On June 15, 2020, the U.S. Supreme Court granted certiorari in Henry Schein, Inc. v. Archer and White Sales, Inc. to decide a question that has divided the federal circuit courts and state supreme courts: “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.” The Fifth Circuit in this case, following decisions of the Second Circuit and the Delaware Supreme Court, held that when a provision exempting certain claims from arbitration is present, it negates otherwise clear and unmistakable evidence of a delegation and requires the party seeking to compel arbitration to make an even more onerous showing. By contrast, the Ninth Circuit and the Kentucky Supreme Court have ruled that the mere presence of such a carve-out provision does not negate otherwise clear and unmistakable evidence of a delegation.
This is the second time the Court has agreed to decide issues arising out of the Henry Schein arbitration agreement. Last year, the Court held that the Federal Arbitration Act (FAA) requires courts to enforce arbitration agreements that delegate questions of arbitrability to the arbitrator even if they believe that the claim of arbitrability is “wholly groundless.” The Court remanded the case to the Fifth Circuit to decide whether the parties had delegated the arbitrability question to the arbitrator. The Court will now review the Fifth Circuit’s conclusion that a court, not an arbitrator, was required to determine the scope of the parties’ arbitration agreement. A decision will be issued next year.
While the Court’s grant of certiorari confirms its continuing interest in arbitration issues, we were disappointed that a few weeks ago, the Court declined to review two petitions that raised the issue of whether the FAA preempts California’s McGill Rule, which invalidates arbitration agreements that do not permit claims for public injunctive relief to be pursued in court or in arbitration. Hopefully, the Court will agree to resolve that important preemption issue in another case in the not-too-distant future.