Henry Schein, Inc. v. Archer and White Sales, Inc.

Whether the Federal Arbitration Act permits a court to decline to enforce an agreement delegating questions of arbitrability to an arbitrator if the court concludes the claim of arbitrability is “wholly groundless.”

Respondent (distributor) sued Petitioner (manufacturer) alleging violations of antitrust laws. Respondent sought damages and “unspecified injunctive relief” and Petitioner moved to compel arbitration. Respondent opposed the motion because of an exception in the arbitration agreement for “actions seeking injunctive relief,” arguing that the inclusion of injunctive relief made the entire dispute subject to litigation rather than arbitration. A magistrate judge granted Petitioner’s motion, but the district court vacated the order. The district court cited Respondent’s argument and determined that any other reading of the agreement would be “wholly groundless.” The Court of Appeals for the Fifth Circuit affirmed, holding if “arbitrability is wholly groundless, the court need not submit the issue of arbitrability to the arbitrator.” Petitioners point out that there is a circuit split, creating uncertainty about whether the courts or an arbitrator determine arbitrability, as some circuits recognize the “wholly groundless exception.” Petitioner argues that the when parties agree to arbitrate arbitrability, the court must order arbitration, even if they believe the dispute to be frivolous. Petitioner argues that examining the underlying agreement goes against the Supreme Court’s previous decisions and promotes “judicial hostility to arbitration.” Furthermore, courts determining arbitrability defeats the purpose and efficiency of arbitration and leaves parties to question whether their agreements will be upheld. Additionally, Petitioner argues that the circuit split will promote forum shopping.