Supreme Court Decides First Arbitration Case On Its Docket – Henry Schein, Inc. v. Archer & White Sales, Inc.

As we noted in our Dec. 19, 2018, blog article, there were three arbitration cases involving the Federal Arbitration Act (FAA), all argued in October 2018, pending on the Court's docket. Now, in a unanimous opinion written by Justice Brett Kavanaugh, Henry Schein, Inc. v. Archer & White Sales, Inc., No. 17-1272 (Jan. 8, 2019), has been decided. And as we sensed based on the oral argument, there was not much sympathy for the "wholly groundless" exception to the contractual delegation of arbitrability questions to an arbitrator.

Indeed, in a straightforward analysis, the opinion rejected the wholly groundless exception as "inconsistent with the statutory text" of the FAA and Court precedent. Moreover, the Fifth Circuit decision confused the "question of who decides arbitrability" with the related but distinct question of "who prevails on arbitrability." Finally, when the parties' agreement "delegates the arbitrability question to an arbitrator, the courts must respect the parties' decision as embodied in that contract." Slip op. at 8. (Emphasis added.) Even though this decision arose from an antitrust dispute, it applies equally to employment law.

The case below

The Henry Schein case began when Archer & White Sales Inc. (Archer & White), a company distributing dental equipment, entered into a contract with a dental equipment manufacturer. When the relationship foundered, Archer & White sued in Federal District Court in Texas for antitrust violations, seeking both monetary and injunctive relief. The relevant dispute resolution provision of the agreement declared that disputes other than those seeking injunctive relief would be resolved by binding arbitration under American Arbitration Association (AAA) rules.

"Disputes. This Agreement shall be governed by the laws of the State of North Carolina. Any dispute arising under or related to this Agreement (except for actions seeking injunctive relief and disputes related to trademarks, trade secrets, or other intellectual property of [Schein]) shall be resolved by binding arbitration in accordance with the arbitration rules of the American Arbitration Association [(AAA)]. The place of arbitration shall be in Charlotte, North Carolina."

Schein moved the District Court to send the antitrust dispute to arbitration premised on the FAA. Archer & White objected, maintaining that the dispute was not arbitrable because it sought, in part, injunctive relief and the contract foreclosed arbitration of a...