Removal Alone Does Not Waive the Right to Arbitrate: Tenth Circuit Consolidates the Firm Waiver Rule and Morgan v. Sundance in DeLaCruz-Bancroft v. Field Nation

1. Introduction

The Tenth Circuit’s decision in DeLaCruz-Bancroft v. Field Nation, LLC (No. 24-2169, 24 July 2025) offers a two-pronged clarification that will resonate in both arbitration and appellate-procedure jurisprudence:

• Arbitration Waiver. Merely removing a case to federal court and filing an answer does not constitute waiver of a contractual right to compel arbitration when the defendant simultaneously asserts arbitration as an affirmative defense and promptly moves to compel.
• Firm Waiver Rule for Magistrate Recommendations. A pro se litigant who fails to object to a magistrate judge’s Proposed Findings and Recommended Disposition (PFRD) forfeits appellate review unless the narrow “interests-of-justice” or notification exceptions apply, and plain-error review must be affirmatively argued on appeal.

Plaintiff-appellant Howard DeLaCruz-Bancroft, proceeding without counsel, sued Field Nation (the work-platform operator), Spartan Computer Services/National Service Center/NewBold Corporation (collectively “NewBold”), and Jack in the Box, Inc. (“JITB”) in New Mexico state court. After removal to federal court, the defendants won dismissal on two independent tracks:

1. Field Nation invoked a written arbitration agreement, which the district court enforced, dismissing claims against it.
2. NewBold and JITB prevailed on a Rule 12 motion; the magistrate judge recommended dismissal, and the district court adopted the recommendation when the plaintiff filed no timely objections.

2. Summary of the Judgment

The Court of Appeals affirmed in full. Key holdings include:

1. Arbitration Enforced. The user agreement’s broad arbitration clause—prominently capitalized and bold-faced—was valid, survived termination of the business relationship, and covered all asserted claims. Field Nation did not waive enforcement because it:
   • pleaded arbitration as an affirmative defense in its first federal filing, and
   • moved to compel arbitration before discovery, scheduling, or counter-pleading activity.
2. Firm Waiver Rule Applied. Appellant’s failure to object to the second PFRD barred appellate review of the dismissal of claims against NewBold and JITB. Neither exception to the waiver doctrine applied, and appellant failed to argue plain error.
3. No Leave to Amend. Because the plaintiff never requested amendment below nor identified curative amendments on appeal, the district court’s outright dismissal was affirmed.

3. Analysis

3.1 Precedents Cited and Their Influence

• Morgan v. Sundance, Inc., 596 U.S. 411 (2022) – Eliminated the “prejudice” requirement previously used to find arbitration waiver. The Tenth Circuit relied on Morgan to emphasize that Field Nation’s conduct must constitute intentional relinquishment of the right to arbitrate; it did not.
• Moore v. United States, 950 F.2d 656 (10th Cir. 1991) – Articulated the “firm waiver rule” barring appellate review where a party fails to object to a magistrate’s recommendation.
• Morales-Fernandez v. INS, 418 F.3d 1116 (10th Cir. 2005) – Defined two exceptions to the firm waiver rule (lack of notice and “interests-of-justice”) and clarified that plain-error review is the fallback standard.
• Richison v. Ernest Group, Inc., 634 F.3d 1123 (10th Cir. 2011) – Reaffirmed the need for appellants to argue plain error when an issue was not raised below.
• Dodson Int’l Parts, Inc. v. Williams Int’l Co., 12 F.4th 1212 (10th Cir. 2021) – Provided the de novo standard of review for orders compelling arbitration.
• Santa Fe Custom Shutters & Doors, Inc. v. Home Depot U.S.A., Inc., 113 P.3d 347 (N.M. Ct. App. 2005) – Limited standing under the New Mexico Unfair Trade Practices Act to buyers of goods or services, forming one basis for dismissal of statutory claims.

3.2 Court’s Legal Reasoning

1. Existence and Scope of Arbitration Agreement. The agreement’s language was unmistakably broad (“any and all covered justiciable disputes”), conspicuous (all-caps, bold), and explicitly survived termination. State-law contract principles validated formation, assent, and consideration.
2. No Waiver by Litigation Conduct. Applying Morgan, the court required proof that Field Nation acted inconsistently with its right to arbitrate. The company:
   • raised arbitration in its answer (Rule 8(c) affirmative defense),
   • moved to compel before merits activity, discovery, or counterclaims, and
   • engaged in no dilatory tactics.
   The court rejected the argument that removal alone waived arbitration, distinguishing cases where defendants actively litigated on the merits.
3. Firm Waiver Rule Process. The second PFRD contained a conspicuous fourteen-day objection notice. Plaintiff did not object, so he forfeited appellate review absent the two limited exceptions—neither of which applied. Moreover, he failed to brief the plain-error standard on appeal.
4. Dismissal Without Leave to Amend. Because plaintiff never sought amendment and could not articulate changes capable of avoiding arbitration, the district court acted within its discretion.

3.3 Anticipated Impact

Although the order is non-precedential under 10th Cir. R. 32.1(A), it carries persuasive weight:

• Arbitration Strategy Post-Morgan. Defendants may remove a case and simultaneously compel arbitration without fearing waiver, provided they:
  • plead arbitration as an affirmative defense, and
  • move to compel before meaningful litigation on the merits.
• Pro se Litigation. The decision underscores that pro se status does not loosen the firm waiver rule. Litigants must file specific, timely objections to preserve appellate issues.
• District Court Practice. Magistrate judges should continue issuing explicit objection notices; district courts can confidently apply de novo or clear-error review when no objections are filed.
• New Mexico UTPA Standing. The case re-highlights Santa Fe Custom Shutters: only purchasers have standing, closing the door on service-providers who attempt to sue under the Act.

4. Complex Concepts Simplified

Arbitration Clause

A contractual provision requiring disputes to be resolved by a private arbitrator rather than a public court.

Waiver of Arbitration

The intentional relinquishment of the right to arbitrate, historically found when a party substantially litigates before invoking arbitration. After Morgan, courts no longer require proof of prejudice to the opposing party—only inconsistency with the right itself.

Removal

Transfer of a lawsuit from state to federal court by a defendant, authorized under 28 U.S.C. § 1441.

Firm Waiver Rule

Tenth Circuit doctrine barring appellate review of issues not raised through timely objections to a magistrate judge’s recommendations.

Plain-Error Review

A stringent standard allowing appellate courts to correct only particularly egregious errors that affect substantial rights and seriously impugn the fairness or integrity of judicial proceedings.

PFRD (Proposed Findings and Recommended Disposition)

A magistrate judge’s report recommending how the district court should resolve dispositive motions. Parties have a statutory window (usually 14 days) to object.

5. Conclusion

DeLaCruz-Bancroft v. Field Nation reinforces two critical principles in Tenth Circuit jurisprudence:

1. Removal to federal court, without more, does not waive a defendant’s right to compel arbitration when the right is timely and clearly asserted, dovetailing with the Supreme Court’s modern approach in Morgan v. Sundance.
2. Appellate review hinges on procedural preservation. Pro se litigants are bound by the same firm waiver rule as counselled parties and must timely address magistrate recommendations or argue plain error on appeal.

Practitioners should heed the strategic roadmap: invoke arbitration immediately and ensure objections are lodged within statutory deadlines. Courts, for their part, may rely on this opinion to streamline dockets, confident that early motions to compel arbitration and unopposed PFRDs can be enforced with minimal risk of reversal.