ALOTECH LIMITED LLC v. HERMAN JONES LLP (2026)

This case involves Herman Jones, LLP's action to collect unpaid legal fees allegedly owed by Alotech Limited, LLC, Alotech's primary member John Grassi, and Alotech's subsequent attorneys James DeGraw and Bridge GC PC. The defendants seek review of the trial court's order granting Herman Jones’ motion to compel arbitration, arguing that (1) Herman Jones waived arbitration by filing the instant complaint in this action; (2) the trial court failed to address an anti-SLAPP motion before ordering the parties to arbitration; and (3) the arbitration agreement failed due to a lack of consideration. We agree with Alotech that Herman Jones affirmatively waived its rights to arbitration by filing the instant lawsuit in court, and so we reverse the trial court's order.

“This Court reviews the grant or denial of a motion to compel arbitration de novo to see if the trial court's decision is correct as a matter of law; but we defer to the trial court's factual findings unless they are clearly erroneous.” Milliken v. C. Merrill Constr., LLC, 371 Ga. App. 701, 703(1), 902 S.E.2d 669 (2024).

The record shows that Alotech and Grassi contracted with Herman Jones in February 2023 to begin work on two separate legal matters. The work for each matter was performed subject to separate engagement agreements, which Grassi signed on behalf of Alotech. Each agreement contained an arbitration provision, stating that if a dispute arose from the engagement, the parties “agreed to submit to binding arbitration to be administered by the American Arbitration Association in Atlanta[.]”¹ The agreements further provided that the “existence, proceedings, and decisions in the arbitration shall be confidential.” At some point, the relationship between Herman Jones and the clients soured, and Alotech stopped paying the fees Herman Jones claimed were due.

After Alotech and Grassi failed to pay the legal fees, on July 2, 2024, Herman Jones sued Alotech and Grassi along with their attorney James DeGraw and his firm, Bridge GC PC, and it demanded a jury trial and set forth claims for breach of contract, unjust enrichment, fraud, and libel. In October 2024, the defendants answered the complaint, filed two separate motions to dismiss, and Bridge GC and DeGraw also filed a motion to strike under the anti-SLAPP statute, OCGA § 9-11-11.1. On October 24, 2024, Herman Jones filed an amended complaint, again seeking a jury trial and claiming venue was proper in the superior court.² On November 22, 2024, the Alotech defendants filed an answer and a new motion to dismiss; Bridge and DeGraw also filed a new motion to dismiss.

On November 26, 2024, Herman Jones requested arbitration of the dispute in a letter sent to a potential arbitrator, and the defendants filed a responsive letter opposing arbitration. On December 10, 2024, Herman Jones filed a motion to compel arbitration, to sever parties, and to stay proceedings. In the motion, Herman Jones claimed that it had tried to initiate arbitration with the defendants, but they refused to acknowledge the existence of the engagement letters containing the arbitration provisions and refused to consent to arbitration.³ The defendants responded to the motion, arguing among other things that Herman Jones — as the plaintiff — had chosen litigation in court rather than arbitration, and thus it had taken actions inconsistent with arbitration and had waived its right to compel it.

After a hearing, the trial court granted the motion to compel and to stay the case pending the arbitration. In reaching its decision, the trial court found that the parties had agreed in two separate agreements to arbitrate any dispute and that Herman Jones had not waived its right to do so. Specifically, the court concluded that although the suit was filed in July 2024, the defendants were not served until August and did not file answers until mid-October. The court noted that because the defendants had filed motions to dismiss, which stayed the discovery period for 90 days, discovery had not commenced when Herman Jones filed its motion. The trial court concluded that simply filing a complaint did not rise to the level of “active litigation” that would bar a party from pursuing arbitration. Instead, the trial court reasoned that Herman Jones had “only engaged in the very basic preliminary steps of litigation prior to moving to compel arbitration.” Furthermore, the trial court noted, the parties’ dispute about the existence of the agreements influenced Herman Jones’ choice of dispute forums. Therefore, the trial court found that the agreement was valid and enforceable, and it ordered the parties to arbitrate. We granted the defendants’ application for interlocutory review.

