DEFAULT/ARBITRATION: No abuse in setting aside entry of default… agreement did not require motion to “require” arbitration, Plaintiff had timely notice that Defendant would “require” arbitration… Defendant did not waive arbitration by removing to Federal Court… agreement enforceable despite not signed by successor company… McKittrick affirmed (IOR I-3(d)).

Michael Carlstrom was hired by Title Cash, a Montana corporation, after signing non-compete and arbitration agreements. EZ Title Pawn, a Georgia corporation, acquired Title Cash 7/10/08, and fired Carlstrom 9/19. He sued both Title Cash and EZ alleging wrongful discharge. EZ removed to Federal Court and requested arbitration. Federal Court remanded for lack of diversity, finding that although Title Cash was a dissolved corporation it could still be sued under Montana law. Carlstrom moved for entry of default against Title Cash 6/1/09 for failure to plead or otherwise defend, and default was entered the same day. Title Cash moved to set aside the entry of default 6/3. Judge McKittrick granted its motion 6/12. EZ moved 8/17 to compel arbitration. McKittrick granted its motion, finding that it timely requested arbitration under the arbitration agreement by requesting arbitration in its answer, it did not waive arbitration by removing to Federal Court, and the agreement was not a contract of adhesion, was within reasonable expectations, and was not unconscionable. Carlstrom appeals.

When default is entered, but no judgment has been entered on the default, the Cribb (Mont. 1989) standard applies to a Rule 55(c) motion to set aside entry of default: whether the default was willful, whether the plaintiff would be prejudiced, and whether the defendant has a meritorious defense. The standard for setting aside entry of default is more flexible than the “excusable neglect” standard of Rule 60 for setting aside a default judgment. Engelsberger (Mont. 2007). This issue is one of discretion, and, given the procedural posture of the case and Title Cash’s immediate motion to set aside, McKittrick did not abuse his discretion.

Carlstrom argues that EZ failed to file its motion within 90 days as required by the agreement:

… in the event that either party seeks relief in an agency or court of competent jurisdiction for a dispute covered by this Agreement, the other party (either you or the Company, as the case may be) may, at any time within 90 days of the service of the charge or complaint, at the responding party’s sole option, require all or part of the dispute to be arbitrated by an arbitrator.

§27-5-321 provides:

Except as otherwise provided, an application to the court under this chapter must be by motion and must be heard in the manner and upon the notice provided by law or rule of court for the making and hearing of motions. Unless the parties have agreed otherwise, notice of an initial application for an order must be served in the manner provided by law for the service of a summons in an action.

The arbitration agreement does not require a motion to “require” arbitration. Carlstrom was on notice that EZ would “require” arbitration 5/8/09 when it filed its answer in Federal Court, well within the 90 days contemplated by the agreement. Its motion was timely after remand and after entry of default was set aside.

Carlstrom argues that EZ waived its right to arbitrate by removing to Federal Court and conducting some discovery. The party asserting waiver must demonstrate knowledge of the right to compel arbitration, acts inconsistent with the right to arbitrate, and prejudice to the party resisting arbitration. Holm (Mont. 1999). Carlstrom has not met his burden. He cites no authority and ignores Montana law that including the right to arbitrate as an affirmative defense, coupled with subsequent actions consistent with the right to arbitrate, “defeats a claim of waiver.” Id.; Downey (Mont. 1992); Stewart (Mont. 2003).

Carlstrom argues that the arbitration agreement is unenforceable because EZ did not sign it. He does not address McKittrick’s findings that it was not a contract of adhesion, was within reasonable expectations, and was not unconscionable. It clearly states that “once signed” by Carlstrom the “Agreement will be binding upon [Carlstrom] and the Company for the duration of [Carlstrom’s] employment with the Company and thereafter.” He has not shown or attempted to show that EZ was not within the definition of “the Company.”

Wheat, McGrath, Nelson, Cotter, Morris.

Carlstrom v. Title Cash and EZ Title Pawn, DA 11-178, 12/13/11.

Steven Potts (Potts Law Firm), Great Falls, for Carlstrom; Jean Faure (Faure Holden), Great Falls, for Defendants.