Update; Oral Argument on May 1, 2019. A lot of “May Day” Oral Hearings at the 5th Circuit…
The Supreme Court’s newest justice, Brett Kavanaugh, issued his first opinion on Tuesday in a unanimous ruling that could help companies keeps disputes in third-party arbitration.
The justices held that courts must enforce contracts that force parties to settle disputes privately through third-party arbitration according to their terms under the Federal Arbitration Act, even if one party claims that the argument for arbitration is “wholly groundless.”
The justices agreed this “wholly groundless” exemption to the arbitrability of a dispute is inconsistent with the law.
“We must interpret the Act as written, and the Act in turn requires that we interpret the contract as written,” Kavanaugh said from the bench while giving a summary of the court’s ruling.
“When the parties’ contract delegates the arbitrability circumstances, a court possesses no power to decide the arbitrability issue.”
The dispute stems from a lawsuit Archer & White Sales Inc., a medical equipment distributor, brought against a business competitor, Henry Schein Inc., alleging Schein violated federal and state antitrust laws.
Schein asked the district court to refer the matter to arbitration under a contractual agreement between the two parties, but Archer & White said the dispute was not subject to arbitration.
Schein argued that arbitrators, not the courts, should decide whether the arbitration agreement applies under the rules governing the contract.
In a 9-0 ruling, the justices agreed.
“When the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract,” Kavanaugh, President Trump‘s second appointee to the court, said from the bench.
The case was remanded for further proceedings in the 5th Circuit Court of Appeals consistent with the court’s ruling.
