Wednesday, January 9, 2019

SCOTUS on the "wholly groundless" exception to the arbitrability question

Yesterday, Justice Kavanaugh issued his first Supreme Court opinion in Henry Schein, Inc. v. Archer & White Sales, Inc. The opinion was a relatively mundane and unanimous arbitration ruling. Of course, arbitration (just about) always wins at the Supreme Court. Frankly, I can't think of a single exception, but I'm adding the "just about" parenthetical just in case.
Justice Kavanaugh

Under the Federal Arbitration Act (FAA), parties can contract to resolve certain disputes via arbitration instead of court litigation. Sometimes, when a dispute arises, they disagree on the threshold question of whether the arbitration agreement covers their specific dispute. The arbitration agreement may specify that the arbitrability question itself is something that must be decided by an arbitrator.

Yesterday, the Supreme Court held:
When the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract.
Some courts had applied an exception to this general rule where the arbitrability claim was "wholly groundless." Yesterday, the Supreme Court rejected the "wholly groundless" exception - the arbitrability question goes to the arbitrator whether the court thinks the request to arbitrate is "wholly groundless" or not. 



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