Background
Honeywell contracted with Chino Valley Unified School District in 2010 to provide carbon dioxide sensors to several schools, with sensors installed in 2011. The contract contained an arbitration clause requiring any dispute to be settled by arbitration. In October 2021 and June 2022, fires occurred at a high school where Honeywell’s sensors were installed. The school’s insurer, Arizona School Risk Retention Trust, and its reinsurer, Lexington Insurance Company, sued Honeywell as subrogees in September and December 2023, alleging the sensors were a cause of the fires.
Honeywell answered the complaints by February 2024 and participated in a joint scheduling order filed in March 2024, in which it “reserve[d] its right to future arbitration if it is deemed to be applicable.” The company identified Senseair, another component manufacturer, as a non-party at fault and facilitated the plaintiffs’ amendment of their complaints to add Senseair as a defendant in May 2024. Honeywell participated in oral argument on Senseair’s motion to dismiss for lack of personal jurisdiction, which the superior court denied in January 2025. Only two weeks later, Honeywell moved to compel arbitration and dismiss the case.
The superior court denied Honeywell’s motion, finding it had waived the right to arbitration through substantial conduct inconsistent with that right and inexcusable delay of more than 14 months after filing its answer. Honeywell appealed.
The Court’s Holding
The Arizona Court of Appeals affirmed the denial of Honeywell’s motion to compel arbitration. The court applied the Ninth Circuit’s current waiver standard under the Federal Arbitration Act, which requires showing that a party had knowledge of the right to arbitrate and took actions inconsistent with that right. The court rejected the older “prejudice” requirement, which Morgan v. Sundance, Inc., 596 U.S. 411 (2022), eliminated.
The majority found Honeywell waived its right through a totality of circumstances analysis. Although Honeywell’s actions were not overtly merits-based, they collectively demonstrated partiality for judicial resolution: answering complaints, filing a joint scheduling order with discovery deadlines and mediation plans, identifying Senseair as a non-party at fault, facilitating the plaintiffs’ amendment to add Senseair, and participating in oral argument on Senseair’s dismissal motion. Critically, Honeywell waited approximately 15 months before moving to arbitrate—and did so only after the superior court resolved Senseair’s motion to dismiss, a key jurisdictional issue. The majority distinguished Armstrong v. Michaels Stores, Inc., 59 F.4th 1011 (9th Cir. 2023), where no waiver was found, noting that Armstrong’s defendant was “consistently vocal” about its arbitration intent, moved to compel within ten months, and engaged in minimal discovery.
Judge Bailey dissented, arguing the Subrogees failed to meet their burden of showing inconsistent conduct under Armstrong. She contended that much of the 14-month delay was attributable to third parties (Lexington’s intervention, Senseair’s motion practice) and the court-imposed stay of the scheduling order deadlines. Filing a non-party at fault notice and appearing at oral argument, she argued, do not constitute active merits litigation. Honeywell undertook no discovery, filed no merits motions, and disclosed no expert witnesses during the litigation pause, distinguishing this case from precedent where waiver was found.
Key Takeaways
- Post-Morgan, waiver of arbitration rights requires only knowledge and inconsistent action—the prejudice element is eliminated, but federal policy no longer provides heightened protection for arbitration agreements.
- Inconsistent conduct need not be overtly merits-based; procedural participation, scheduling involvement, and strategic use of court processes can demonstrate partiality for judicial resolution.
- Delay in moving to compel arbitration is significant, particularly when a party times its motion to follow a favorable ruling on a key issue, suggesting deliberate choice of forum.
- Silent or reserved assertions of arbitration rights—without consistent, vocal affirmation—may weigh against preserving the right despite delays.
Why It Matters
This decision clarifies Arizona’s approach to arbitration waiver under the FAA post-Morgan and provides practical guidance for defendants balancing strategic litigation decisions with preservation of contractual arbitration rights. The court’s emphasis on the “totality of circumstances” and non-merits conduct expands the waiver analysis beyond active merits litigation, signaling that procedural participation and delay carry substantial weight. The majority’s approach reflects a shift away from the strong federal policy favoring arbitration, instead treating arbitration clauses as ordinary contract terms.
For defendants facing arbitration clauses, the decision underscores the importance of affirmatively and consistently asserting arbitration rights from the outset and moving promptly to enforce them. Waiting for favorable rulings on threshold issues—even while remaining silent on arbitration—creates substantial waiver risks. The dissent’s narrower view would have provided more protection for delayed enforcement, but the majority’s totality approach prevailed, making early and vocal assertion of arbitration intent critical for preserving the right.