By Leslie King O’Neal
Preventing “Dogged, Unreasonable Opposition” to Arbitration
Arbitration is a quick, economical, and efficient dispute resolution method. However, prolonged litigation before arbitration begins and after award can thwart these goals. Some courts are awarding sanctions to prevent this.
Those fond of the strategy of opposing every step in the arbitration process with court filings may want to reconsider this approach. “Reluctance to see the benefits of arbitration smothered by the costs and delay of litigation explains the increasing tendency of courts to order a party feebly opposing arbitration (or its outcome) to pay the winner’s legal fees. [citations omitted] Anything less makes a mockery of arbitration’s promise to expedite and cut the costs of resolving disputes.” [i]
In Caroline Retzios v. Epic Systems Corporation[ii] the 7th Circuit, frustrated by plaintiff’s “dogged, objectively unreasonable opposition” to arbitration, awarded appellate attorney’s fees as sanctions for the frivolous appeal from an order compelling arbitration.
Motion to Compel Arbitration Granted; Case Dismissed
Epic Systems fired plaintiff Retzios for refusing vaccination from COVID-19. She sued, alleging a civil rights violation for failure to accommodate her religious objection to vaccination. The district court granted Epic’s motion to compel arbitration pursuant to the employment agreement and dismissed the suit. Dismissing the case (rather than staying it) created an appealable order, [iii] much to Judge Easterbrook’s dismay.
Arbitration Clause is a Forum Selection Clause
Both the district court and the 7th Circuit held the arbitration agreement, which covered any statutory or common law legal claims that related to or arose out of Retzios’s employment or the termination of her employment, included her civil rights claim. The 7th Circuit noted “an arbitration clause is a forum-selection clause.” Many cases have held that statutory claims, such as this civil rights claim, are subject to arbitration.
Objections to Arbitration Meritless
The 7th Circuit found Plaintiff’s claims that the arbitration agreement was “illusury” [sic] or barred by promissory estoppel to be meritless and unsupported by any facts. The court denied Plaintiff’s claim that Epic waived arbitration because it did not move to dismiss her EEOC or unemployment claims, since those claims were specifically excepted from the arbitration clause.
Groundless Objections to Arbitration Warrant Sanctions
Granting Epic’s motion for sanctions[iv] the court said, “Many decisions in this circuit award sanctions when litigants present objectively groundless objections to arbitration—either before the arbitrator has a crack at the dispute, or when the loser tries to upset the award.”
The court noted that unwarranted litigation before and after an arbitration makes arbitration its own enemy. The arbitration clause exacerbates the dispute rather than providing fast, efficient dispute resolution.
Sanctions Imposed to Protect Arbitration Process
Judge Easterbrook stated: “Arbitration will not work if legal contests are its bookends: a suit to compel or prevent arbitration, the arbitration itself, and a suit to enforce or set aside the award. Arbitration then becomes more costly than litigation.”[v] “This circuit’s decisions awarding sanctions for dogged, objectively unreasonable opposition are designed to prevent that from happening.”
Takeaways:
- Arbitration’s benefits can be smothered by the costs and delays of litigation before arbitration begins and after award.
- To prevent this, courts are awarding sanctions for filing meritless appeals from orders compelling arbitration or filing meritless motions to vacate arbitration awards.
[i] Prod. Employees’ Local 504 v. Roadmaster Corp., 916 F.2d 1161, 1163 (7th Cir. 1990). https://casetext.com/case/prod-employees-local-504-v-roadmaster-corp
[ii] Retzios v Epic Systems Corp., No. 24-1701 (7th Cir. 2025).https://law.justia.com/cases/federal/appellate-courts/ca7/24-1701/24-1701-2025-01-24.html
[iii] The 7th Circuit noted that the district court should have stayed the case upon compelling arbitration, rather than dismissing it, citing Smith v. Spizzirri, 601 U.S. 472 (2024).
[iv] Epic moved for sanctions under Fed. R. App. P. 38.1163.
[v] Citing Roadmaster Corp., supra, at 1163 (7th Cir. 1990).
