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

(Slip Opinion) OCTOBER TERM, 2018 1

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is

being done in connection with this case, at the time the opinion is issued.

The syllabus constitutes no part of the opinion of the Court but has been

prepared by the Reporter of Decisions for the convenience of the reader.

See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

HENRY SCHEIN, INC., ET AL. v. ARCHER & WHITE

SALES, INC.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

No. 17–1272. Argued October 29, 2018—Decided January 8, 2019

Respondent Archer & White Sales, Inc., sued petitioner Henry Schein,

Inc., alleging violations of federal and state antitrust law and seeking

both money damages and injunctive relief. The relevant contract be-

tween the parties provided for arbitration of any dispute arising

under or related to the agreement, except for, among other things, ac-

tions seeking injunctive relief. Invoking the Federal Arbitration Act,

Schein asked the District Court to refer the matter to arbitration, but

Archer & White argued that the dispute was not subject to arbitra-

tion because its complaint sought injunctive relief, at least in part.

Schein contended that because the rules governing the contract pro-

vide that arbitrators have the power to resolve arbitrability ques-

tions, an arbitrator—not the court—should decide whether the arbi-

tration agreement applied. Archer & White countered that Schein’s

argument for arbitration was wholly groundless, so the District Court

could resolve the threshold arbitrability question. The District Court

agreed with Archer & White and denied Schein’s motion to compel

arbitration. The Fifth Circuit affirmed.

Held: The “wholly groundless” exception to arbitrability is inconsistent

with the Federal Arbitration Act and this Court’s precedent. Under

the Act, arbitration is a matter of contract, and courts must enforce

arbitration contracts according to their terms. Rent-A-Center, West,

Inc. v. Jackson, 561 U. S. 63, 67. The parties to such a contract may

agree to have an arbitrator decide not only the merits of a particular

dispute, but also “ ‘gateway’ questions of ‘arbitrability.’ ” Id., at 68–

69. Therefore, when the parties’ contract delegates the arbitrability

question to an arbitrator, a court may not override the contract, even

if the court thinks that the arbitrability claim is wholly groundless.

2 HENRY SCHEIN, INC. v. ARCHER & WHITE SALES, INC.

Syllabus

That conclusion follows also from this Court’s precedent. See AT&T

Technologies, Inc. v. Communications Workers, 475 U. S. 643, 649–

650.

Archer & White’s counterarguments are unpersuasive. First, its

argument that §§3 and 4 of the Act should be interpreted to mean

that a court must always resolve questions of arbitrability has al-

ready been addressed and rejected by this Court. See, e.g., First Op-

tions of Chicago, Inc. v. Kaplan, 514 U. S. 938, 944. Second, its ar-

gument that §10 of the Act—which provides for back-end judicial

review of an arbitrator’s decision if an arbitrator has “exceeded” his

or her “powers”—supports the conclusion that the court at the front

end should also be able to say that the underlying issue is not arbi-

trable is inconsistent with the way Congress designed the Act. And it

is not this Court’s proper role to redesign the Act. Third, its argu-

ment that it would be a waste of the parties’ time and money to send

wholly groundless arbitrability questions to an arbitrator ignores the

fact that the Act contains no “wholly groundless” exception. This

Court may not engraft its own exceptions onto the statutory text.

Nor is it likely that the exception would save time and money system-

ically even if it might do so in some individual cases. Fourth, its ar-

gument that the exception is necessary to deter frivolous motions to

compel arbitration overstates the potential problem. Arbitrators are

already capable of efficiently disposing of frivolous cases and deter-

ring frivolous motions, and such motions do not appear to have

caused a substantial problem in those Circuits that have not recog-

nized a “wholly groundless” exception.

The Fifth Circuit may address the question whether the contract at

issue in fact delegated the arbitrability question to an arbitrator, as

well as other properly preserved arguments, on remand. Pp. 4–8.

878 F. 3d 488, vacated and remanded.

KAVANAUGH, J., delivered the opinion for a unanimous Court.

Cite as: 586 U. S. ____ (2019) 1

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the

preliminary print of the United States Reports. Readers are requested to

notify the Reporter of Decisions, Supreme Court of the United States, Wash-

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SUPREME COURT OF THE UNITED STATES

_________________

No. 17–1272

_________________

HENRY SCHEIN, INC., ET AL., PETITIONERS v.

ARCHER AND WHITE SALES, INC.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE FIFTH CIRCUIT

[January 8, 2019]

JUSTICE KAVANAUGH delivered the opinion of the Court.

