Opposition Brief — Archer and White Sales, Inc., Petitioner v. Henry Schein, Inc.

No. 19-1080

In the Supreme Court of the United States

ARCHER AND WHITE SALES, INC., CROSS-PETITIONER

v.

HENRY SCHEIN, INC.

ON CONDITIONAL CROSS-PETITION

FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE CROSS-RESPONDENT IN OPPOSITION

PAUL F. SCHUSTER

CYNTHIA KEELY TIMMS

LOCKE LORD LLP

2200 Ross Avenue,

Suite 2800

Dallas, TX 75201

RICHARD C. GODFREY

BARACK S. ECHOLS

KIRKLAND & ELLIS LLP

300 North LaSalle Street

Chicago, IL 60654

KANNON K. SHANMUGAM

Counsel of Record

STACIE M. FAHSEL

WILLIAM T. MARKS

PAUL, WEISS, RIFKIND,

WHARTON & GARRISON LLP

2001 K Street, N.W.

Washington, DC 20006

(202) 223-7300

kshanmugam@paulweiss.com

ETHAN R. MEREL

PAUL, WEISS, RIFKIND,

WHARTON & GARRISON LLP

1285 Avenue of the Americas

New York, NY 10019

QUESTIONS PRESENTED

1. Whether the incorporation in an arbitration agreement of arbitration rules that permit the arbitrator to resolve questions of arbitrability constitutes a clear and unmistakable delegation of those questions to the arbitrator.

2. Whether an arbitration agreement that delegates

questions of arbitrability to an arbitrator requires that

the arbitrator decide the question whether a non-signatory to the agreement can compel arbitration.

(I)

CORPORATE DISCLOSURE STATEMENT

Cross-respondent Henry Schein, Inc., has no parent

corporation, and no publicly held company holds 10% or

more of its stock.

(II)

TABLE OF CONTENTS

Page

Opinions below ................................................................................ 1

Jurisdiction ...................................................................................... 1

Statement ......................................................................................... 2

Argument ......................................................................................... 5

A. The first question presented does not warrant

the Court’s review ............................................................. 6

B. The second question presented does not warrant

the Court’s review ........................................................... 13

Conclusion ...................................................................................... 17

TABLE OF AUTHORITIES

Cases:

Ally Align Health, Inc. v. Signature Advantage, LLC,

574 S.W.3d 753 (Ky. 2019) ................................................. 8

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

878 F.3d 488 (5th Cir. 2017) .....................................3, 4, 14

Awuah v. Coverall North America, Inc.,

554 F.3d 7 (1st Cir. 2009) ............................................. 7, 11

Belnap v. Iasis Healthcare,

844 F.3d 1272 (10th Cir. 2017) ..................................... 7, 16

Brennan v. Opus Bank,

796 F.3d 1125 (9th Cir. 2015) ....................................... 7, 11

Brittania-U Nigeria, Ltd. v. Chevron USA, Inc.,

866 F.3d 709 (5th Cir. 2017) ............................................. 16

C&L Enterprises, Inc. v. Citizen Band Potawatomi

Indian Tribe of Oklahoma, 532 U.S. 411 (2001) ..... 11, 12

Chesapeake Appalachia, LLC v. Scout Petroleum,

LLC, 809 F.3d 746 (3d Cir.),

cert. denied, 137 S. Ct. 40 (2016) ....................................... 8

Chevron Corp. v. Ecuador,

795 F.3d 200 (D.C. Cir. 2015),

cert. denied, 136 S. Ct. 2410 (2016) ................................... 8

(III)

IV

Page

Cases—continued:

Commonwealth Edison Co. v. Gulf Oil Corp.,

541 F.2d 1263 (7th Cir. 1976) ............................................. 8

Contec Corp. v. Remote Solution, Co.,

398 F.3d 205 (2d Cir. 2005) .......................................... 7, 16

DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015)........... 12

Dunn v. Nitro Distributing, Inc., 549 U.S. 1077 (2006) ..... 8

Eickhoff Corp. v. Warrior Met Coal, LLC,

265 So. 3d 216 (Ala. 2018)................................................... 8

Fallo v. High-Tech Institute,

559 F.3d 874 (8th Cir. 2009) ............................................... 7

First Options of Chicago, Inc. v. Kaplan,

514 U.S. 938 (1995) ............................................................ 10

Flandreau Public School District No. 50-3

v. G.A. Johnson Construction, Inc.,

701 N.W.2d 430 (S.D. 2005) ............................................. 10

Garthon Business Inc. v. Stein,

86 N.E.3d 514 (N.Y. 2017) ................................................. 8

Global Client Solutions, LLC v. Ossello,

367 P.3d 361 (Mont. 2016) .................................................. 9

Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989) ....... 7

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

139 S. Ct. 524 (2019) .................................................4, 7, 11

HPD, LLC v. TETRA Technologies, Inc.,

424 S.W.3d 304 (Ark. 2012) ................................................ 8

James & Jackson, LLC v. Willie Gary, LLC,

906 A.2d 76 (Del. 2006) ....................................................... 8

Jody James Farms, JV v. Altman Group, Inc.,

547 S.W.3d 624 (Tex. 2018) .............................................. 16

Kindred Nursing Centers Limited Partnership

v. Clark, 137 S. Ct. 1421 (2017) ....................................... 10

Kramer v. Toyota Motor Corp.,

705 F.3d 1122 (9th Cir.),

cert. denied, 571 U.S. 818 (2013) ..................................... 16

Kramlich v. Hale, 901 N.W.2d 72 (N.D. 2017) ..................... 8

Limited Liability Co. v. Doe, 569 U.S. 1029 (2013) ............. 8

V

Page

Cases—continued:

