Arbitrability and the Right Forum

The international movement has been for less collateral litigation, clearer divisions between courts and arbitral tribunals, and for courts to serve more in a supervisory role and less as an interventionist—that is, to keep more of the case within the arbitral forum, under the rules governing the arbitration, including the arbitral tribunal’s discretion to decide its own jurisdiction. There are some indications that there is an effort to more clearly define the allocation of functions between the arbitral tribunal and the courts in the United States. 

On January 8, 2019, the US Supreme Court issued a unanimous opinion in Henry Schein, Inc. v. Archer & White Sales, Inc. The Supreme Court cautioned that courts should be careful not to take away the question of arbitrability—i.e., whether an arbitration agreement applies—from arbitrators. A court must first decide whether a parties’ arbitration agreement delegates the question of arbitrability to an arbitrator, and if so, “a court possesses no power to decide the arbitrability issue.” This appears to be a departure by degree from the Court in BG Group, PLC v. Republic of Argentina, 572 U.S. 25, 34 (2014), which stated: “[C]ourts presume that the parties intend courts, not arbitrators, to decide … disputes about ‘arbitrability.’” BG Group followed the interpretation in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943-44 (1995), which looked for “clear and unmistakable evidence” of the parties’ intent to submit the issue of arbitrability to the tribunal, while limiting the court’s initial inquiry to who has the power to rule on arbitrability.

Henry Schein, Inc. v. Archer & White Sales, Inc. dealt with a domestic arbitration in which the lower court interpreted the applicability of an arbitration agreement. Archer & White sued Schein in District Court, alleging violations of federal and state antitrust law and seeking both money damages and injunctive relief. Schein moved to compel arbitration under the Federal Arbitration Act. The contract between the parties provided for arbitration under the arbitration rules of the American Arbitration Association (AAA), and the arbitration agreement encompassed any dispute arising under or related to the agreement—except for actions seeking injunctive relief. Archer and White opposed the motion to compel arbitration, arguing that the dispute was not subject to arbitration because of the exception clause. The District Court denied the motion to compel arbitration, and the Fifth Circuit affirmed. The US Supreme Court remanded to the Fifth Circuit to address whether the contract delegated the question of arbitrability to an arbitrator. The case confirms that a court’s initial inquiry stops at determining who decides the question of arbitrability.