Under the Federal Arbitration Act, parties to a contract

may agree that an arbitrator rather than a court will

resolve disputes arising out of the contract. When a dis-

pute arises, the parties sometimes may disagree not only

about the merits of the dispute but also about the thresh-

old arbitrability question—that is, whether their arbitra-

tion agreement applies to the particular dispute. Who

decides that threshold arbitrability question? Under the

Act and this Court’s cases, the question of who decides

arbitrability is itself a question of contract. The Act allows

parties to agree by contract that an arbitrator, rather than

a court, will resolve threshold arbitrability questions as

well as underlying merits disputes. Rent-A-Center, West,

Inc. v. Jackson, 561 U. S. 63, 68−70 (2010); First Options

of Chicago, Inc. v. Kaplan, 514 U. S. 938, 943−944 (1995).

Even when a contract delegates the arbitrability ques-

tion to an arbitrator, some federal courts nonetheless will

short-circuit the process and decide the arbitrability ques-

tion themselves if the argument that the arbitration

agreement applies to the particular dispute is “wholly

2 HENRY SCHEIN, INC. v. ARCHER & WHITE SALES, INC.

Opinion of the Court

groundless.” The question presented in this case is

whether the “wholly groundless” exception is consistent

with the Federal Arbitration Act. We conclude that it is

not. The Act does not contain a “wholly groundless” excep-

tion, and we are not at liberty to rewrite the statute

passed by Congress and signed by the President. When

the parties’ contract delegates the arbitrability question to

an arbitrator, the courts must respect the parties’ decision

as embodied in the contract. We vacate the contrary

judgment of the Court of Appeals.

I

Archer and White is a small business that distributes

dental equipment. Archer and White entered into a con-

tract with Pelton and Crane, a dental equipment manufac-

turer, to distribute Pelton and Crane’s equipment. The

relationship eventually soured. As relevant here, Archer

and White sued Pelton and Crane’s successor-in-interest

and Henry Schein, Inc. (collectively, Schein) in Federal

District Court in Texas. Archer and White’s complaint

alleged violations of federal and state antitrust law, and

sought both money damages and injunctive relief.

The relevant contract between the parties provided:

“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 [Schein]), shall be resolved by binding ar-

bitration in accordance with the arbitration rules of

the American Arbitration Association [(AAA)]. The

place of arbitration shall be in Charlotte, North Caro-

lina.” App. to Pet. for Cert. 3a.

After Archer and White sued, Schein invoked the Federal

Arbitration Act and asked the District Court to refer the

Cite as: 586 U. S. ____ (2019) 3

Opinion of the Court

parties’ antitrust dispute to arbitration. Archer and White

objected, arguing that the dispute was not subject to arbi-

tration because Archer and White’s complaint sought

injunctive relief, at least in part. According to Archer and

White, the parties’ contract barred arbitration of disputes

when the plaintiff sought injunctive relief, even if only in

part.

The question then became: Who decides whether the

antitrust dispute is subject to arbitration? The rules of

the American Arbitration Association provide that arbitra-

tors have the power to resolve arbitrability questions.

Schein contended that the contract’s express incorporation

of the American Arbitration Association’s rules meant that

an arbitrator—not the court—had to decide whether the

arbitration agreement applied to this particular dispute.

Archer and White responded that in cases where the

defendant’s argument for arbitration is wholly ground-

less—as Archer and White argued was the case here—the

District Court itself may resolve the threshold question of

arbitrability.

Relying on Fifth Circuit precedent, the District Court

agreed with Archer and White about the existence of a

“wholly groundless” exception, and ruled that Schein’s

argument for arbitration was wholly groundless. The

District Court therefore denied Schein’s motion to compel

arbitration. The Fifth Circuit affirmed.

In light of disagreement in the Courts of Appeals over

whether the “wholly groundless” exception is consistent

with the Federal Arbitration Act, we granted certiorari,

585 U. S. ___ (2018). Compare 878 F. 3d 488 (CA5 2017)

(case below); Simply Wireless, Inc. v. T-Mobile US, Inc.,

877 F. 3d 522 (CA4 2017); Douglas v. Regions Bank, 757

F. 3d 460 (CA5 2014); Turi v. Main Street Adoption Servs.,

LLP, 633 F. 3d 496 (CA6 2011); Qualcomm, Inc. v. Nokia

Corp., 466 F. 3d 1366 (CA Fed. 2006), with Belnap v. Iasis

Healthcare, 844 F. 3d 1272 (CA10 2017); Jones v. Waffle

4 HENRY SCHEIN, INC. v. ARCHER & WHITE SALES, INC.

Opinion of the Court

House, Inc., 866 F. 3d 1257 (CA11 2017); Douglas, 757

F. 3d, at 464 (Dennis, J., dissenting).

II

In 1925, Congress passed and President Coolidge signed

the Federal Arbitration Act. As relevant here, the Act

provides:

