In Archer & White Sales v. Henry Schein, Inc.¹, the Fifth Circuit clarified who determines whether a dispute is arbitrable—a court or an arbitrator—when a motion to compel arbitration is “wholly groundless.”

In Archer, the plaintiff sought damages and injunctive relief for antitrust violations. The defendants moved to compel arbitration under a contract providing for arbitration under American Arbitration Association (AAA) rules of any dispute arising under or related to the agreement (except actions seeking injunctive relief).

The magistrate judge concluded that the incorporation of AAA rules required an arbitrator to decide issues of arbitrability and granted the motion. The district court disagreed, holding that a court should decide arbitrability and the provision excluding suits seeking injunctive relief precluded arbitration. The defendants filed an interlocutory appeal.

The Fifth Circuit reviewed the arbitration clause under the standard three-step process looking at whether:

• there is an arbitration agreement;
• the dispute is covered by the arbitration agreement; and
• a court or an arbitrator should decide arbitrability.

The court noted that the third step should be addressed before the second.

The question of arbitrability under the third step involves determining whether the parties “clearly and unmistakably” intend to delegate the question of arbitrability to an arbitrator. If so, then arbitration is almost always proper, unless there is not a plausible argument for arbitrability in the first place. Douglas v. Regions Bank, 757 F.3d 460 (5th Cir. 2014).  If a motion to compel arbitration is “wholly groundless,” a court can determine arbitrability regardless of any delegation in step one.

In Archer, the Fifth Circuit found the Douglas “wholly groundless” exception applicable because the arbitration provision expressly and unambiguously excluded all actions seeking injunctive relief.  Accordingly, the Fifth Circuit affirmed the district court’s order denying the motion to compel arbitration.

The question of who decides arbitrability is often a hotly contested issue. But Archer confirms that courts decide whether an arbitration provision is clearly inapplicable.

¹No. 16-41674, 2017 U.S. App. LEXIS 26215 (5th Cir. Dec. 21, 2017)