On January 8, 2019, a unanimous Supreme Court tightened the grounds for avoiding contractual obligations to arbitrate in Henry Schein, Inc. v. Archer & White Sales, Inc. The Court’s decision simultaneously reins in the ability of state and federal courts to limit the authority of arbitrators, while affirming the power of some arbitrators to determine their own jurisdiction under federal law.
Under the Federal Arbitration Act (FAA), courts must enforce contractual agreements to arbitrate as written. When faced with a potential dispute governed by the FAA, two questions immediately arise. First, do the parties’ claims and allegations fall within the scope of their existing arbitration agreement? Second, who has the power to resolve any dispute over the answer to the first question: a judge or the arbitrator? Even when arbitration agreements clearly empower arbitrators to decide this second question of “arbitrability,” some litigants nevertheless seek to dodge their contractual obligation to arbitrate by filing suit in state or federal court. These litigants then argue to courts that there was no need to involve an arbitrator, supposedly because it is “obvious” that the claims fall outside the scope of the agreement to arbitrate.
In Henry Schein, the Supreme Court resolved a conflict among the circuit courts by ruling that there is no such “wholly groundless” exception to the requirement that courts must enforce valid delegations of this authority to arbitrator. The “wholly groundless” exception, developed principally in the Fifth, Sixth and Federal Circuits, permitted courts to decide the second question of arbitrability as a threshold matter, even when parties had contractually delegated arbitrability to an arbitrator. The Supreme Court has now held that this...
