Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Archer and White Sales, Inc. v. Henry Schein, Inc.

United States Court of Appeals, Fifth Circuit

August 14, 2019

ARCHER AND WHITE SALES, INCORPORATED, Plaintiff - Appellee
v.
HENRY SCHEIN, INCORPORATED; DANAHER CORPORATION; INSTRUMENTARIUM DENTAL, INCORPORATION; DENTAL EQUIPMENT, L.L.C.; KAVO DENTAL TECHNOLOGIES, L.L.C.; DENTAL IMAGING TECHNOLOGIES, CORPORATION, Defendants - Appellants

          Appeals from the United States District Court for the Eastern District of Texas

          Before HIGGINBOTHAM, GRAVES, and HIGGINSON, Circuit Judges.

         ON REMAND FROM THE UNITED STATES SUPREME COURT

          PATRICK E. HIGGINBOTHAM, CIRCUIT JUDGE.

         In light of the Supreme Court's decision, we consider anew the question of whether the parties in this dispute delegated the threshold arbitrability determination to an arbitrator. After being sued for antitrust violations, defendants in this suit sought to enforce an arbitration agreement. Initially, the magistrate judge granted a motion to compel arbitration, concluding that the question of arbitrability of the claims itself belonged to an arbitrator. The district court disagreed, holding that the arbitrability question was one for the courts. This panel affirmed.[1] We determined that we need not reach the issue of whether the arbitration provision delegated the issue of arbitrability to an arbitrator because of a then-established narrow exception: where an assertion of arbitrability was "wholly groundless," a court was not required to submit the issue of arbitrability to an arbitrator. Determining defendants' arguments for arbitrability were wholly groundless, we affirmed the district court's holding that the claims were not arbitrable.

         The Supreme Court reversed, holding that the "wholly groundless" exception was inconsistent with the Federal Arbitration Act.[2] The Court declined to opine on whether the contract in this case in fact delegated the threshold arbitrability question to an arbitrator, remanding for this court to make that determination in the first instance. It reminded that "courts 'should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.'"[3] Tasked with interpreting the arbitration clause anew, we conclude that the parties have not clearly and unmistakably delegated the question of arbitrability to an arbitrator. Accepting that the district court had the power to decide arbitrability, we now hold that the district court correctly determined that this case is not subject to the arbitration clause and affirm.

         I.

         The origins of this dispute are well-known; the complaint in this case was filed nearly seven years ago.[4] Plaintiff-Appellee Archer and White Sales, Inc. is a family-owned company that distributes, sells, and services dental equipment. It brought this antitrust suit against Defendant-Appellants Henry Schein, Inc., Danaher Corporation, and a number of subsidiaries who distribute and manufacture dental equipment. Archer claims that defendants entered into an anticompetitive agreement to restrict Archer's sales and to boycott Archer. Archer's complaint alleges violations of federal and Texas antitrust law and seeks money damages and injunctive relief.

         The contract between Archer and Pelton and Crane, one of the defendant's predecessors-in-interest, (the "Dealer Agreement") contains an arbitration clause that is at the heart of this dispute. It provides:

Disputes. This Agreement shall be governed by the laws of the State of North Carolina. 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 Pelton & Crane), shall be resolved by binding arbitration in accordance with the arbitration rules of the American Arbitration Association [(AAA)]. The place of arbitration shall be in Charlotte, North Carolina.

         After the case was referred to a magistrate judge, defendants invoked the Federal Arbitration Act and moved to compel arbitration. Archer opposed that motion, arguing that its complaint sought injunctive relief and the arbitration clause explicitly excluded actions seeking such relief.

         The magistrate judge granted the motion, determining that the arbitrability question should be left to an arbitrator because the Dealer Agreement incorporated the AAA rules and there was at least a "plausible construction" that would compel arbitration. Three years later, the district court vacated that order and held that the court could decide the threshold arbitrability question, reasoning that this action fell squarely within the arbitration clause's express exclusion of actions seeking injunctive relief.

         We affirmed. Relying on an exception then operative in at least four circuits, [5] we concluded that defendants' argument for arbitration was wholly groundless. In our view, there was "no plausible argument that the arbitration clause" applied to an action seeking injunctive relief.[6] Applying our precedent in Douglas v. Regions Bank, [7] we determined that because the assertion of arbitrability was implausible, the threshold arbitrability question should be decided by the district court.[8] The Supreme Court reversed, eliminating that exception and abrogating Douglas. Relying on the text of the Federal Arbitration Act, the Supreme Court held that if a "contract delegates the arbitrability question to an arbitrator, a court may not override the contract."[9]The Court reaffirmed its holding in First Options, that "parties may delegate threshold arbitrability questions to the arbitrator, so long as the parties' agreement does so by 'clear and unmistakable' evidence."[10] Sending the case back to us, the Court instructed this court to determine whether clear and unmistakable evidence of the parties' delegation exists here.[11]

         II.