1. The defendants first contend that the trial court erred by compelling arbitration because Herman Jones waived its right to arbitrate by filing suit and repeatedly acting inconsistently with the arbitration agreement. They claim that the cases the trial court relied on, including Milliken, involve defendants, not plaintiffs. We agree that Herman Jones waived its right to arbitrate by filing suit, so we reverse the trial court's order compelling arbitration.

The statutory underpinning for motions to compel arbitration is OCGA § 9-9-6 (a), which provides:

A party aggrieved by the failure of another to arbitrate may apply for an order compelling arbitration. If the court determines there is no substantial issue concerning the validity of the agreement to submit to arbitration or compliance therewith and the claim sought to be arbitrated is not barred by limitation of time, the court shall order the parties to arbitrate. If a substantial issue is raised or the claim is barred by limitation of time, the court shall summarily hear and determine that issue and, accordingly, grant or deny the application for an order to arbitrate. If an issue claimed to be arbitrable is involved in an action pending in a court having jurisdiction to hear a motion to compel arbitration, the application shall be made by motion in that action. If the application is granted, the order shall operate to stay a pending or subsequent action, or so much of it as is referable to arbitration.

Generally, the party seeking arbitration bears the burden of proving the existence of a valid and enforceable agreement to arbitrate. Triad Health Mgmt. of Ga., III v. Johnson, 298 Ga. App. 204, 206(2), 679 S.E.2d 785 (2009). This is because “arbitration is a matter of contract[,] and a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit.” Yates v. CACV of Colorado, 303 Ga. App. 425, 430(1), 693 S.E.2d 629 (2010) (punctuation omitted). Therefore, “[w]hether there is a valid agreement to arbitrate is generally governed by state law principles of contract formation, and is appropriate for determination by the court.” Triad Health, 298 Ga. App. at 206(2), 679 S.E.2d 785. In this case, the trial court found that the parties eventually agreed that there was an arbitration provision in the parties’ agreement, thus resolving this threshold issue.

In Georgia, “an agreement to arbitrate is waived by any action of a party which is inconsistent with the right of arbitration.” Wise v. Tidal Constr. Co., 261 Ga. App. 670, 675(2), 583 S.E.2d 466 (2003) (finding that defendant waived arbitration by conducting discovery, moving for summary judgment, and entering a consolidated pre-trial order). In this regard, our Supreme Court has stated:

despite the strong policy in favor of arbitration, a party may, by its conduct, waive its right to arbitration. Thus, a party that substantially invokes the litigation machinery prior to demanding arbitration may waive its right to arbitrate. A party has waived its right to arbitrate if, under the totality of the circumstances, the party has acted inconsistently with the arbitration right[.]

SunTrust Bank v. Lilliston, 302 Ga. 840, 842–43, 809 S.E.2d 819 (2018) (quotation marks omitted); see also Phil Wooden Homes, Inc. v. Ladwig, 262 Ga. App. 792, 793, 586 S.E.2d 697 (2003) (defendants waived arbitration by answering complaint, asserting a counterclaim and affirmative defenses, serving written discovery, and jointly obtaining extensions to discovery). Whether a party has waived the right to arbitration depends on the facts of each case. USA Payday Cash Advance Ctr. #1, Inc. v. Evans, 281 Ga. App. 847, 850, 637 S.E.2d 418 (2006). But “[w]here, as here, the concern is whether the undisputed facts of [a party's] pretrial participation in the litigation satisfy the standard for waiver, the question of waiver of arbitration is one of law[.]” Milliken, 371 Ga. App. at 707(1)(a)(ii), 902 S.E.2d 669.

