Waiver is an issue decided by the court prior to arbitration. Ohio-Sealy Mattress Mfg. Co. v. Kaplan, 712 F.2d 270, 272 (7th Cir. 1983). After considering the issue, we find that plaintiffs have failed to allege facts sufficient to support a claim that RTC has waived its right to arbitration.
Plaintiffs allege no action taken by the RTC that could be deemed inconsistent with a desire to arbitrate. Zechman v. Merrill Lynch, Pierce, Fenner & Smith, 742 F. Supp. 1359, 1366 (N.D. Ill. 1990) (stating that in order to find waiver, a court must look for actions inconsistent with the arbitration right). RTC filed a demand for arbitration. It is plaintiffs who now seek to delay the arbitration proceeding by bringing this action in court.
Plaintiffs claim, however, that they have been prejudiced by discovery taken by the RTC because that discovery unfairly gave the "RTC an advantage which plaintiffs do not have, and which RTC would not otherwise have, in arbitration." Plaintiffs cite the RTC's "extensive pretrial merits discovery, including judicial compulsion of testimony from plaintiffs."
We disagree that the plaintiffs have been prejudiced by the RTC's actions. Although extensive judicial discovery may support a finding of prejudice, e.g., In re application of ABN Int'l Capital Markets Corporation, 812 F. Supp. 418, 420 (S.D.N.Y. 1993), the discovery alleged by plaintiffs was conducted pursuant to 12 U.S.C.A. §§ 1818(n) (West 1989) and 1821(d)(2)(I) (West Supp. 1993). Those sections entitle the RTC to conduct factual investigations in connection with the assertion of claims on the behalf of a failed institution.
The RTC was not a party to plaintiffs' alleged fraudulent acts, and only through its discovery was it able to conclude that it possessed a colorable claim against the plaintiffs. Plaintiffs cannot complain that being required to cooperate in an administrative investigation caused it prejudice. Such an investigation by a regulatory agency is a foreseeable part of doing business with a federally insured and regulated entity.
Waiver of arbitration is not to be lightly inferred. Morrie & Shirlee Mages Foundation v. Thrifty Corp., 916 F.2d 402, 405 (7th Cir. 1990) (quoting Midwest Window Systems, Inc. v. Amcor Indus., Inc., 630 F.2d 535, 536 (7th Cir. 1980)). Accordingly, we determine that plaintiffs have not met their burden in stating a colorable claim of waiver, and the RTC's motion to dismiss on this ground is granted.
C. Statute of Limitations
In their complaint, plaintiffs allege that the "RTC's demand for arbitration is barred by the applicable statute of limitations. Specifically, plaintiffs allege that the RTC is barred from bringing the first claim in its arbitration demand, a claim brought under the Commodity Exchange Act. The Commodity Exchange Act has a two-year statute of limitations. Plaintiffs point out that Santa Barbara's trading account was closed in August 1987, and that the RTC did not demand arbitration until April 1993. Thus, according to plaintiffs, the RTC brings its Commodity Exchange Act claim too late.
The contract at issue in this suit is governed by New York law. Under New York law, courts, not arbitrators, decide statute of limitations issues. Paver & Wildfoerster v. Catholic High School Ass'n, 38 N.Y.2d 669, 345 N.E.2d 565, 567, 382 N.Y.S.2d 22 (N.Y. 1976); In re Application of Kohn Pederson Fox Assoc., P.C., 189 A.D.2d 557, 592 N.Y.S.2d 16 (N.Y. App. Div. 1993). Because parties may make state arbitration rules applicable by including a state choice of law clause in their contract, Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. 468, 103 L. Ed. 2d 488, 109 S. Ct. 1248 (1989), New York law applies in this instance, and as a result, this Court is compelled to decide the statute of limitations issue presented by plaintiffs. See also Mastrobuono v. Shearson Lehman Hutton Inc., 812 F. Supp. 845 (N.D. Ill. 1993).
Having so decided, we determine that plaintiffs have stated a claim upon which relief can be granted as to the RTC's claim based on the Commodity Exchange Act.
Plaintiffs therefore may proceed to litigate this issue.
For the reasons stated above, RTC's motion to dismiss based on improper venue and lack of subject matter jurisdiction is denied, and its motion to dismiss based on failure to state a claim is denied in part and granted in part.
Charles P. Kocoras
United States District Judge
Dated: August 25, 1993