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

United States Court of Appeals for the Fifth Circuit · Contracts

ContractsArbitrationDelegationContract interpretationFAAarbitrabilitydelegation clauseAAA rules

Facts

Archer and White Sales sued Henry Schein and related defendants for federal and Texas antitrust violations, seeking both money damages and injunctive relief. The dealer agreement provided that any dispute arising under or related to the agreement, except for actions seeking injunctive relief and certain intellectual-property disputes, would be resolved by binding arbitration in accordance with AAA rules. Defendants moved to compel arbitration under the FAA, while Archer argued that its suit fell within the express carve-out for actions seeking injunctive relief. The dispute centered on whether incorporation of the AAA rules delegated arbitrability despite the carve-out and whether this action itself was excluded from arbitration.

Issue

Did the dealer agreement clearly and unmistakably delegate the threshold question of arbitrability to an arbitrator when it incorporated the AAA rules but excluded actions seeking injunctive relief from arbitration? If not, was Archer's antitrust suit, which sought injunctive relief, outside the scope of the arbitration clause?

Rule

Parties may delegate gateway questions of arbitrability to an arbitrator only if their agreement provides clear and unmistakable evidence of that intent. Incorporation of the AAA rules generally supplies such evidence, but courts must read that incorporation together with the rest of the contract; where the agreement's plain language limits arbitration and the AAA-rule incorporation to disputes excluding a carve-out, there is no clear and unmistakable delegation as to disputes within that carve-out. When contract language is clear and unambiguous, courts must enforce its plain terms and may not rewrite an arbitration carve-out to preserve arbitration.

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Maya Ortiz and Red Mesa Surgical Supply signed a distribution agreement in Phoenix, Arizona. It states: "Any dispute arising under or related to this agreement (except actions seeking injunctive relief), shall be resolved by binding arbitration in accordance with the Commercial Rules of the American Arbitration Association." Maya later sued in federal court in Denver, seeking damages for breach and an injunction barring continued interference with her customer accounts.

Who should decide whether Maya's lawsuit is arbitrable?

Explanation. The governing rule is that incorporation of AAA rules generally provides clear and unmistakable evidence of delegation, but only to the extent the contract text makes those rules applicable. Here, the most natural reading is that disputes other than actions seeking injunctive relief go to arbitration under AAA rules. That means the alleged delegation does not clearly extend to a suit within the carve-out, so the court decides arbitrability. (Derived from Henry Schein, Inc. v. Archer and White Sales, Inc. (n.d.).)