Waiving Arbitration in a TCPA Case: Morgan v. Sundance and After
A business with an arbitration agreement can lose it by litigating a TCPA case in court first. Since Morgan v. Sundance in 2022, the consumer doesn’t have to show the delay hurt them. The Ninth Circuit now asks whether the company knew of its right and acted inconsistently with it, and the California Supreme Court adopted the same approach in 2024. A business that raises arbitration early and avoids asking the court to decide the merits keeps its strongest position.
What did the Supreme Court decide in Morgan v. Sundance?
That courts can’t require a showing of prejudice before finding a waiver of the right to arbitrate. In Morgan v. Sundance, Inc. (2022) 596 U.S. 411, the employer had litigated for months before switching course. According to the opinion, it answered the complaint with 14 affirmative defenses, none of them mentioning arbitration, and then took part in a joint mediation. Nearly eight months after the suit was filed, it moved to stay the case and compel arbitration.
The Court held that “the Eighth Circuit was wrong to condition a waiver of the right to arbitrate on a showing of prejudice.” The opinion explained that the federal policy favoring arbitration “is about treating arbitration contracts like all others,” not about promoting arbitration over litigation. Courts “must hold a party to its arbitration contract just as the court would to any other kind,” but they “may not devise novel rules to favor arbitration over litigation.”
The holding was narrow. The Court didn’t decide whether Sundance had waived its right. It remanded for the lower court to ask whether Sundance had knowingly given up the right “by acting inconsistently with that right,” or to decide that a different approach, “such as forfeiture,” applies.
What is the waiver test in the Ninth Circuit now?
Two elements, with no prejudice requirement. In Armstrong v. Michaels Stores, Inc. (9th Cir. 2023) 59 F.4th 1011, the court held that after Morgan, “the party asserting waiver must demonstrate: (1) knowledge of an existing right to compel arbitration and (2) intentional acts inconsistent with that existing right.”
The burden is lighter than it used to be. The court said the party opposing arbitration “still bears the burden of showing waiver,” but that burden is no longer a heavy one. It’s “the same as the burden for establishing waiver in any other contractual context.”
The Ninth Circuit still gave defendants a usable guide. A party generally “acts inconsistently with exercising the right to arbitrate when it (1) makes an intentional decision not to move to compel arbitration and (2) actively litigates the merits of a case for a prolonged period of time,” the opinion states. Michaels kept its right because it “repeatedly reserved its right to arbitration, did not ask the district court to weigh in on the merits, and did not engage in any meaningful discovery.”
Does California apply the same rule in state court?
Yes, with a higher burden of proof. In Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, the California Supreme Court said its prejudice requirement was “based upon the federal precedent that Morgan overruled,” and “we now abrogate it.” Under California law, “a court should apply the same principles that apply to other contracts” when deciding whether a party has waived its right to arbitrate.
The opinion also set the standard of proof. The court held that the party opposing enforcement “must prove by clear and convincing evidence that the waiving party knew of the contractual right and intentionally relinquished or abandoned it.” That’s a meaningful hurdle, and a business defending a TCPA case in California state court should hold the plaintiff to it.
Quach also shows what loses the right. The employer there answered the complaint and “initiated discovery, propounding form interrogatories, special interrogatories, requests for admission, and a request for production of documents.” It moved to compel “13 months after Quach filed his lawsuit,” according to the opinion, and the court found a waiver.
| Conduct after a TCPA suit is filed | How courts have treated it | Case |
|---|---|---|
| Answering and pleading arbitration as a defense | Supports keeping the right | Armstrong |
| Telling the court in case management statements that a motion is coming | Supports keeping the right | Armstrong |
| Answering with no mention of arbitration, then mediating | Remanded for a waiver analysis without prejudice | Morgan |
| Full written discovery and a deposition before moving | Waiver found | Quach |
| Asking the court to rule on the merits | Points toward waiver under the Ninth Circuit test | Armstrong |
How does a business protect its arbitration right in a TCPA case?
