
addressed the question of “waiver” in a case where the party
seeking a stay had not moved for summary judgment, and
there we did not purport to prescribe a standard for general
application. See Cornell & Co., 360 F.2d at 513 (affirming
denial of stay where movant had sought to transfer venue,
answered the complaint, filed a counterclaim, taken a
deposition, and obtained discovery because “[t]he litigation
machinery had been substantially invoked”).
Our reluctance thus far to define the standard further has
imposed a cost upon both litigants and the district court. The
waste of resources occasioned by this lawsuit, for one, might
have been avoided had we been more clear about the standard
we would have the district court apply. This is our effort to
fill that gap.
First, to be technically correct as well as clear, we note
forfeiture, not waiver, is the appropriate standard for
evaluating a late-filed motion under Section 3 of the FAA.
Forfeiture is the “failure to make a timely assertion of a right”
and, unlike waiver, entails no element of intent. Olano, 507
U.S. at 733. A party who fails timely to invoke his right to
arbitrate is “necessarily ‘in default’” when he later attempts to
proceed with arbitration under Section 3. See Cornell & Co.,
360 F.2d at 513-14 (emphasizing congressional intent to
prevent “dilatoriness and delay”); see also Moses H. Cone
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Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 (1983)
(identifying both waiver and delay as “defense[s] to
arbitrability” under the FAA, 9 U.S.C. § 2).
Second, to clarify what we mean by “timely,” we expand
upon the suggestion of the district court: A defendant seeking
a stay pending arbitration under Section 3 who has not
invoked the right to arbitrate on the record at the first
available opportunity, typically in filing his first responsive
pleading or motion to dismiss, has presumptively forfeited
that right. See Fed. R. Civ. P. 8(c) (enumerating affirmative
defenses defendant must raise in answer or else forfeit). A
defendant who delays seeking a stay pending arbitration until
after his first available opportunity might still prevail on a
later stay motion provided his delay did not prejudice his
opponent or the court. See Cancer Research, 821 F.2d at 776
(considering but rejecting defendant’s argument that
intervening decision by Supreme Court excused its earlier
failure to invoke arbitration); cf. FEC v. Legi-Tech, Inc., 75
F.3d 704 (D.C. Cir. 1996) (district court did not abuse
discretion permitting defendant to amend answer to include
separation-of-powers defense after intervening decision of
court of appeals where there was no prejudice to the FEC).
In this appeal, we affirm the district court’s denial of the
stay because Auffenberg failed to make a timely assertion of
his right to arbitrate, and his litigation activity after he filed
his initial answer and counterclaim imposed substantial costs
upon Zuckerman and the district court. That Auffenberg
failed to invoke arbitration in (or before filing) his original
answer is undisputed. Assuming for the sake of his argument
that Auffenberg “told Zuckerman early and often” of his
intention to arbitrate, that representation is nowhere
documented in the record. In his pre-trial huffery and puffery
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a party may float all sorts of intentions, serious or not; a court
considering a question of forfeiture is properly concerned
only with intentions placed upon the record.
For similar reasons we reject Auffenberg’s belated
attempt to distinguish his “arbitrable” claim regarding fees,
which he says he did not attempt to litigate, from his “non-
arbitrable” claim regarding third-party communications,
which he says was the only subject to which his litigation
conduct after filing his answer was addressed. See Cancer
Research, 821 F.2d at 775 (conduct of discovery pertaining
only to non-arbitrable claims would not by itself indicate
forfeiture of right to arbitration of arbitrable claims). Nothing
in Auffenberg’s filings prior to his motion to stay indicated to
Zuckerman or to the district court that Auffenberg was
pursuing in the court only his malpractice claims, or that he
was asking the district court to stay only the fee dispute
pending arbitration. On the contrary, Auffenberg petitioned
the ACAB to arbitrate the malpractice claims he now calls
“non-arbitrable.” Auffenberg therefore has forfeited any
argument that he litigated only his non-arbitrable claims.
Auffenberg might have overcome the presumption of
having forfeit his right to a stay had his conduct in litigation
after the first responsive pleading imposed no or little cost
upon opposing counsel and the courts. In this vein,
Auffenberg argues he made only “reactive defensive efforts”
that could not have prejudiced Zuckerman. Auffenberg’s
participation in discovery and mediation, however, combined
with his months-long delay before petitioning the ACAB,
unquestionably prejudiced Zuckerman, which reasonably
enough had commenced an internal investigation, responded
to and filed discovery requests, and begun preparing for
depositions, all of which activity related to Auffenberg’s
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arbitrable as well as non-arbitrable claims. Auffenberg’s
filings, including the repeated amendment of his answer and
counterclaims to cure the defects Zuckerman identified, also
drew upon inherently limited judicial resources, including the
time of both the district court and the Magistrate Judge.
Although delay alone “rarely” constitutes prejudice,
Cancer Research, 821 F.2d at 777, Auffenberg’s purportedly
“reactive” litigation activity induced Zuckerman and the
district court to expend time and effort on disputes, the
resolution of which would not equally advance the future
resolution of Auffenberg’s claims in arbitration. These costs
would have been avoided had he filed his petition to arbitrate
and corresponding motion for a stay eight months earlier,
when he first answered the complaint and filed his notice of
removal. A rebuttable presumption of forfeiture will realign
litigants’ incentives consistent with the FAA, with benefits in
the form of savings inuring to all.
III. Conclusion
By this opinion we alert the bar in this Circuit that failure
to invoke arbitration at the first available opportunity will
presumptively extinguish a client’s ability later to opt for
arbitration. Accordingly, the order of the district court is
Affirmed.