The district court concluded that Sundance had waived its right to arbitrate, but the US Court of Appeals for the 8th Circuit disagreed. Both courts made their determinations by using a three-part test, asking whether Sundance knew of its right to arbitrate, whether Sundance acted inconsistently with that right, and — importantly — whether Morgan was prejudiced by Sundance's delay. The third factor was the main source of disagreement between the district and appellate courts; whether it was proper for the courts to take this factor into account at all is the main issue before the Supreme Court.