Argument Analysis: Justices Signal Opposition to Vague Exceptions That Would Limit Enforceability of Arbitration Agreements
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The November argument session brought the justices back once again to the Federal Arbitration Act, with a pair of cases on the topic — Henry Schein Inc. v. Archer & White Sales Inc. and Lamps Plus Inc. v. Varela. As these things go, the issue in Henry Schein is straightforward: When one party wants to take a dispute to arbitration but the other party disagrees, how do courts decide whether a particular dispute should be decided by a court or sent to arbitration?
The problem commonly arises when two parties have signed a contract that includes a provision calling for arbitration, but don’t agree whether a particular dispute falls within the provision. In this case, for example, the contract called for arbitration of any “dispute arising under or related to” the contract “except for actions seeking injunctive relief.” The complaint sought tens of millions of dollars in damages for alleged violations of the Sherman Act and various parallel state laws, as well as injunctive relief. Notwithstanding the claim for injunctive relief – which would seem to put the dispute outside the arbitration clause – the defendants sought arbitration, arguing that the primary thrust of the complaint was to seek damages, and that any appropriate injunctive relief could issue after the arbitrator ruled on the merits of the complaint for damages.
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