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Taco Bell Case Puts Arbitration in Spotlight at Supreme Court

Nov. 15, 2021, 2:36 PM

The U.S. Supreme Court agreed to consider whether an Iowa fast-food worker must arbitrate her overtime claims against a Taco Bell franchise, rather than press them in federal court.

Accepting the case could signal that the court may have found a stopping point for robust enforcement of arbitration rights, which have been at the center of numerous suits over the past decade.

The case centers on the waiver of rights by failing to promptly invoke arbitration early in litigation.

Robyn Morgan’s suit against the franchise, Sundance, Inc., proceeded in federal court for nearly eight months before the company invoked an arbitration provision in its standard form employment contract.

The trial judge in the Southern District of Iowa said Sundance had waited too long to bring its motion, and ordered the litigation to continue in court.

But the U.S. Court of Appeals for the Eighth Circuit reversed that ruling. Although Sundance failed to promptly invoke arbitration, that delay didn’t prejudice Morgan, the Eighth Circuit said.

Morgan argues the Fifth Circuit ruling puts arbitration provisions on better footing than other contractual rights which don’t require a showing of prejudice before they are deemed waived.

She also argues that courts across the country are split on whether prejudice is required, creating a “gauntlet of inconsistencies,” Morgan said in her brief urging the justices to take the case.

The case is Morgan v. Sundance, Inc., U.S., No. 21-328.

To contact the reporter on this story: Kimberly Strawbridge Robinson in Washington at krobinson@bloomberglaw.com

To contact the editors responsible for this story: Seth Stern at sstern@bloomberglaw.com; John Crawley at jcrawley@bloomberglaw.com

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