The vast majority of our case law on the question of waiver focuses on the actions of defendants and whether those defendants timely raised the issue of arbitration, and it does not appear that this Court has directly analyzed the issue of arbitration waiver in the context of a plaintiff's litigation efforts. The defendants direct us to Taft v. Burttram, 254 Ga. 687, 333 S.E.2d 585 (1985), as the closest comparator case. In Taft, two employees of a securities account agent had arbitration clauses in their employment contracts. Id. at 687(1), 333 S.E.2d 585. After the employees were terminated for cause, an executive of the firm swore out criminal warrants seeking to have the employees arrested for theft by taking. Id. at 687, 333 S.E.2d 585. In a subsequent civil suit, the Supreme Court of Georgia concluded that the firm had waived its right to arbitration under the employment agreements, stating in broad and clear terms that

in swearing out criminal warrants against the appellants instead of seeking to arbitrate, this was the clearest kind of waiver on their part of an agreement to arbitrate. Any other holding would be contrary to the clear federal policy of encouraging parties to resolve disputes through arbitration, rather than a resort to the courts ․ [T]he parties involved in both [the criminal and civil] cases for all practical purposes are identical. The appellees, in choosing the forum of criminal law rather than arbitration in their first attempt to sort out their dispute ․, waived their right to compel arbitration.

Id. at 688(1), 333 S.E.2d 585.

In another somewhat comparable case, this Court concluded that the defendants’ filing of a counterclaim did not demand a finding that it waived arbitration because it otherwise “consistently sought to enforce its right to arbitration under the contract,” but we cautioned that if the defendant had “flagrantly disregarded arbitration as a contractual prerequisite, and filed a claim of lien and a complaint of foreclosure without attempting to enforce its arbitration rights, a waiver of the arbitration provisions of the contract may have occurred.” H. R. H. Prince LTC Faisal M. Saud v. Batson-Cook Co., 161 Ga. App. 219, 221(3)(b), 291 S.E.2d 249 (1982).

Turning to the facts of this case, Herman Jones requested a jury trial and claimed in its complaint and its amended complaint that venue was proper in the superior court. Significantly, though Herman Jones referenced the parties’ contracts to pay for fees, it did not mention the arbitration provisions in either complaint. And after initiating litigation in July 2024, Herman Jones waited until December 2024 to raise the issue of arbitration. Though this Court has recognized that “not every foray into the courthouse effects a waiver of the right to arbitrate, and actions undertaken by a party against whom the waiver would operate that are merely defensive will be considered consistent with an assertion of the right to arbitrate[,]” Milliken, 371 Ga. App. at 709(1)(a)(ii), 902 S.E.2d 669, we can think of no clearer act that shows Herman Jones’ intent to resolve this dispute in court rather than in arbitration than by filing two complaints initiating litigation in court without mentioning arbitration.⁴ And although Herman Jones asks us to consider the totality of the circumstances in this case, the totality of the circumstances show that Herman Jones very clearly chose to resolve its dispute in court, not arbitration. To paraphrase the Supreme Court of Georgia, “[t]he appellees, in choosing the forum of [civil] law rather than arbitration in their first attempt to sort out their dispute ․, waived their right to compel arbitration. To put it simply, [Herman Jones] cannot run with the hare and the hounds.” Taft, 254 Ga. at 688(1), 333 S.E.2d 585.

In response, Herman Jones contends that it was required to file a lawsuit because the defendants initially denied that the agreements and arbitration provisions existed. But we fail to see how this fact helps Herman Jones because they nevertheless filed two complaints without mentioning the arbitration agreements or asking the trial court to compel arbitration. If Herman Jones wished to arbitrate the matter, it could have filed a demand for arbitration under OCGA § 9-9-6(c) or styled its complaint as a petition under OCGA § 9-9-6(a) and requested from the beginning that the trial court resolve the dispute over whether the agreements existed and then order the parties to arbitrate.

Additionally, to support its conclusion that Herman Jones did not waive its right to arbitration, the trial court relied heavily on Milliken, in which this Court reversed the trial court's denial of a motion to compel arbitration, explaining that the defendant “did not engage in substantial discovery before demanding arbitration and his conduct is less accurately characterized as active litigation than as an effort to protect [his] position.” Id. at 708(1)(a)(ii), 902 S.E.2d 669. But Milliken involved discerning whether a defendant engaged in “active litigation” and thus whether its actions were consistent with the intention to resolve the dispute in arbitration. In contrast, we readily conclude that a plaintiff filing a complaint and initiating normal litigation in court, without any mention that the plaintiff is seeking arbitration, goes well beyond a mere defensive act to protect a litigation position but is instead a clear indication of a deliberate choice to resolve the dispute in court.

