Henry Schein, Inc. v. Archer & White Sales, Inc.

Background

Archer and White, a small business that distributes dental equipment, sued Schein (the successor to a manufacturer and Henry Schein, Inc.) over antitrust claims and sought money damages and injunctive relief. Their contract incorporated the American Arbitration Association rules and said most disputes go to arbitration but excepted some injunctive-relief and intellectual-property claims. Schein asked the federal court to compel arbitration. The district court, following Fifth Circuit precedent, ruled Schein’s arbitration argument was "wholly groundless" and denied the motion; the Fifth Circuit affirmed, and the Supreme Court took the case because other appeals courts disagreed about the exception.

Reasoning

The central question was whether courts may refuse to send an arbitrability question to an arbitrator when the argument for arbitration is "wholly groundless." Relying on the Federal Arbitration Act and prior cases, the Court held the Act contains no such exception. When a contract delegates the question of arbitrability to an arbitrator, courts must respect that contractual choice and may not decide arbitrability themselves, even if they view the argument as frivolous. The Court vacated the Court of Appeals judgment and remanded. The Court did not resolve here whether this particular contract actually delegated arbitrability; that factual question returns to the lower court.

Real world impact

The decision limits judges’ ability to screen out arbitration referrals on the ground that an arbitration claim is "wholly groundless." More arbitrability disputes will go first to arbitrators when contracts delegate that choice. The ruling preserves parties’ contractual allocation of who decides arbitrability and sends remaining questions about delegation back to lower courts on remand.