## Facts

- Cabinetree of Wisconsin, Inc., a cabinet seller/installer, entered a 1989 written sales policy agreement drafted by Kraftmaid Cabinetry, Inc., a cabinet manufacturer.
- The agreement contained a broad arbitration clause requiring arbitration in Cleveland, Ohio under AAA rules for any dispute arising between the parties.
- Cabinetree alleged Kraftmaid also made an oral promise granting Cabinetree an exclusive sales territory, which induced Cabinetree to enter the written agreement.
- On September 30, 1993, Cabinetree sued Kraftmaid in Wisconsin state court, alleging violations of the Wisconsin Fair Dealership Law and related common-law claims tied to termination and exclusivity.
- Kraftmaid removed the case to the Eastern District of Wisconsin on November 4, 1993, based on diversity jurisdiction.
- The parties litigated in federal court; the district court set a December 6, 1994 trial date, and discovery proceeded, including substantial document production by Cabinetree.
- On July 11, 1994—months after removal and after meaningful litigation activity—Kraftmaid moved under 9 U.S.C. § 3 to stay the action pending arbitration.
- Cabinetree opposed the stay, arguing Kraftmaid had waived arbitration by choosing to litigate.

## Issues

1. Whether Kraftmaid waived its contractual right to arbitrate by removing the action to federal court and participating in litigation before seeking a stay for arbitration.
2. Whether waiver of arbitration in this context requires the opposing party to prove prejudice beyond the burdens inherent in switching forums mid-litigation.

## Decision

- The Seventh Circuit affirmed the order denying Kraftmaid’s motion to stay pending arbitration.
- The court held Kraftmaid waived arbitration by electing to proceed in a judicial forum and litigating for months before invoking the arbitration clause.
- The court rejected a rule requiring an independent showing of prejudice as a prerequisite to finding waiver in these circumstances.

## Legal Principles

- A party’s election to proceed before a nonarbitral tribunal to resolve a contractual dispute is a presumptive waiver of the right to arbitrate.
- Waiver may be found when a party acts inconsistently with arbitration, including removal to federal court and substantial participation in pretrial litigation before moving to compel arbitration.
- Waiver is ordinarily effective without requiring proof of detrimental reliance or a separate showing of prejudice beyond the ordinary burdens imposed by abandoning litigation for arbitration midstream.
- Federal policy favoring arbitration under the FAA does not displace ordinary contract doctrines such as waiver where conduct indicates an intentional choice of the judicial forum.

## Conclusion

The Seventh Circuit held that Kraftmaid’s removal of the case to federal court and extended participation in litigation before seeking arbitration constituted a waiver of its contractual arbitration right, and that waiver did not depend on a separate, heightened showing of prejudice.


Cabinetree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388 (7th Cir. 1995)