Finally, Herman Jones argues that the defendants were not prejudiced by its delayed invocation of its right to arbitration. However, Herman Jones has not cited to any caselaw indicating that a party must prove prejudice to show that the opposing party waived their right to arbitration, and the United States Supreme Court has concluded that the Federal Arbitration Act does not require a showing of prejudice. Morgan v. Sundance, Inc., 596 U. S. 411, 416–19(II), 142 S.Ct. 1708, 212 LE2d 753 (2022). We similarly decline to impose such a requirement when there is no basis to do so in either the statute or our caselaw.⁵ See Milliken, 371 Ga. App. at 706(1)(a)(ii) n.4, 902 S.E.2d 669 (declining to examine prejudice following Morgan). See also Ladwig, 262 Ga. App. at 793, 586 S.E.2d 697 (finding waiver without any discussion or requirement of a showing of prejudice); Wise, 261 Ga. App. at 673(1), 583 S.E.2d 466 (same).

Thus, because Herman Jones took clear acts inconsistent with the right of arbitration, we must conclude that Herman Jones waived its right to arbitrate this dispute. We therefore reverse the trial court's order compelling arbitration.

2. In two other enumerations of error, the defendants claim that the trial court erred by failing to decide DeGraw's anti-SLAPP motion before ordering the parties to arbitration, and they also claim that there was a failure of consideration in the parties’ arbitration agreements because Herman Jones repeatedly breached the confidentiality provision of the contract. Because of our conclusion in Division 1, we do not reach these issues.

Judgment reversed.

FOOTNOTES

1.   The arbitration provisions provided that “the laws of the State of Georgia” would apply.

2.   According to the defendants’ response to Herman Jones’ motion to compel arbitration, Herman Jones sent discovery requests the day after it filed its amended complaint, consisting of interrogatories, requests for production of documents, and requests for admissions, and Herman Jones apparently sent a follow-up letter on November 12, 2024, insisting that the discovery proceed immediately. These letters, however, do not appear to be in the appellate record.

3.   In addition to compelling arbitration, Herman Jones also sought an order severing the claims against the Alotech defendants and staying the case. The trial court denied the portion of the motion seeking to sever.

4.   We note that numerous out-of-state cases have held that the party who files a lawsuit is assumed to have waived its right to arbitration. See, e.g., Allstate Ins. Co. v. Singletary, 540 So.2d 938, 939 (Fla. Dist. Ct. App. 1989); De Sapio v. Kohlmeyer, 35 N.Y.2d 402, 405, 362 N.Y.S.2d 843, 321 N.E.2d 770 (1974).

5.   In SunTrust Bank, the Supreme Court of Georgia cited a federal case from the Eleventh Circuit Court of Appeals, S & H Contractors, Inc. v. A.J. Taft Coal Co., Inc., 906 F.2d 1507 (11th Cir. 1990), for the standard of waiver under the Federal Arbitration Act, stating that “[a] party has waived its right to arbitrate if, under the totality of the circumstances, the party has acted inconsistently with the arbitration right, and in so acting, has in some way prejudiced the other party.” 302 Ga. at 843, 809 S.E.2d 819 (emphasis supplied); see also Yash Solutions, LLC v. New York Global Consultants Corp., 352 Ga. App. 127, 133(1) n.12, 834 S.E.2d 126 (2019) (citing SunTrust Bank in a non-arbitration case). As noted above, however, the United States Supreme Court has since determined that no prejudice showing is necessary under that Act, overruling S & H Contractors, Inc. in the process. Morgan, 596 U. S. at 416–19 (II) & n.1, 142 S.Ct. 1708. The Supreme Court of Georgia's holding in SunTrust Bank also did not rely on prejudice, nor did the Court otherwise discuss prejudice beyond that one reference. 302 Ga. at 843–45, 809 S.E.2d 819. Accordingly, given the United States Supreme Court's more recent pronouncement, we decline to follow this portion of SunTrust Bank for the proposition that the defendants here must make a showing of prejudice. See Milliken, 371 Ga. App. at 706(1)(a)(ii) n.4, 902 S.E.2d 669 (declining to follow SunTrust Bank and examine prejudice following Morgan).

Davis, Judge.

Rickman, P. J., and Gobeil, J., concur.