This article first appeared on the Securities Arbitration Alert (SAA) Blog, here.
The Supreme Court has reversed in a summary dismissal its decision to grant Certiorari in its second look at Henry Schein, despite having heard oral argument in December.
One of the late Gilda Radner’s many characters was Emily Litella, who would give misguided editorial replies that were inevitably based on her misunderstanding of the facts. When the error was pointed out, she would exclaim, “Oh, that’s very different. Never mind!” Channeling Ms. Litella, after hearing oral argument last December SCOTUS has walked back its decision to hear the arbitration-centric Henry Schein, Inc. v. Archer and White Sales, Inc., No. 19-963 (Henry Schein II).
A Succinct Review
We refer readers to SAA 2020-47 (Dec. 17) for our analysis of the oral argument (ed: see the transcript and audio recording.) As we reported in SAA 2020-23 (Jun. 17), the Supreme Court in June 2019 agreed to review an open issue from its ruling in Henry Schein, Inc. v. Archer and White Sales, Inc.,139 S. Ct. 524 (2019), where the Court held unanimously that there is no delegation carveout under the Federal Arbitration Act for “wholly groundless” assertions of arbitrability. The predispute arbitration agreement (“PDAA”) provided for AAA arbitration of: “Any dispute arising under or related to this Agreement (except for actions seeking injunctive relief and disputes relating to trademarks, trade secrets or other intellectual property of [the manufacturing company]) ….” (brackets in original). Left unresolved after the first trip to SCOTUS was whether this PDAA constituted clear and unmistakable delegation of all issues of arbitrability or carved out injunctive relief. The issue for review in Schein’s granted Petition for Certiorari was: “Whether a provision in an arbitration agreement that exempts certain claims from arbitration negates an otherwise clear and unmistakable delegation of questions of arbitrability to an arbitrator.”
SCOTUS Validates our Views
Our take after the oral argument was: “To us, a very obvious common theme was the sense that members of the Court realized that, in retrospect, they might have taken up the related issue of whether incorporating the AAA’s Rules constitutes clear and unmistakable evidence of delegation. While we usually make bold predictions on where the Court may land, this one is murky at best. If forced, we would say the odds favor Schein, but we’re not betting on it.” SCOTUS evidently harbored second-thoughts, because in a one-line per curiam Order the Court decides: “The writ of certiorari is dismissed as improvidently granted.” Or, as Ms. Litella would say, “Never mind!”
What it Means
We endorse the views expressed in the January 25 CPR blog: “The immediate effect is that respondent Archer and White Sales sees a big win: It will get the determination of whether its long-running case over a medical equipment contract dispute is to be arbitrated made by a judge, not an arbitrator. A Fifth U.S. Circuit Court of Appeals decision now stands. See Archer & White Sales, Inc. v. Henry Schein, Inc., 935 F.3d 274 (5th Cir. 2019) ….”
(ed: *Dismissals by the Court after oral argument are relatively rare, but they happen. See, for example, And After All That Work!: The Dreaded U.S. Supreme Court “DIG,” The Washington Legal Foundation’s The Legal Pulse (Jan. 31, 2013). We can’t recall SCOTUS ever taking similar action in an arbitration-related case. If anyone has contrary recollections, email us at Help@SecArbAlert.com. **An Alert h/t to CPR’s Russ Bleemer for quickly blogging on this one.)
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