By raising it early and saying so on the record. The first step is to find the agreement. A TCPA plaintiff who’s also a customer may have accepted terms online, and the arbitration clause may sit in a checkout flow or an app’s terms of service. The company should locate the signed or clicked version for the named plaintiff before the first response is due.
The second step is to preserve the right in every filing. Pleading arbitration as an affirmative defense, as the post on affirmative defenses in a TCPA answer explains, is a start, but it isn’t enough on its own. Quach shows an employer that pleaded arbitration in its answer and still lost the right through its later conduct. Case management statements should say a motion to compel is coming, and discovery should stay limited until the court rules.
Mediation deserves a note. Morgan involved a defendant that mediated before moving to compel, and the Court sent the case back for a waiver analysis. A business considering early mediation of a TCPA class action while holding an arbitration agreement should reserve the right in writing before the session.
A motion to dismiss is a harder call. Asking the court to dismiss the complaint on the merits can look like a decision to seek a judicial ruling, which is the conduct the Ninth Circuit test describes. When the company has a strong arbitration agreement, moving to compel first, and arguing the merits only in the alternative or after the ruling, is usually the safer sequence. That sequencing is a core part of the work TCPA defense attorneys in California do in the first weeks of a case. If many consumers then file individual claims, the post on mass arbitration defense covers what comes next.
Steps to take when a TCPA suit names a customer with an arbitration agreement
- Preserve the call and text logs, dialer and platform data, and consent records for the plaintiff’s number, along with the terms of service and arbitration clause versions in effect, under a litigation hold.
- Pull the opt-out and internal do-not-call logs with dates for the plaintiff’s number.
- Pull the National Do Not Call Registry scrub records and the Registry version dates used for the campaigns named in the complaint.
- Collect the vendor and lead-source contracts and scripts, any prerecorded or AI-voice files, and the records showing how the plaintiff accepted the arbitration terms.
- Talk to a lawyer before filing any response, serving discovery, or agreeing to mediate, since each step can bear on waiver.
Questions about waiving arbitration in TCPA cases
Does a business waive arbitration by answering the complaint?
Not by itself. In Armstrong, the defendant answered, removed the case to federal court, and still kept its right, because it pleaded arbitration as a defense and told the court it planned to move to compel. The risk grows when an answer is followed by merits litigation or full discovery, as in Quach, without any step toward arbitration.
How long can a business wait before moving to compel arbitration?
No fixed deadline exists. Courts look at the defendant’s conduct as a whole, not just the calendar. In Morgan, nearly eight months passed, and in Quach, 13 months passed with active discovery. The safest course is to move as soon as the agreement is located and the plaintiff’s acceptance can be proved.
Does the plaintiff still have to show prejudice in California state court?
No. Quach abrogated California’s prejudice requirement for waiver of arbitration. But the plaintiff must prove waiver by clear and convincing evidence, which the court described as the generally applicable standard for waiver of a contractual right. That burden gives a business real room to argue that its conduct didn’t show an intent to give up arbitration.
Can a business seek discovery before moving to compel arbitration?
Limited discovery may be safe. In Armstrong, the defendant served a small set of interrogatories and document requests and kept its right, and the court noted it “did not engage in any meaningful discovery.” Broad merits discovery, and depositions above all, is the kind of conduct Quach treated as waiver. Discovery aimed at the arbitration issue itself is less risky.
When the plaintiff agreed to arbitrate
If your company has been sued in a TCPA class action by a customer who accepted an arbitration agreement, the order of the first filings often decides whether the case stays in court. Rosenberger + Kawabata represents businesses defending TCPA lawsuits and class actions through its business litigation practice, including claims involving customers bound by arbitration agreements. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The statutes are the Federal Arbitration Act at 9 U.S.C. § 3 and 9 U.S.C. § 6, and the Telephone Consumer Protection Act at 47 U.S.C. § 227.
The court decisions are Morgan v. Sundance, Inc. (2022) 596 U.S. 411, Armstrong v. Michaels Stores, Inc. (9th Cir. 2023) 59 F.4th 1011, and Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562.
This post is general information about the Telephone Consumer Protection Act and related laws as of April 25, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Courts and the FCC change the rules in this area often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.