U.S. Supreme Court Resolves Circuit Split, Reverses Fifth Circuit, Regarding Who Decides Whether a Claim Belongs in Arbitration

January 8

By Tarush R. Anand – Shareholder, Houston, TX

On January 8, 2019, the U.S. Supreme Court made an important ruling in the area of arbitrations. The issue before the Court was essentially this: When there is an arbitration clause in a contract, who gets to decide whether a particular claim falls within the scope of that arbitration clause?

Contracts containing arbitration clauses often provide that the arbitrator decides whether a claim belongs in arbitration. But there was a circuit spit on whether this type of provision is always enforceable. While such clauses are generally enforced, several courts, including the U.S. Court of Appeals for the Fifth Circuit, had created an exception. Those courts had ruled that a court can resolve the question of arbitrability itself if the argument regarding the claim being subject to the arbitration agreement was wholly groundless. In such situations, the court would decide the arbitrability of the claim, despite the agreement requiring an arbitrator to make that decision. The courts following this view reasoned that this “wholly groundless” exception allowed courts to block frivolous attempts by a party to transfer a case from the court system to arbitration. But today, the Supreme Court rejected this practice.

In a unanimous decision, the Supreme Court ruled that, when the contract assigns the arbitrability question to an arbitrator, courts cannot decide the issue. That remains true even when the court believes that the argument regarding the dispute falling within the scope of the arbitration clause is wholly groundless. The Supreme Court explained that if a contract delegates the arbitrability question to an arbitrator, a court simply has no power to decide the arbitrability question. It must go to the arbitrator.

The case is Henry Schein Inc. v. Archer and White Sales Inc., No. 17-1272; In the Supreme Court of the United States. The opinion is available at this link: https://www.supremecourt.gov/opinions/18pdf/17-1272_7l48.pdf.

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