In a significant ruling, the Seventh Circuit has clarified precisely when litigation conduct crosses the line into a waiver of arbitration rights.
The decision in Village of Schaumburg, Illinois v. Permasteelisa North America Corp., Case No. 24-1168, handed down in August 2026, affirmed that a plaintiff can forfeit the right to arbitrate through delay.
The court found that filing suit and waiting several months before seeking arbitration was enough to constitute waiver, regardless of other considerations.
Crucially, the Seventh Circuit also held that an express contractual no-waiver clause could not rescue the plaintiff’s right to arbitrate once that waiver had occurred.
The underlying dispute involved allegedly defective construction work performed for the Village of Schaumburg, which sued multiple entities in February 2022 over alleged construction defects.
The Village later added subcontractor Permasteelisa North America Corp. as a defendant in November 2022, but did not request arbitration in its complaint or advise Permasteelisa of any intention to arbitrate.
After Permasteelisa moved to dismiss, the Village still did not seek an arbitral referral, and instead waited approximately eight months before asking the district court to refer the dispute to arbitration.
The court’s analysis focused entirely on that eight-month delay, finding it sufficient to constitute waiver without any requirement to demonstrate prejudice to Permasteelisa.
The Village argued that concerns about preserving its claims against a limitations defence excused the delay, but the Seventh Circuit rejected that reasoning without hesitation.
The court held that the Village could have requested arbitration when it filed suit or, at the latest, when Permasteelisa moved to dismiss, and its failure to do so was decisive.
On the no-waiver clause, the Village pointed to contract language stating that a party’s failure to exercise a contractual right would not be construed as a waiver or relinquishment of that right with respect to future performance.
The Seventh Circuit drew a clear distinction between contractual rights and litigation conduct, ruling that parties cannot contract around federal procedural rules once a case is before a court.
In reaching that conclusion, the court aligned itself with decisions from the Second, Third, Fifth, and Sixth Circuits on the same issue, reinforcing a broad federal consensus.
Those circuits have consistently held that contractual no-waiver provisions do not restrict a federal court’s authority to find waiver based on delay or strategic conduct during litigation.
The practical message for litigants and their counsel is direct: if arbitration may apply, the right must be raised at the earliest possible opportunity.
Parties should identify the governing arbitration agreement, evaluate who may enforce it, and assert the right promptly rather than waiting to test the litigation forum.
Waiting while a court considers dispositive relief may be enough to waive arbitration, even without a ruling on the merits or a showing of prejudice to the opposing party.
Counsel should not assume that broadly drafted no-waiver language permits a party to defer its arbitration demand while assessing conditions in the litigation forum.
The ruling sits alongside a recent Third Circuit opinion addressing the opposite question, confirming that litigation activity alone does not necessarily waive arbitration rights in all cases.
Together, the two decisions offer a more complete picture of the boundaries courts will draw when parties attempt to move between litigation and arbitration mid-dispute.