Labor & Employment Law Daily Wrap Up, ARBITRATION—6th Cir.: Employer that litigated for a year lost right to seek arbitration, (Aug 28, 2025)

By Jason Albright, J.D.

Section 3 of the Federal Arbitration Act “suggests that a party cannot stay a case if the party is in ‘default’ of seeking arbitration.”

A hospital that participated in litigation for a year with a former employee—who was fired for her refusal to use preferred pronouns or to refer patients for gender-reassignment surgeries—was too late to seek to arbitrate her Section 1983, Title VII, and state-law claims, having moved to dismiss them all on the merits, the Sixth Circuit found. The defendants’ litigation conduct put them “in default in proceeding with [their requested] arbitration” under Section 3 of the Federal Arbitration Act, the appeals court concluded. Judge Murphy, who wrote for the court, wrote separately to concur with himself. Judge Bloomekatz also wrote a separate concurrence (Kloosterman v. Metropolitan Hospital, No. 24-1398 (6th Cir. Aug. 27, 2025)).

Physician assistant. The plaintiff began employment as a physician assistant with Metropolitan Hospital in Wyoming, Michigan, in 2004. She worked at an outpatient clinic that provided internal, family, and pediatric care about 15 minutes away from the main hospital building. Over the years, the hospital gave her “exemplary performance reviews” and never put any discipline in her personnel file. She also had a “stellar” reputation with patients, who knew her as a “caring provider.” She treated all patients the same, regardless of their sexual orientation or gender identity, according to the court.

Alleged state actor. In 2016, the hospital became a subsidiary of the University of Michigan Health System. It eventually began to do business under the name University of Michigan Health-West. The University of Michigan Board of Regents obtained the power to control its policies, and so the hospital allegedly became a state actor.

LGBTQ+ patient training. After that point, the hospital required the physician assistant to take training “on serving LGBTQ+ patients.” In the middle of 2021, this training allegedly compelled her, for the first time, to “affirm statements concerning sexual orientation and gender identity that her Christian faith prohibited her from affirming.”

Beliefs. Specifically, the plaintiff’s faith has led her to believe that God creates humans as either male or female and that individuals should not attempt to change their sex. Her faith also allegedly bars her from referring to patients using pronouns that do not match their biological sex. And it allegedly also prevents her from helping patients obtain “sterilizing drugs” or undergo “surgical procedures” to alter their sex.

Her “medical judgment.” Apart from her religion, the physician assistant also believes that puberty-blocking drugs and sex-reassignment surgeries do not qualify as proper health care as a matter of her “medical judgment,” according to the court. And the training allegedly would have required her to affirm statements inconsistent with these opinions on threat of termination.

Religious accommodation request. To seek a religious accommodation, she reached out to the office manager of her clinic, her supervising physician, and a nurse who served as a HR “liaison.” The nurse and the plaintiff’s supervising physician told her “to do what she felt was right in her heart.” The office manager told her to speak with employees in the hospital’s Department of Diversity, Equity, and Inclusion (DEI). The plaintiff then contacted the vice president of this department, who arranged for a meeting to discuss her accommodation request.

Pronouns and gender reassignment referrals. On around July 29, 2021, she met with the HR director, the DEI program director, and the HR liaison. The meeting participants asked whether she “would use gender identity-based pronouns” and “be willing to refer patients for ‘gender reassignment surgery.’” She explained that her religious faith and medical judgment barred her from engaging in these practices. She added that she would use “patients’ names in place of pronouns” so that she could “respect their wishes” in a way that comported with her beliefs.

Exchange with DEI program director. This response allegedly angered the DEI program director, who repeatedly attacked her faith. He told her that “she could not take the Bible or her religious beliefs to work with her... and that she was abusing her power as a health care provider to manipulate patients.” He went so far as to refer to her as “evil” for her refusal to give patients what they wanted. And he called her a “liar” when she suggested that she had treated gay and lesbian patients for years without any complaints. He also allegedly opined that patients would commit suicide if she refused to use their preferred pronouns.

Termination. About a month after this “heated exchange,” the physician assistant noticed an unexpected meeting pop up on her calendar for August 24 with the HR director and the HR liaison. At the meeting, the HR director handed her a termination letter from the hospital’s president, and the HR liaison explained to that the hospital was firing her immediately because of her refusal to use preferred pronouns or to refer patients for gender-reassignment surgeries. The hospital barred her from returning to the clinic to get her things or even to say goodbye to her colleagues of many years, according to the court.

Lawsuit. In October 2022, the former physician assistant sued the hospital and the responsible administrators. She alleged federal constitutional claims under 42 U.S.C. § 1983, federal statutory claims under Title VII, and state constitutional and statutory claims under Michigan law.

A year of motions practice. Over the next year, the parties engaged in substantial motions practice in the district court, according to the Sixth Circuit. In January 2023, the hospital and its administrators moved to dismiss all claims on the merits. In response, the plaintiff filed a first amended complaint that mooted these initial motions. The hospital and administrators then renewed their motions to dismiss and again sought to end the case. They also moved to stay all discovery in the meantime. The court granted this discovery stay, and in response to the two motions to dismiss, the plaintiff briefed the merits of her claims and sought leave to file a second amended complaint.

