Case No. 17-1272 | 5th Cir.
Preview by Allison Baker
In 2012, Archer and White Sales, Inc. (“Archer”), a distributor of medical equipment, brought suit against its business competitors Henry Schein, Inc., Danaher Corporation, and subsidiaries of Danaher Corporation (“Henry Schein”). In its complaint, Archer alleged that Henry Schein violated section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 (2018), and the Texas Free Enterprise and Antitrust Act, Tex. Bus. & Com. Code Ann. § 15.05 (West 2017), by engaging in price fixing and attempting to reduce industry competition. Archer sought monetary damages and injunctive relief from Henry Schein.
Henry Schein moved to compel arbitration pursuant to a contractual clause between the parties that referred disputes arising under the contract to arbitration consistent with rules promulgated by the American Arbitration Association (“AAA”). Archer argued that arbitration was inappropriate because the arbitration clause specifically excluded claims for injunctive relief. Henry Schein argued that under AAA rules it is the arbitrator, and not the court, who decides questions of arbitrability. In Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., the Fifth Circuit held that reference to AAA rules in an arbitration clause “presents clear and unmistakable evidence that the parties agreed to arbitrate arbitrability.” 687 F.3d 671, 675 (5th Cir. 2012). However, when confronted with the question of arbitrability in Archer & White Sales, Inc. v. Henry Schein, Inc., the Fifth Circuit found that the express exclusion of claims for injunctive relief from the arbitration clause left the question of arbitrability “wholly groundless,” and that the court thus was not required to submit the question to an arbitrator. 878 F.3d 488, 497 (5th Cir. 2017); see generally Douglas v. Regions Bank, 757 F.3d 460 (5th Cir. 2014) (explaining and applying the “wholly groundless” test). Henry Schein appealed.
The question before the Supreme Court is whether courts may refuse to enforce a contractual arbitration clause under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1–16 (2018), if the question of arbitrability is “wholly groundless.”
Henry Schein contends that the Supreme Court should reject the “wholly groundless” standard because courts are prohibited from interfering once contracting parties agree to arbitration and the statutory text of the FAA does not recognize any such exception to the enforcement of arbitration clauses. Archer responds by arguing that, contrary to Henry Schein’s assertion, there is statutory support for the “wholly groundless” standard in the FAA, and that enforcing such an exception “avoids needless expense and delay.” Brief for the Respondent at 11, Henry Schein, Inc. v. Archer & White Sales, Inc., No. 17-1272 (U.S. filed Sept. 18, 2018).
The Chamber of Commerce of the United States filed an amicus brief supporting Henry Schein, arguing that the “wholly groundless” standard is inconsistent with precedent, and that finding otherwise would create uncertainty about the enforceability of arbitration clauses.