Supreme Court Ruling a Decisive Win for Arbitration Proponents

Author: David B. Weisenfeld, XpertHR Legal Editor

January 11, 2019

Arbitrators, not judges, should decide if a dispute may be referred to arbitration instead of the courts, the Supreme Court has ruled unanimously. Writing his first Supreme Court opinion in Schein v. Archer & White Sales, Justice Brett Kavanaugh said that when a contract delegates an arbitrability question to an arbitrator, "a court may not override the contract, even if the court thinks that the arbitrability claim is wholly groundless."

Justice Kavanaugh explained that the Federal Arbitration Act allows parties to agree by contract that an arbitrator, rather than a court, will resolve threshold arbitrability questions as well as underlying disputes. The Court added that arbitration is a matter of contract, and courts must enforce arbitration contracts according to their terms.

"To be sure, before referring a dispute to an arbitrator, the court determines whether a valid arbitration agreement exists," acknowledged Justice Kavanaugh. "But if a valid agreement exists, and if the agreement delegates the arbitrability issue to an arbitrator, a court may not decide the arbitrability issue."

While the ruling arose out of a contractual dispute between two companies working with dental equipment, it marks another pro-arbitration Supreme Court decision that potentially could be applied in the employment context. Last May, the Court ruled 5-4 that companies may compel their employees to arbitrate individually rather than as part of a class action in Epic Systems Corp. v. Lewis, a case expected to affect an estimated 25 million employment contracts.

The justices have heard two other arbitration-related cases this term, including one that asks whether employees may bring their workplace claims as a class arbitration proceeding if an arbitration agreement does not explicitly bar class actions in Lamps Plus v. Varela. The Court has yet to issue an opinion in that case.