Federal Circuit Affirms Denial of Oil Company’s Attempt to Compel Arbitration Following Loss at Trial

Benton Energy Service Co. (BESCO) has lost its appeal seeking to compel arbitration in a drilling patent dispute against Cajun Services Unlimited LLC. The Federal Circuit Court of Appeals, upholding a decision from the Eastern District of Louisiana, recently found that BESCO waived its right to arbitration of its claims in light of the extended litigation that took place before BESCO even raised the possibility of arbitration.

In January 2017, Cajun filed suit against BESCO in Louisiana district court in a dispute over ownership and intellectual property rights in an elevator system used in oil drilling. For seven months following BESCO’s first responsive pleading in that case, BESCO made no mention of arbitration, raising it for the first time in opposition to one of Cajun’s motions for summary judgment following discovery. That case was administratively closed, but a separate, similar suit was later filed. This time, BESCO raised arbitration as an affirmative defense, but only in the context of Cajun’s breach of contract claim. The case proceeded to trial, where a jury found in Cajun’s favor on all claims.

Following the jury verdict, BESCO moved to compel arbitration of all Cajun’s claims, asking the district court to vacate the jury verdict in light of an arbitration provision between the parties.  The district court denied BESCO’s motion to compel arbitration, noting that BESCO had failed to take any action to initiate arbitration until two years after litigation had commenced, and following an unfavorable trial on the merits. The court concluded that BESCO had waived its right to arbitration of all its claims by substantially invoking the judicial process to Cajun’s prejudice. On appeal, the Federal Circuit found that the Louisiana district court did not clearly err in its conclusion and thus affirmed.