Schein v. Archer
The Federal Arbitration Act (FAA) allows parties to a contract to resolve their disputes via arbitration rather than in court. However, in passing the FAA, Congress also generally left to the courts the power to decide arbitrability—that is, whether the parties agreed to arbitrate their dispute in the first place. In this case, Petitioner Henry Schein Inc. and Respondent Archer and White Sales, Inc. disagree over whether a court or arbitrator should decide the arbitrability of their ongoing antitrust dispute.
The contract at issue in this case provides for arbitration to resolve any dispute between the parties except for disputes seeking injunctive relief, and it stipulates that any arbitration abide by the rules of the American Arbitration Association (AAA). The AAA rules mentioned in the contract contain a jurisdictional clause stating that an arbitrator may decide the question of arbitrability, and the petitioner has used that clause to argue that any dispute over arbitrability must be decided by an arbitrator. Respondent disagrees, arguing that the dispute at issue falls under the carve-out of “disputes seeking injunctive relief.” The U.S. Court of Appeals for the Fifth Circuit agreed with the respondent, and in June 2020 the Supreme Court granted petitioner’s request for review.
CAC filed an amicus curiae brief in support of respondent arguing that the Supreme Court should affirm the Fifth Circuit’s decision, but on the ground that a mere reference to arbitral rules that contain a jurisdictional provision is not enough to delegate all questions of arbitrability to an arbitrator. Our brief first explained that while Congress passed the FAA to permit parties to arbitrate their disputes outside of the courts, it also left the crucial role of deciding arbitrability to the courts as a general matter. As a result, if parties to a contract want to opt out of the presumption that courts decide arbitrability and instead delegate that question to an arbitrator, there must be clear and unmistakable evidence of that intent.
Our brief then argued that the incorporation in a contract of AAA rules containing a jurisdictional provision was not clear and unmistakable evidence that the parties wished to delegate all questions of arbitrability exclusively to an arbitrator. The contract itself said nothing about arbitrability, and the mere reference to AAA rules, which contained a jurisdictional provision among dozens of other provisions, could not itself be enough to delegate arbitrability. Indeed, the AAA provision said only that an arbitrator may decide arbitrability, not that the arbitrator had exclusive jurisdiction or that courts were precluded from deciding arbitrability. Moreover, many contracts incorporate arbitral rules like those of the AAA, and a presumption that inclusion of those rules constitutes clear and unmistakable evidence of an intent to designate all questions of arbitrability to an arbitrator would undermine Congress’s plan that the courts generally decide such questions.
Finally, our brief argued that the decisions in lower courts holding that various references to arbitral rules with ambiguous jurisdictional provisions meet the clear-and-unmistakable standard relied on weak reasoning. Our brief urged the Supreme Court to correct the lower courts’ mistakes and hold that a cross-reference to ambiguous arbitral rules is not sufficient to provide clear and unmistakable evidence of the parties’ intent to arbitrate arbitrability.
In January 2021, the Supreme Court dismissed the case as improvidently granted. As a result of the Court’s dismissal, the Fifth Circuit’s ruling, which held that a federal district court, not an arbitrator, should decide the question of arbitrability, will remain in place.
October 20, 2020
CAC files amicus curiae briefSup. Ct. Amicus Br.
December 8, 2020
The Supreme Court hears oral argument
January 25, 2021
The Supreme Court dismisses the case as improvidently granted