U.S. Fifth Circuit Holds, Based on Language in Arbitration Provision at Issue, that Action which Included Claims for Injunctive Relief under Sherman Antitrust Act Were Not Subject to Arbitration

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Sued by a competitor for antitrust violations, the defendants sought to enforce an arbitration agreement. The magistrate judge granted the motion to compel arbitration, holding that the threshhold question of arbitrability belonged to an arbitrator. The district court reversed, holding it had the authority to rule on the question of arbitrability, and that the claims at issue were not arbitrable. The U.S. Fifth Circuit affirmed.

“We first ask if the parties clearly and unmistakably delegated the issue of arbitrability. Absent a delegation, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.  Just as the arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute, so the question who has the primary power to decide arbitrability turns upon what the parties agreed about that matter.  A contract need not contain an express delegation clause to meet this standard. An arbitration agreement that expressly incorporates the AAA Rules presents clear and unmistakable evidence that the parties agreed to arbitrate arbitrability. Under AAA Rule 7(a), the arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.”  However, under the specific Dealer Agreement in question, “Any dispute arising under or related to this Agreement (except for actions seeking injunctive relief and disputes related to trademarks, trade secrets, or other intellectual property of [the predecessor]), shall be resolved by binding arbitration in accordance with the arbitration rules of the American Arbitration Association.”

The defendant argues that the Dealer Agreement “clearly contemplates two categories of disputes — those involving ‘actions seeking injunctive relief’ and certain intellectual property disputes, and all other disputes — and that only the latter category must be subject to arbitration.  Archer contends that the clause’s incorporation of ‘action’ prohibits any piecemeal litigation because ‘action’, as distinct from ‘claim’, pertains to all of the claims in a given case.”

However, the Court found that: “The arbitration clause creates a carve-out for ‘actions seeking injunctive relief’.  It does not limit the exclusion to ‘actions seeking only injunctive relief’,  nor ‘actions for injunction in aid of an arbitrator’s award’.  Nor does it limit itself to only claims for injunctive relief…. The mere fact that the arbitration clause allows Archer to avoid arbitration by adding a claim for injunctive relief does not change the clause’s plain meaning.”

 

Archer & White Sales v. Henry Schein, Inc., No.16-41674, 2017 WL 6523680 (5th Cir. Dec. 21, 2017).

 

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