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<xTITLE>Henry Schein Redux - Is Competence Language in Arbitration Rules Evidence of Intent to Arbitrate Arbitrability?</xTITLE>

Henry Schein Redux - Is Competence Language in Arbitration Rules Evidence of Intent to Arbitrate Arbitrability?

by Mark Kantor
May 2020 Mark Kantor

You may recall my posts (set out below) from last summer about the US 5th Circuit Court of Appeals decision on remand following the 2019 US Supreme Court decision in Henry Schein, Inc. v. Archer and White Sales, Inc. rejecting the appellate court’s initial view that courts could deny arbitration if the arbitrability argument was “wholly groundless,” regardless of whether the parties had agreed that such questions were “clearly and unmistakably” allocated to the arbitral tribunal for decision. On remand, the 5th Circuit then ruled that the arbitration clause at issue did not in fact “clearly and unmistakably” allocate the relevant question to the arbitrators. The Appeals Court held that, based on the exclusion from arbitration for “actions seeking injunctive relief” in the clause, the courts were entitled to consider arbitrability and the dispute in question was not arbitrable.

The party seeking arbitration, Henry Schein, Inc., sought certiorari again before the US Supreme Court, with the opposing party, Archer and White Sales, Inc., filing a conditional cross-petition. In perhaps a signal that the Supreme Court may indeed grant cert, the Court on Monday “relisted” the two petitions after considering them at last week’s conference among the Justices (FYI it has become common practice for the Court to often first “relist” a case after conference before eventually granting cert). If the Court does grant certiorari, it is possible that the Court will return to an issue it avoided in its review of the earlier Henry Schein Court of Appeals decision – whether an arbitration agreement that specifies a set of arbitration rules, and those rules authorize the arbitral tribunal to decide arbitrability issues under the competence-competence principle, “clearly and unmistakably” delegates to the arbitrator disputes about whether the parties agreed to arbitrate in the first place. 

Readers will recall that, during Henry Schein’s first trip to the US Supreme Court, the “arbitration rules delegation” question was raised in an amicus brief by Prof. George Bermann. Prof. Bermann’s brief reflected the Restatement approach that incorporation of such arbitration rules was not sufficient to satisfy the “clear and unmistakable” test first established by the Supreme Court in First Options v. Kaplan). Justice Ruth Ginsburg noted the issue at oral argument in Henry Schein, but the Supreme Court did not decide the issue in the first go-around of this dispute.

There is also an “equitable estoppel” issue embedded in these cases – who decides whether a non-signatory to an arbitration agreement can enforce the arbitration agreement through equitable estoppel, the arbitral tribunal or the court? That particular question was not at issue before the Supreme Court in the recent GE Power v. Outokumpu Stainless case decided earlier this month.

This is what the blog Scotusblog.com has to say about the issues raised in the new petitions (https://www.scotusblog.com/2020/06/sequel-watch/).

Henry Schein, Inc. v. Archer and White Sales, Inc., 19-963, and Archer and White Sales, Inc. v. Henry Schein, Inc., 19-1080, are sequels to — you’ll never guess — Henry Schein, Inc. v. Archer and White Sales, Inc. Last term, the Supreme Court unanimously held that under the Federal Arbitration Act, a court may not decide a question of arbitrability — that is, whether an arbitration agreement applies to the particular dispute — if the parties clearly and unmistakably delegated the question to an arbitrator, even if the court believed that the argument for arbitrability was “wholly groundless.”

On remand, the U.S. Court of Appeals for the 5th Circuit once again refused to compel arbitration. It concluded that the parties had delegated at least some questions of arbitrability to the arbitrator. But it held that because the arbitration agreement included a provision exempting certain claims from arbitration (as relevant here, actions seeking injunctive relief), the agreement did “not clearly and unmistakably delegate[] the question of arbitrability to an arbitrator.” Henry Schein, Inc., seeks to challenge that determination. In a conditional cross-petition, Archer and White Sales argues that this question does not warrant review, but that if the court takes the case anyway, the court should also decide (1) whether an arbitration agreement that identifies a set of 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; and (2) whether an arbitrator or a court decides whether a nonsignatory to an arbitration agreement can enforce it through equitable estoppel.

In one of the two petitioned cases, Archer and White Sales Inc. v. Henry Schein Inc., Prof. Bermann has again submitted an amicus brief (available at https://www.supremecourt.gov/DocketPDF/19/19-1080/140731/20200402122219711_Archer%20White%20v.%20Schein%20Amicus%20Mar%2030%202020%20To%20File.pdf) arguing that “The competence-competence language in arbitration rules does not reflect “clear and unmistakable” evidence of an intent to arbitrate arbitrability.” No other amicus briefs have yet been filed in this iteration of the dispute.

