Posted Wed, Dec 9th 2020 2:52 pm by Ronald Mann
Tuesday’s argument in Henry Schein Inc. v. Archer and White Sales Inc. was the second time the Supreme Court considered this particular dispute over arbitration clauses “Gateway”: those who give an arbitrator the power to determine whether A particular dispute is the subject of arbitration. The arbitration clause here – in a contract between two dental equipment companies, Henry Schein Inc. and Archer and White Sales Inc. – excluded claims that required fair relief. When the parties quarreled, Archer and White sued Henry Schein in court in 2012. Henry Schein immediately filed for arbitration, but Archer and White appealed, and the federal courts debated for the next eight years whether the courts or the arbitrator should decide whether the dispute should be arbitrated.
The case has been pending before the Supreme Court, leading to a finding that gateway arbitration clauses are enforceable even if a court finds the argument for arbitration to be “totally unfounded”. In custody in the U.S. 5th Circuit Court of Appeals, the Court of Appeals ruled that the companies’ contract provided for gateway arbitration (because it contains the American Arbitration Association rules, which provide a provision to that effect), but rejected it nonetheless to order arbitration. The 5th Circuit reasoned that the treaty’s exclusion of injunctive disputes from arbitration burdens the courts with deciding whether a particular dispute is an injunction and sent the case back to the district court to make that decision.
The main topic of the argument on Tuesday was the comment on the narrowness of the question before the judges. When the case goes to court, it goes without saying that the contract will require the arbitrator to decide whether a particular dispute is arbitral. The only question is whether, despite this provision, the court should decide whether this particular case is a type of dispute that is excluded from arbitration. If you think the question seems to answer itself, you will understand the reaction of judges like Samuel Alito, who commented at the beginning of the argument, “This case comes to us in a more artificial attitude, so we have to accept The contract … provides for the arbitration of [the] Question “Who decides?” … And if that’s true, the answer to the question we are supposed to decide is of course predetermined. “
To the extent that the argument contains a substantive issue, the question would be whether it makes sense to have some arbitrability issues decided by a judge and others by an arbitrator. Chief Justice John Roberts and Justice Elena Kagan suggested to Kannon Shanmugam, attorney for Henry Schein, to see some logic for splitting the arbitration decision. As Kagan put it, “Once you’ve decided that certain questions should be brought to court, you won’t want to go to the arbitrator here to determine whether lawsuits that plausibly seek injunctive relief are real. The. You just want to keep this in court in general. “
As the argument went on, some of the judges had a very different opinion on the point. It started with Judge Brett Kavanaugh (who wrote the opinion in Henry Schein when the case was last heard in the Supreme Court), who “emphasized his understanding … that the question of who makes arbitration … almost never between one Court and arbitrator will decide because that would be nonsense … You need one person to decide and it will be either the court or the arbitrator, not both the court and the arbitrator. “Shanmugam readily agreed. For Kavanaugh, this point seemed to form the whole decision:
Virtually every arbitration agreement … either sets limits or has carveouts. If that alone means the court decides what is arbitration, the court always decides on arbitration and eliminates the idea that arbitrators can ever rule on arbitration.
This perspective dominated much of the rest of the argument. For example, when Roberts began questioning Daniel Geyser, Archer and White’s attorney, he stated, “The main challenge you face is … the one that Justice Kavanaugh was talking about. How do you differentiate what we call a common situation where there is no explicit outsourcing? He then gave a common example of an arbitration agreement limited to ‘disputes within the factory’, suggesting that Geyser’s reading would require a court order as to whether a dispute over the use of an adjacent building was a dispute within the ‘ Factory “applies This appears to undermine the parties’ determination to refer Gateway issues from the court to the arbitrator.
Justice Sonia Sotomayor made Geyser even more elaborate:
Your position basically states … that any arbitration issue must be decided by the court, as any arbitration agreement has limitations. Almost all of the agreements state that disputes related to this contract are subject to arbitration. And almost inevitably, one party will come in and say that this dispute is not related to a contract. And what would a court do? Do you decide on this issue and then send it to arbitration – even if the contract says all disputes related to arbitration go to the arbitrator?
And when Kavanaugh’s tenure resurfaced towards the end of the argument, he pushed the same point home harder, claiming, “It just doesn’t work that way in the real world, and it couldn’t work that realistically in the real world either. I do not believe that an arbitration contract says that arbitration on certain issues should be decided by the arbitrator and [arbitrability] from other subjects [shall be decided] From the court. “
In several places the argument became quite heated. When Geyser told Roberts that the specific gateway provision here (from the AAA rules) was not entirely clear, Roberts interjected, “I wish you would just leave the AAA rules off. I think that’s what we tried when we denied certification on this issue. “Sotomayor was even more angry with Geyser when she responded to one of his interruptions and told him,” Stop it. Let me finish ”and a few minutes later reprimanded him for an evasive answer by saying,“ Please just answer my question ”.
There is almost always room for doubt about the outcome after an argument. Given the wandering nature of the argument and questions about what exactly the judges should decide, it’s a little early to be sure what will happen. However, I think the argument shows that some judges are quite dissatisfied with the repeated reluctance of the 5th Circle to enforce the arbitration agreement before them.
Ronald Mann, argument analysis: judges consider narrow question in second look at arbitration,
SCOTUSblog (December 9, 2020, 2:52 p.m.), https://www.scotusblog.com/2020/12/argument-analysis-justices-ponder-narrow-question-in-second-look-at-arbitration-dispute /.