The Sixth Circuit recently reversed a denial of a motion to compel arbitration in an MDL, where the district court had raised the issue of waiver of arbitration rights on its own and ruled defendant had waived the right even when there was no evidence it had knowledge of the right.  In Re Chrysler Pacifica Fire Recall Products Liability Litigation, — F.4th —-, 2025 WL 1904525 (6th Cir. Jul. 10, 2025).

The case arose from a recall of certain Chrysler minivans with batteries that “could spontaneously explode.”  Id. at *3.  Seven putative class actions were filed, which were consolidated into an MDL in the Eastern District of Michigan.  The defendant filed a motion to dismiss the resulting consolidated complaint, but discovery commenced while the motion was pending.  After serving subpoenas on the dealers that sold the minivans to named plaintiffs, the defendant learned that over one quarter of those plaintiffs had sales contracts containing arbitration provisions, and moved to compel arbitration for that group.  Despite the fact that the issue of waiver was not raised by plaintiffs, the district court denied the defendant’s motion on that basis, holding that moving to dismiss all claims was “entirely inconsistent” with an intent to arbitrate.

On appeal, the Sixth Circuit reversed.  The court noted that “[u]nder ordinary waiver rules, a party cannot waive a right unless he first knows that right exists,” including the right to arbitrate.  Id. at *5.  While prior Sixth Circuit opinions found waiver where the moving party either knew of the right or had all the information needed to determine the right, that was not the situation here where the contracts were not uncovered until discovery began.  And while the district court had expressed disbelief that the defendant was unaware of the standard contracts its own dealers used, the Sixth Circuit noted there was no evidence to support that finding aside from the lower court’s “anecdotal experience with car dealerships” and belief in the ubiquity of arbitration clauses, neither of which could support a finding of knowledge on the defendant’s part.  Id. at *7.

The Sixth Circuit also strongly criticized the lower court’s ruling on an argument not raised by the opposing party, which it held was an “even more fundamental problem” that “violated the principle of party representation,” and it relied on this error as a reason why the district court should not be given another opportunity to rule on the motion.  Id. at *7–8.  Explaining that this principle set a “very high bar” only cleared in exceptional circumstances or to avoid miscarriage of justice, the appellate court found no injustice would be done to plaintiffs by requiring them to abide by the contracts they signed, while the defendant was prejudiced because the manner of the lower court’s decision gave the defendant no opportunity to contest the factual findings about knowledge of the right to arbitrate.  For that reason, the Sixth Circuit reversed, rather than remanding to the lower court for further fact finding.