A recent decision of the United States Supreme Court addressed the frequently encountered issue of arbitrability—that is, whether a court or an arbitrator should decide whether or not a particular issue is subject to arbitration based on the arbitration clause in an agreement.
This decision is noteworthy because the issue often arises about how to handle an argument that a claim is subject to arbitration when that claim is frivolous (at least in one party’s view.) In Henry Schein, Inc. v. Archer & White Sales, Inc., U.S. Supr. Ct., No. 17-1272 (Jan. 8, 2019), a unanimous decision written by Justice Brett Kavanaugh, the court rejected a judicially-imposed exception to arbitrability under the Federal Arbitration Act. The court determined that if an agreement containing an arbitration clause provides that arbitrators have the power to resolve arbitrability questions, then an arbitrator—not the court—should decide whether the arbitration provision applies to the issue involved, regardless of whether the arbitration demand is “groundless.”
The court rejected an argument followed by some lower courts that if an arbitration claim was “wholly groundless,” a court should decide arbitrability. The nation’s high court reasoned that because the statute did not impose a “wholly groundless” exception, the gateway question of arbitrability is a matter of contract law and, for example, when an agreement refers to the rules of the American Arbitration Association, those rules provide for the arbitrator to have the power to resolve arbitrability questions.
This decision should be compared to the long line of Delaware cases on arbitrability beginning with the Delaware Supreme Court decision in Willie Gary, highlighted on these pages here, that almost 13 years ago reached a similar result regarding questions of arbitrability. (Yours truly successfully argued that Willie Gary case.)