In a unanimous decision issued on January 8, 2019, the Supreme Court held that when parties to an arbitration agreement have agreed to have an arbitrator decide the question of whether a dispute is covered by the agreement, making it “arbitrable,” courts may not intervene even if the argument that the dispute is covered under the agreement is “wholly groundless.” Henry Schein, Inc. v. Archer & White Sales, Inc., Docket No. 17–1272. Ordinarily, courts have the authority to decide “gateway” issues of arbitrability, including the issue of whether a particular dispute is arbitrable under the agreement. But the Supreme Court had held previously that parties could delegate that authority to an arbitrator if they made a “clear and unmistakable” agreement to do so. The question in the Henry Schein case was whether that delegation could be ignored if the arbitration agreement clearly did not cover the dispute at issue, or, in other words, if the argument to have a matter arbitrated was “wholly groundless.”
Archer & White, a dental equipment distributor, had argued that the arbitration agreement it had with Henry Schein, an equipment manufacturer, specifically excluded the antitrust claims that Archer & White had brought against Henry Schein in a lawsuit in federal district court. Archer & White was seeking injunctive relief and money damages and the arbitration clause in its contract with Henry Schein excluded “actions seeking injunctive relief” from the requirement to arbitrate contractual disputes. Since the argument that the dispute was covered by the arbitration clause was “wholly groundless,” Archer & White argued, the court should just dismiss Henry Schein’s motion to compel arbitration and allow Archer & White’s lawsuit to proceed. The District Court agreed with Archer & White, and the Fifth Circuit Court of Appeals upheld the lower court.
Justice Brett Kavanaugh, writing for the unanimous Supreme Court, reversed the Fifth Circuit. He explained that nothing in the Federal Arbitration Act, 9 U.S.C. §§ 1-16, permitted a court to ignore the parties’ agreement to delegate arbitrability questions to an arbitrator. Therefore, even if it appeared that a party was making a “wholly groundless” argument to shoehorn a dispute into the coverage of an arbitration agreement, that determination would have to be made by the person or entity the parties’ chose to make that assessment. Absent contractual language to the contrary, a court ordinarily makes that decision. But if the parties agreed to have an arbitrator assess the coverage of the arbitration clause, then a court would have step back and let the arbitrator do his or her job.
Justice Kavanaugh nonetheless remanded the case to the Fifth Circuit to decide whether or not the parties had agreed to delegate arbitrability questions to an arbitrator. He wrote: “We express no view about whether the contract at issue in this case in fact delegated the arbitrability question to an arbitrator. The Court of Appeals did not decide that issue. Under our cases, courts ‘should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.’ First Options, 514 U. S., at 944 (alterations omitted). On remand, the Court of Appeals may address that issue in the first instance.”