What is the meaning of the sentence....

It appears to mean that there is a right to arbitration which can be used unless the party who now wants to assert that right already sued the opponent and caused damages to them.

That is hardly an example of clear legal writing, is it? It is not a sentence that anybody should be particularly proud to have written. Even if you understand what an arbitration clause is and what it means to have waived the right to enforce such a clause by taking part in litigation, you are likely to stumble over the last part of the sentence which seems to suddenly have turned everything backwards. All right, I will take a stab at it. An arbitration clause is a provision in a contract which the commits the parties to the contract to resolve any dispute that may arise by submitting it to a non-judicial arbitration procedure rather than by suing and going to court. Arbitration is essentially a private, informal, court. In some kinds of business dealings an arbitration clause can be very much to the advantage of one side over the other. So, assume that the parties to a contract containing an arbitration clause have a disagreement and one of them sues the other in court instead of going through arbitration. The party being sued could ask the court to dismiss the lawsuit as contrary to the arbitration clause . . . but doesn't. Instead, both sides proceed with the court litigation. Did the party being sued "waive" (i.e., give up or surrender) the protection of the arbitration clause by participating in the lawsuit without claiming the clause as grounds to dismiss? That seems to be what the discussion is about. At that point the sentence loses its coherence, possibly because we are reading it out of context. It appears to say that only a party that has itself initiated litigation will be held to have waived enforcement of an arbitration clause, and that merely failure to assert the clause as a defense when being sued is not, by itself, a waiver. But, at least taken out of context, it is not very clear. This question has nothing to do with federal crime, and I have retagged it "arbitration." Perhaps somebody else can make more sense of it than I can.

I think Attorneys Wolf and Sachs have provided good answers, and I agree with Attorney Sachs that the provision could have been better written in order to avoid, or at least minimize, ambiguity. I think that it means that recourse to arbitration is not waived merely because the party who might ask for arbitration later was the same party who instituted litigation proceedings in the first place. This clause seems to be written in such a way that the party who might later ask for arbitration can try the litigation route to a point, but only to the point where the other side has not incurred substantial costs/expenses by participating in the litigation. Once the party who is not seeking arbitration has done so, it would be considered unfair to suddenly halt the litigation process and take this dispute outside the judicial process altogether. This clause does not close the door to litigation or arbitration, but closes it a little, in the interest of fairness. Once either route has been traveled far enough, that is the route that must be continued.

It is stating a general summary of case law which says that merely submitting to the jurisdiction of the court and filing or answering a complaint or petition does not automatically waive that party's right to seek enforcement of an valid arbitration agreement so long as no significant benefit from participation in the litigation has occurred (such as having actively engaged in substantial discovery of the opposing party). This issue can often arise in the context of a motion to compel arbitration.

It means that a party does not give up its right to enforce an agreement to submit a dispute to arbitration instead of the courts just because it files an answer to a complaint in court. However, at some subsequent point, participation in the court action will serve as a waiver. Fore example, the employer can't claim arbitration must replace the court action the day before trial.