Seventh Circuit: Delay in Litigation Can Waive Arbitration Rights
Seventh Circuit ruled delay in litigating waives arbitration rights despite no-waiver clauses.
Why it matters: This decision emphasizes the need for timely arbitration demands, affecting how corporations and law firms manage dispute resolutions. It signals stricter procedural standards that can alter arbitration strategies across industries.
- Case: Village of Schaumburg, Illinois v. Permasteelisa North America Corp., decided August 18, 2026, by the Seventh Circuit.
- The Village filed suit in February 2022 but waited about eight months after naming Permasteelisa as defendant before seeking arbitration.
- The court held that contractual no-waiver clauses do not protect a party from waiver of arbitration rights due to litigation delay.
- The U.S. Supreme Court's Morgan v. Sundance decision supports this by removing the need to prove prejudice when finding arbitration waiver.
In Village of Schaumburg, Illinois v. Permasteelisa North America Corp., the Seventh Circuit determined that a party's right to arbitration can be waived if it delays too long in invoking that right, even when the contract contains a no-waiver clause. The court emphasized that deliberate delay in litigation signals waiver, regardless of contractual protections.
The case arose when the Village of Schaumburg, Illinois, filed a construction defect lawsuit in February 2022 and waited until November 2022—approximately eight months after adding Permasteelisa as a defendant—before seeking to compel arbitration.
The Seventh Circuit rejected the argument that a no-waiver clause in the contract shielded the party from forfeiting arbitration rights. This reflects adherence to the U.S. Supreme Court's ruling in Morgan v. Sundance, Inc., which held parties can waive arbitration rights by litigation conduct without showing prejudice.
Legal practitioners should note that these decisions reinforce the importance of promptly asserting arbitration rights. Procrastination or delay may effectively default a party into foregoing arbitration, impacting dispute resolution tactics and contractual negotiations.
By the numbers:
- February 2022 — Village of Schaumburg filed initial lawsuit
- November 2022 — Permasteelisa added as defendant
- Eight months — Delay before seeking arbitration