“A written provision in . . . a contract evidencing a

transaction involving commerce to settle by arbitra-

tion a controversy thereafter arising out of such con-

tract . . . shall be valid, irrevocable, and enforceable,

save upon such grounds as exist at law or in equity for

the revocation of any contract.” 9 U. S. C. §2.

Under the Act, arbitration is a matter of contract, and

courts must enforce arbitration contracts according to

their terms. Rent-A-Center, 561 U. S., at 67. Applying the

Act, we have held that parties may agree to have an arbi-

trator decide not only the merits of a particular dispute

but also “ ‘gateway’ questions of ‘arbitrability,’ such as

whether the parties have agreed to arbitrate or whether

their agreement covers a particular controversy.” Id., at

68–69; see also First Options, 514 U. S., at 943. We have

explained that an “agreement to arbitrate a gateway issue

is simply an additional, antecedent agreement the party

seeking arbitration asks the federal court to enforce, and

the FAA operates on this additional arbitration agree-

ment just as it does on any other.” Rent-A-Center, 561 U. S.,

at 70.

Even when the parties’ contract delegates the threshold

arbitrability question to an arbitrator, the Fifth Circuit

and some other Courts of Appeals have determined that

the court rather than an arbitrator should decide the

threshold arbitrability question if, under the contract, the

argument for arbitration is wholly groundless. Those

courts have reasoned that the “wholly groundless” excep-

Cite as: 586 U. S. ____ (2019) 5

Opinion of the Court

tion enables courts to block frivolous attempts to transfer

disputes from the court system to arbitration.

We conclude that the “wholly groundless” exception

is inconsistent with the text of the Act and with our

precedent.

We must interpret the Act as written, and the Act in

turn requires that we interpret the contract as written.

When the parties’ contract delegates the arbitrability

question to an arbitrator, a court may not override the

contract. In those circumstances, a court possesses no

power to decide the arbitrability issue. That is true even if

the court thinks that the argument that the arbitration

agreement applies to a particular dispute is wholly

groundless.

That conclusion follows not only from the text of the Act

but also from precedent. We have held that a court may

not “rule on the potential merits of the underlying” claim

that is assigned by contract to an arbitrator, “even if it

appears to the court to be frivolous.” AT&T Technologies,

Inc. v. Communications Workers, 475 U. S. 643, 649–650

(1986). A court has “ ‘no business weighing the merits of

the grievance’ ” because the “ ‘agreement is to submit all

grievances to arbitration, not merely those which the court

will deem meritorious.’ ” Id., at 650 (quoting Steelworkers

v. American Mfg. Co., 363 U. S. 564, 568 (1960)).

That AT&T Technologies principle applies with equal

force to the threshold issue of arbitrability. Just as a court

may not decide a merits question that the parties have

delegated to an arbitrator, a court may not decide an

arbitrability question that the parties have delegated to

an arbitrator.

In an attempt to overcome the statutory text and this

Court’s cases, Archer and White advances four main ar-

guments. None is persuasive.

First, Archer and White points to §§3 and 4 of the Fed-

eral Arbitration Act. Section 3 provides that a court must

6 HENRY SCHEIN, INC. v. ARCHER & WHITE SALES, INC.

Opinion of the Court

stay litigation “upon being satisfied that the issue” is

“referable to arbitration” under the “agreement.” Section

4 says that a court, in response to a motion by an ag-

grieved party, must compel arbitration “in accordance

with the terms of the agreement” when the court is “satis-

fied that the making of the agreement for arbitration or

the failure to comply therewith is not in issue.”

Archer and White interprets those provisions to mean,

in essence, that a court must always resolve questions of

arbitrability and that an arbitrator never may do so. But

that ship has sailed. This Court has consistently held that

parties may delegate threshold arbitrability questions to

the arbitrator, so long as the parties’ agreement does so by

“clear and unmistakable” evidence. First Options, 514

U. S., at 944 (alterations omitted); see also Rent-A-Center,

561 U. S., at 69, n. 1. To be sure, before referring a dis-

pute to an arbitrator, the court determines whether a

valid arbitration agreement exists. See 9 U. S. C. §2. 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.

