We Called It (Mostly). SCOTUS Grants Certiorari To Address Loose End in Henry Schein but Declines To Take on Broader Issues
Posted on Categories Arbitration Agreements, Business & Employment, News, Non-Securities ArbitrationTags , , ,

By George H. Friedman, SAA Editor-in-Chief

The Supreme Court agrees to review an open issue from its 2019 ruling in Henry Schein, Inc. v. Archer and White Sales, Inc., but opts not to take on two other issues with broader implications.

First, a review. In Henry Schein, Inc. v. Archer and White Sales, Inc.,139 S. Ct. 524 (2019), the Supreme Court held unanimously that there is no delegation carveout under the Federal Arbitration Act (“FAA”) for “wholly groundless” assertions of arbitrability. SCOTUS, however, stopped short of deciding whether the specific predispute arbitration agreement (“PDAA”) in question delegated the arbitrability question to an arbitrator. Instead, that issue was remanded for further consideration.

The Remand

The PDAA expressly carved out injunctive relief applications, which on its face were involved in the underlying dispute. So, what happened on remand? We reported in SAA 2019-32 (Aug. 21) that the Fifth Circuit on August 14 in Henry Schein, Inc. v. Archer and White Sales, No. 16-41674, held that the parties did not clearly delegate arbitrability. Said the unanimous Court: “The most natural reading of the arbitration clause at issue here states that any dispute, except actions seeking injunctive relief, shall be resolved in arbitration in accordance with the AAA rules. The plain language incorporates the AAA rules – and therefore delegates arbitrability – for all disputes except those under the carve-out” (emphasis in original). With the Motion to compel arbitration denied, the parties were back at the trial court on Archer and White’s original antitrust suit against Henry Schein – pursuing in the Eastern District of Texas a Petition for injunctive relief filed over seven years ago.

Frenetic Last-Minute Activity

We next reported in SAA 2020-03 (Jan. 22) that, on the eve of trial in Archer and White Sales, Inc. v. Henry Schein, Inc., No. 2:12-cv-572 (E.D. Texas), SCOTUS on January 24 issued an Order granting Henry Schein’s Motion for a stay pending the filing and disposition of a Petition for a Writ of Certiorari (Justice Ginsburg was the sole dissenter). We also reported in #03 that Schein committed to seeking Certiorari by January 31, and in SAA 2020-05 (Feb. 5) that they had fulfilled that commitment. Specifically, Schein’s timely Petition in case No. 19-963 identified this sole issue: “Whether a provision in an arbitration agreement that exempts certain claims from arbitration negates an otherwise clear and unmistakable delegation of questions of arbitrability to an arbitrator.”

But There Was More…

We had thought that was it, but we were wrong, because Archer and White on March 2 filed a cross-Petition for Certiorari, raising two new questions: “1. Whether an arbitration agreement that identifies a set of arbitration rules to apply if there is arbitration clearly and unmistakably delegates to the arbitrator disputes about whether the parties agreed to arbitrate in the first place. 2. Whether an arbitrator or a court decides whether a nonsignatory to an arbitration agreement can enforce the arbitration agreement through equitable estoppel.” The Cross-Petition also described Schein’s question as “unworthy of review.”

Half a Loaf from SCOTUS

The Court on June 15 granted Schein’s Certiorari Petition in No. 19-962, but denies Archer and White’s Cross-Petition in 19-1080 (see pages 2-3 of the Order List). Why the split verdict? Our take is the Court’s appetite was limited to cleaning up a loose end from its original holding, and that taking on all three issues collectively raised by the parties would have resulted in a complicated case.

(ed: *We correctly predicted that the Court would take up this case in some manner, and would dispose of the dueling Petitions before the Term ending later this month. **We’re a bit disappointed that SCOTUS is taking on a rather esoteric issue (a PDAA containing a delegation clause with a carveout), while avoiding the two broader issues (efficacy of provider rules with express delegation language and who decides equitable estoppel) with much greater impact. ***We will certainly keep our eye on this one.) (SAC Ref. No. 2020-23-01)

Like what you see here?

Twice a week we present blog posts consisting of one write-up from each of our two flagship weekly online Alert services. Consider a subscription to these publications to receive the full array of coverage right on your desktop every week. Give it a try and sign up for a free trial to the Securities Arbitration Alert and the Securities Litigation Alert.

Read Our Recent Blog