My earlier posts about this case from last year, with slightly corrected details of the Fifth Circuit opinion on remand, are below. As discussed in those posts, the reliance by the 5th Circuit on an “injunctive relief” carve-out as evidence that the parties had not unmistakably allocated arbitrability issues to the arbitrators is particularly important for the intellectual property community, whose arbitration clauses often contain carve-outs for specific technical matters, including disputes “concerning the validity, scope, infringement and essentiality of a patent or a patent claim.” Moreover, it is extremely common in all sorts of contracts for an arbitration clause to include as well an express authorization for a disputing party to seek injunctive relief from the courts.

The Supreme Court routinely issues orders granting or denying certiorari on Mondays during the Term. The next opportunity for thee Court to issue orders in these disputes is therefore Monday, June 15 at 9:30 a.m. US East Coast time. Of course, the Court is not required to issue relevant orders at any particular date until the Justices so desire.

Biography


Mark Kantor serves as an arbitrator and mediator in commercial and investment disputes, and as an Adjunct Professor at the Georgetown University Law Center (Recipient, 2006 Fahy Award for Outstanding Adjunct Professor). Mr. Kantor is a member of the World Bank Group Sanctions Board. He is also Editor-in-Chief of the online journal Transnational Dispute Management.  Until he retired from Milbank, Tweed, Hadley & McCloy LLP, Mr. Kantor was a partner in the Corporate and Project Finance Groups of the Firm and resident in the Washington, D.C. office.
 

Mr. Kantor is a qualified arbitrator and a member of the American Arbitration Association Commercial and International Panels, the AAA's Large Complex Case Roster, the AAA/ICDR's Energy Arbitrators List, the ICC Arbitrator Database, The Chartered Institute of Arbitrators, the London Court of International Arbitration list of arbitrators, the rosters of arbitrators of the Hong Kong, Singapore and Kuala Lumpur International Arbitration Centres, the Pakistani Center for International Investment and Commercial Arbitration roster, the CPR Panel of Distinguished Neutrals for Banking and Finance, the CPR International Panel and the CPR Energy Committee. He is a Chartered Arbitrator of The Chartered Institute of Arbitrators. He is honored in Who’s Who in America; Who’s Who in the World; Who’s Who in American Law; International Who’s Who, Commercial Arbitration; Chambers USA, International Arbitrators; Best Lawyers in America; U.S. News & World Report, Tier 1 International Arbitration; Lifetime Achievement Award from Marquis Who's Who; and Superlawyers. In 2013, he was named Best Lawyers Washington DC International Arbitration - Governmental "Lawyer of the Year." Mr. Kantor was the 2011 recipient of the Arbitral Women Honorable Man Award.


Mr. Kantor is a member of the ADR Advisory Board of the International Law Institute, the Editorial Board of Global Arbitration Review and the Boards of Editors of the Journal of World Energy Law and Business, the Journal of Damages in International Arbitration and the Journal of Technology in International Arbitration. Additionally, he serves as a member of the Editorial Board for investmentclaims.com and as an Associate Editor of the Oil-Gas-Energy Law Intelligence Service. Over the years, he has served repeatedly as Chair and as Vice-Chair of the DC Bar International Dispute Resolution Committee, and the DC Bar International Investment and Finance Committee. Mr. Kantor is the author of Valuation for Arbitration: Compensation Standards, Valuation Methods and Expert Evidence (Kluwer 2008), named Best Book of 2008 in the OGEMID Awards, and “A Code of Conduct for Party-Appointed Experts in International Arbitration – Can One be Found?” 26 Arbitration International 323 (2010), named Best International Dispute Resolution Article of 2010 in the OGEMID Awards.


Mr. Kantor has written extensively on international business matters. In addition to his book Valuation for Arbitration and co-editing Reports of Overseas Private Investment Corporation Determinations, serving as Editor-in-Chief for Transnational Dispute Management and on numerous editorial boards for publications, he has published numerous additional articles and papers.


Mr. Kantor has taught as a faculty member of the International Law Institute and has chaired or spoken at numerous professional conferences.


In 1990, Mr. Kantor was General Counsel of the Resolution Trust Corporation Oversight Board (the U.S. Federal agency responsible for supervision and oversight with respect to the S&L crisis). He served from 1987 until 1999 as Counsel to the American Academy of Diplomacy. Until 2014, he was a Senior Fellow at the Columbia Center for Sustainable International Investment (a joint undertaking of Columbia Law School and the Earth Institute at Columbia University).


Mr. Kantor graduated with honors in 1975 from the University of Southern California and in 1979 from both the University of Michigan's Institute for Public Policy Studies, where he received his master's degree, and the University of Michigan Law School. He joined Milbank Tweed in 1979, and was assigned to the Firm's Hong Kong office for several years in the 1980s. In late 1986, he became a partner in the Firm. He relocated to the Washington, D.C. office in 1987. Mr. Kantor retired from Milbank Tweed at the end of 1999.



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