Can extensive litigation waive arbitration rights for related claims? Vivint Solar v. Lundberg Explained

The Utah Court of Appeals addressed an important question about waiver of arbitration rights in Vivint Solar v. Lundberg, examining whether extensive litigation of related claims can preclude later arbitration of intertwined claims.

Background and Facts

Jim Lundberg left Vivint Solar as associate general counsel and began working for Vivint Smart Home, believing his stock options and restricted stock units would continue vesting. When Solar denied his equity award claims in 2020, both parties initiated extensive litigation. Lundberg filed federal court actions and arbitration demands, while Solar filed cases in Utah and Delaware courts under forum selection clauses. After nearly two years of litigation, Solar filed an arbitration demand alleging attorney malpractice against Lundberg, citing a mandatory arbitration provision in his employment contract.

Key Legal Issues

The central issue was whether Solar’s substantial participation in litigation of equity award claims for nearly two years constituted a waiver of its contractual right to arbitrate malpractice claims against Lundberg. Solar argued it could not waive arbitration rights for claims it didn’t know existed and that the equity award claims were contractually required to be litigated in court under forum selection clauses.

Court’s Analysis and Holding

The court applied the two-part test for arbitration waiver: (1) substantial participation in litigation inconsistent with intent to arbitrate, and (2) prejudice to the opposing party. Following Nelson v. Liberty Acquisitions Servicing, the court found the equity award claims and malpractice claims were sufficiently intertwined because they arose from the same agreements and involved overlapping factual issues about Lundberg’s knowledge of plan interpretations. The court rejected Solar’s argument that it was contractually bound to litigate, noting Solar chose to litigate rather than waive forum selection provisions and join Lundberg’s arbitration.

Practice Implications

This decision reinforces that parties cannot have it both ways—extensive court litigation followed by later arbitration demands for related claims. The ruling clarifies that intertwined claims analysis focuses on whether matters raised in earlier litigation connect with issues in later claims, regardless of whether the earlier claims were themselves arbitrable. Practitioners should carefully consider consolidating all related claims early to preserve arbitration rights and avoid the significant time and expense of duplicative proceedings.