In September 2023, the district court issued a 43-page opinion granting the motion to dismiss in part and denying it in part. The court first held that the former physician assistant had adequately stated Section 1983 claims against the hospital administrators under the First Amendment’s Free Exercise Clause and the Fourteenth Amendment’s Equal Protection Clause. However, the court also held that she had failed to state a Section 1983 claim against the administrators under the First Amendment’s Free Speech Clause. The court next found that she had adequately stated discrimination and failure-to-accommodate claims against the hospital under Title VII. It held, however, that she failed to plausibly allege a disparate-impact claim. Finally, the court dismissed all her state-law claims under the Michigan Constitution but allowed her to amend to pursue claims against the hospital administrators under Michigan’s Elliott-Larsen Civil Rights Act.

Arbitration defense raised. Following the beginning of discovery planning and over a year after she sued, the hospital and the named administrators raised an arbitration defense for the first time. In their answer, they argued that the dispute was “subject to arbitration.” A short time later, they filed a “motion for summary judgment to compel arbitration.” In support of this request, they pointed to an employment agreement—which included an arbitration clause—that the physician assistant had entered with the hospital before it had become part of the University of Michigan Health System.

Decision below and appeal. The district court granted the motion to arbitrate, finding the arbitration clause enforceable and applicable to the dispute. It also held that the hospital and its administrators had not waived the arbitration defense by their delay in asserting it. The district court thus compelled arbitration and dismissed the case.

The former physician assistant appealed to the Sixth Circuit.

Section 3 of the FAA. The appeals court initially observed that Section 3 of the Federal Arbitration Act (FAA) suggests that a party cannot stay a case if the party is in “default” of seeking arbitration. 9 U.S.C. § 3. Specifically, it provides that a court “shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.” (emphasis added). And a party is in “default” of a duty or promise if the party omits or fails “to fulfill [the] duty” or “promise” through “neglect” or otherwise, said the Sixth Circuit.

In “default.” Here, the appeals court found that the hospital’s decision to litigate the physician assistant’s case in court before seeking to resolve it in arbitration put the hospital in “default” of proceeding with that arbitration.

Sought “an immediate and total victory.” “Most significantly,” the Sixth Circuit said, “our cases treat a defendant’s actions as ‘entirely inconsistent’ with arbitration if the defendant first seeks ‘an immediate and total victory’ in court through a motion to dismiss under Rule 12(b)(6) and then moves to arbitrate only after the court rejects this initial attempt to end the dispute.”

That is what happened here. “Before the Hospital gave the slightest hint that it might invoke arbitration, it twice sought ‘an immediate and total victory’ by asking the district court—not an arbitrator—to reject [the physician assistant’s] case on the merits.” It first requested that the district court dismiss all claims in her complaint “with prejudice” to her refiling them anywhere, including in arbitration. It then renewed this request for a “with prejudice” dismissal after she filed her first amended complaint.

The hospital also opposed her efforts to file a second amended complaint on the ground that the filing would be “futile” because the additional allegations could not survive a motion to dismiss. And the district court partially rejected the hospital’s motion to dismiss, reasoning that the former physician assistant had stated viable claims under the First Amendment, Title VII, and Michigan law.

A “sneak peak”and a broken promise. Only at that point—after the hospital “got a sneak peak of how the case would proceed if it remained in court,” according to the Sixth Circuit—did it shift to wanting to take its chances in arbitration. By then, however, the hospital had already broken its “promise” to arbitrate the dispute, said the appeals court, because it had sought a judicial decision on the merits instead. It thus was in “default” of the parties’ arbitration agreement and so lost its right to seek arbitration under the FAA. 9 U.S.C. § 3.

Holding that the hospital lost its right to arbitrate the dispute under the FAA by seeking to dismiss all the plaintiff’s claims on the merits, the appeals court reversed and remanded.

Judge Murphy’s concurrence. In his separate opinion, concurring with his opinion for the court, Judge Murphy wrote “to propose one way to reconcile our precedent with broader waiver and forfeiture principles.” “In short,” said Murphy, “a party might be able to both waive and forfeit the right to arbitrate. That is, parties might waive a substantive right to compel arbitration under state contract law, and they might forfeit that right under federal procedural rules.” In this case, according to Murphy, the hospital and its administrators likely forfeited that right under a special federal forfeiture rule in the FAA, and they may also have waived that right under Michigan contract law.

Concurrence by Judge Bloomekatz. Judge Bloomekatz, also concurring, wrote separately to explain his view that “the distinction between waiver and forfeiture is not always so simple.” “Ultimately, what constitutes waiver or forfeiture is context dependent and depends on a variety of factors—both substantive and procedural. Indeed, some categories of conduct might not fall neatly along waiver-forfeiture lines,” and Section 3 of the FAA speaks in terms of “default” rather than waiver or forfeiture.

The case is No. 24-1398.

Judge: Murphy, E.

Attorneys: Kevin Joseph Wynosky (Clement & Murphy) for Valerie Kloosterman. Larry R. Jensen, Jr. (Hall, Render, Killian, Heath & Lyman) for Metropolitan Hospital dba University of Michigan Health - West dba Metro Health - University of Michigan Health.

Companies: Metropolitan Hospital; University of Michigan Health - West; Metro Health - University of Michigan Health

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