         We review a ruling on a motion to compel arbitration de novo.[12] Our inquiry proceeds in two steps. The first is a matter of contract formation- "whether the parties entered into any arbitration agreement at all."[13] Next we turn to the question of contract interpretation and ask whether "this claim is covered by the arbitration agreement."[14] While ordinarily both steps are questions for the court, [15] the parties can enter into an arbitration agreement that delegates to the arbitrator the power to decide whether a particular claim is arbitrable.[16] The Supreme Court has repeatedly made clear that "parties can agree to arbitrate 'gateway' questions of 'arbitrability,' such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy."[17]

         When considering whether there was a valid delegation, "the court's analysis is limited."[18] As always, we ask if the parties entered into a valid agreement. If they did, we turn to the delegation clause and ask "whether the purported delegation clause is in fact a delegation clause-that is, if it evinces an intent to have the arbitrator decide whether a given claim must be arbitrated."[19] When determining that intent, "[c]ourts should not assume that the parties agreed to arbitrate arbitrability unless there is 'clear and unmistakable' evidence that they did so."[20] If there is a valid delegation, the court must grant the motion to compel.[21]

         The parties agree that there is a valid arbitration clause. With respect to delegation, the parties' arguments on remand sing a familiar tune. Archer contends that there is no clear and unmistakable evidence that the parties delegated arbitrability disputes to an arbitrator. The way the agreement is written, Archer asserts that the AAA rules (and resulting delegation) only apply to disputes that fall outside of the arbitration clause's carve-out for actions seeking injunctive relief. Under their reading, if a case falls within the carve-out, the agreement does not incorporate the AAA rules and the gateway arbitrability question is not delegated to an arbitrator. On the other hand, defendants argue that the agreement's incorporation of the AAA rules ends the inquiry. They maintain that the carve-out for actions seeking injunctive relief does not trump the parties' delegation. Defendants warn that to read the contract as Archer suggests would require the court to make a merits determination about the scope of the carve-out-whether this is indeed an action seeing injunctive relief-to answer the delegation question, precisely the category of inquiries a court is precluded from making in answering the delegation question.

         "Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator."[22] A contract need not contain an express delegation clause to meet this standard. As we held in Petrofac, an arbitration agreement that incorporates the AAA Rules "presents clear and unmistakable evidence that the parties agreed to arbitrate arbitrability."[23] Under AAA Rule 7(a), "[t]he 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 or to the arbitrability of any claim or counterclaim."[24]

         It is undisputed that the Dealer Agreement incorporates the AAA rules, delegating the threshold arbitrability inquiry to the arbitrator for at least some category of cases. The parties dispute the relationship of the carve-out clause- exempting actions seeking injunctive relief-and the incorporation of the AAA rules. The agreement states that "[a]ny 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 agreement in Petrofac explicitly covered "all claims and disputes," containing no carve-out provision.[25] We have previously applied Petrofac to arbitration provisions that do contain carve-out provisions. In Crawford, we considered an arbitration agreement that incorporated the AAA Rules and also contained a carve-out that nothing in the arbitration provision "shall prevent either party from seeking injunctive relief for breach of th[e Agreement]."[26]Without specifically discussing the carve-out, we held that the Crawford agreement's incorporation of the AAA rules was "clear and unmistakable evidence that the parties to the [] Agreement agreed to arbitrate arbitrability."[27] Under the terms of that agreement, the gateway arbitrability question was delegated to the arbitrator. The Ninth Circuit considered a similar agreement in Oracle Am., Inc. v. Myriad Group A.G.[28] The arbitration clause adopted arbitration rules delegating arbitrability issues to the arbitrator and contained a carve-out for certain intellectual property and licensing claims. [29] Because the claims carved-out by that agreement "ar[ose] out of or relat[ed] to" the Source License, and the agreement explicitly provided that any claim arising out of the Source License was subject to arbitration, the Ninth Circuit held that Oracle's carve-out argument "conflate[ed] the scope of the arbitration clause . . . with the question of who decides arbitrability."[30]

         The Second Circuit has also considered an arbitration clause that incorporated the AAA rules and exempted certain claims from arbitration.[31] The court noted that it had "found the 'clear and unmistakable' provision satisfied where a broad arbitration clause expressly commits all disputes to arbitration, concluding that all disputes necessarily includes disputes as to arbitrability."[32] However, the parties in NASDAQ had not clearly and unmistakably delegated arbitrability "where a broad arbitration clause is subject to a qualifying provision that at least arguably covers the present dispute."[33] Because there was ambiguity as to whether the parties intended to have arbitrability questions decided by an arbitrator-because the dispute arguably fell within the carve-out-the court held the arbitrability question was for the court to decide.[34]

         Defendants urge that Crawford controls and the only difference between that arbitration agreement and the one here is syntax-the ordering of words. But that is precisely the point-the placement of the carve-out here is dispositive. We cannot re-write the words of the contract. The most natural reading of the arbitration clause at issue here states that any dispute, except actions seeking injunctive relief, shall be resolved in arbitration in accordance with the AAA rules. The plain language incorporates the AAA rules-and therefore delegates arbitrability-for all disputes except those under the carve- out. Given that carve-out, we cannot say that the Dealer Agreement evinces a "clear and unmistakable" intent to delegate arbitrability.

         We are mindful of the Court's reminder that "[w]hen the parties' contract delegates the arbitrability question to an arbitrator, the courts must respect the parties' decision as embodied in the contract."[35] But we must also heed its warning that "courts 'should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.'"[36] The parties could have unambiguously delegated this question, but they did not, and we are not empowered to re-write their agreement.

         III.

         In addition to disputing whether an arbitrator must decide the gateway question of arbitrability, the parties disagree about whether the underlying dispute is arbitrable at all. Accepting that the district court had the power to decide arbitrability, we next examine whether it correctly determined that the instant action is not subject to the arbitration clause. We do so against the backdrop of a strong presumption in favor of arbitration, [37] yet we also remain mindful of the fact that the FAA "does not require parties to arbitrate when they have not agreed ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.