Second, Archer and White cites §10 of the Act, which

provides for back-end judicial review of an arbitrator’s

decision if an arbitrator has “exceeded” his or her “pow-

ers.” §10(a)(4). According to Archer and White, if a court

at the back end can say that the underlying issue was not

arbitrable, the court at the front end should also be able to

say that the underlying issue is not arbitrable. The dis-

positive answer to Archer and White’s §10 argument is

that Congress designed the Act in a specific way, and it is

not our proper role to redesign the statute. Archer and

White’s §10 argument would mean, moreover, that courts

presumably also should decide frivolous merits questions

that have been delegated to an arbitrator. Yet we have

already rejected that argument: When the parties’ con-

tract assigns a matter to arbitration, a court may not

Cite as: 586 U. S. ____ (2019) 7

Opinion of the Court

resolve the merits of the dispute even if the court

thinks that a party’s claim on the merits is frivolous.

AT&T Technologies, 475 U. S., at 649−650. So, too, with

arbitrability.

Third, Archer and White says that, as a practical and

policy matter, it would be a waste of the parties’ time and

money to send the arbitrability question to an arbitrator if

the argument for arbitration is wholly groundless. In

cases like this, as Archer and White sees it, the arbitrator

will inevitably conclude that the dispute is not arbitrable

and then send the case back to the district court. So why

waste the time and money? The short answer is that the

Act contains no “wholly groundless” exception, and we

may not engraft our own exceptions onto the statutory

text. See Exxon Mobil Corp. v. Allapattah Services, Inc.,

545 U. S. 546, 556−557 (2005).

In addition, contrary to Archer and White’s claim, it is

doubtful that the “wholly groundless” exception would

save time and money systemically even if it might do so in

some individual cases. Archer and White assumes that it

is easy to tell when an argument for arbitration of a par-

ticular dispute is wholly groundless. We are dubious. The

exception would inevitably spark collateral litigation (with

briefing, argument, and opinion writing) over whether a

seemingly unmeritorious argument for arbitration is

wholly groundless, as opposed to groundless. We see no

reason to create such a time-consuming sideshow.

Archer and White further assumes that an arbitrator

would inevitably reject arbitration in those cases where a

judge would conclude that the argument for arbitration is

wholly groundless. Not always. After all, an arbitrator

might hold a different view of the arbitrability issue than

a court does, even if the court finds the answer obvious. It

is not unheard-of for one fair-minded adjudicator to think

a decision is obvious in one direction but for another fair-

minded adjudicator to decide the matter the other way.

8 HENRY SCHEIN, INC. v. ARCHER & WHITE SALES, INC.

Opinion of the Court

Fourth, Archer and White asserts another policy argu-

ment: that the “wholly groundless” exception is necessary

to deter frivolous motions to compel arbitration. Again,

we may not rewrite the statute simply to accommodate

that policy concern. In any event, Archer and White over-

states the potential problem. Arbitrators can efficiently

dispose of frivolous cases by quickly ruling that a claim is

not in fact arbitrable. And under certain circumstances,

arbitrators may be able to respond to frivolous arguments

for arbitration by imposing fee-shifting and cost-shifting

sanctions, which in turn will help deter and remedy frivo-

lous motions to compel arbitration. We are not aware that

frivolous motions to compel arbitration have caused a

substantial problem in those Circuits that have not recog-

nized a “wholly groundless” exception.

In sum, we reject the “wholly groundless” exception.

The exception is inconsistent with the statutory text and

with our precedent. It confuses the question of who de-

cides arbitrability with the separate question of who pre-

vails on arbitrability. When the parties’ contract dele-

gates the arbitrability question to an arbitrator, the courts

must respect the parties’ decision as embodied in the

contract.

We express no view about whether the contract at issue

in this case in fact delegated the arbitrability question to

an arbitrator. The Court of Appeals did not decide that

issue. Under our cases, courts “should not assume that

the parties agreed to arbitrate arbitrability unless there is

clear and unmistakable evidence that they did so.” First

Options, 514 U. S., at 944 (alterations omitted). On re-

mand, the Court of Appeals may address that issue in the

first instance, as well as other arguments that Archer and

White has properly preserved.

The judgment of the Court of Appeals is vacated, and

the case is remanded for further proceedings consistent

with this opinion.

It is so ordered.