Mastrobuono v. Shearson Lehman Hutton, Inc.,

514 U.S. 52 (1995) ........................................................ 11, 13

McGee v. Armstrong, 941 F.3d 859 (6th Cir. 2019) ............. 7

Microchip Technology Inc. v. U.S. Philips Corp.,

367 F.3d 1350 (Fed. Cir. 2004) ........................................ 16

Morgan v. Sanford Brown Institute,

137 A.3d 1168 (N.J. 2016) ................................................. 10

Petrofac, Inc. v. DynMcDermott Petroleum

Operations Co., 687 F.3d 671 (5th Cir. 2012) .................. 7

State ex rel. Pinkerton v. Fahnestock,

531 S.W.3d 36 (Mo. 2017) ................................................... 8

Preston v. Ferrer, 552 U.S. 346 (2008) ................................ 11

Qualcomm Inc. v. Nokia Corp.,

466 F.3d 1366 (Fed. Cir. 2006) .......................................... 8

Republic of Iraq v. BNP Paribas USA,

472 Fed. Appx. 11 (2d Cir. 2012) ..................................... 16

Schenkel & Shultz, Inc. v. Hermon F. Fox

& Associates, P.C., 658 S.E.2d 918 (N.C. 2008) ............ 11

Simply Wireless, Inc. v. T-Mobile US, Inc,

877 F.3d 522 (4th Cir. 2017),

cert. denied, 139 S. Ct. 915 (2019) ................................. 7, 8

Spirit Airlines, Inc. v. Maizes, 139 S. Ct. 1322 (2019) ....... 8

Terminix International Co. v. Palmer Ranch LP,

432 F.3d 1327 (11th Cir. 2005) ....................................... 7, 8

West Virginia CVS Pharmacy, LLC v. McDowell

Pharmacy, Inc., 796 S.E.2d 574 (W. Va. 2017) ............... 8

William Charles Construction Co. v. Teamsters,

827 F.3d 672 (7th Cir. 2016) ............................................. 12

Zivotofsky v. Clinton, 566 U.S. 189 (2012).......................... 14

Statutes:

Federal Arbitration Act, 9 U.S.C. 1-16 ................................. 4

28 U.S.C. 1254(1) ...................................................................... 2

VI

Page

Miscellaneous:

American Arbitration Association, Commercial

Arbitration Rules and Mediation Procedures

(2013) <adr.org/commercial> ............................... passim

Richard A. Lord,

Williston on Contracts (4th ed. 2012) ............................ 11

Restatement of the U.S. Law of International

Commercial and Investor-State Arbitration

(proposed final draft Apr. 24, 2019;

approved May 20, 2019) ................................................... 13

In the Supreme Court of the United States

No. 19-1080

ARCHER AND WHITE SALES, INC., CROSS-PETITIONER

v.

HENRY SCHEIN, INC.

ON CONDITIONAL CROSS-PETITION

FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE CROSS-RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-16a)

is reported at 935 F.3d 274.1 The district court’s opinion

denying cross-respondent’s motion to compel arbitration

(Pet. App. 17a-36a) is unreported. A prior opinion of this

Court is reported at 139 S. Ct. 524, and a prior opinion of

the court of appeals is reported at 878 F.3d 488.

JURISDICTION

The judgment of the court of appeals was entered on

August 14, 2019. A petition for rehearing was denied on

December 6, 2019 (Pet. App. 42a-43a). The petition for a

writ of certiorari in No. 19-963 was filed on January 31,

All appendix references are to the appendix to cross-respondent’s

petition for a writ of certiorari in No. 19-963 (filed Jan. 31, 2020).

1

(1)

2

2020, and this conditional cross-petition was filed on

March 2, 2020 (a Monday). The jurisdiction of this Court

is invoked under 28 U.S.C. 1254(1).

STATEMENT

The facts and procedural history of this case are set

out in the statement of cross-respondent’s petition for a

writ of certiorari (19-963 Pet. 4-11), which presents the

question whether a provision in an arbitration agreement

that exempts certain claims from arbitration negates an

otherwise clear and unmistakable delegation of questions

of arbitrability to an arbitrator. This statement provides

additional facts relevant to the questions presented by the

conditional cross-petition.

1. This case arises from a complaint filed by cross-petitioner in federal district court against cross-respondent

and other parties, alleging violations of federal and state

antitrust law. 17-1272 J.A. 43-48. Cross-respondent and

the other defendants moved to compel arbitration based

on cross-petitioner’s distribution agreements with certain

manufacturing companies. Id. at 12-13. As is relevant

here, the agreements defined how the parties were to resolve any disputes as follows:

Any dispute arising under or related to this Agreement (except for actions seeking injunctive relief and

disputes relating to trademarks, trade secrets or other

intellectual property of [the manufacturing company])

shall be resolved by binding arbitration in accordance

with the arbitration rules of the American Arbitration

Association.

Id. at 58. The rules of the American Arbitration Association (AAA) provide that “[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

3

of the arbitration agreement or to the arbitrability of any

claim or counterclaim.” American Arbitration Association, Commercial Arbitration Rules and Mediation Procedures R-7(a) (2013) <adr.org/commercial> (AAA Commercial Rules).

Cross-petitioner opposed the motions to compel arbitration. Cross-petitioner primarily claimed that a boilerplate request for injunctive relief in its complaint rendered the entire dispute triable to a jury rather than an

arbitrator. Cross-petitioner also argued that cross-respondent, a non-signatory to the arbitration agreement,

could not rely on principles of equitable estoppel to invoke

the agreement. A magistrate judge ruled in favor of

cross-respondent, rejecting cross-petitioner’s arguments

and compelling arbitration. Pet. App. 37a-41a.

The district court vacated the magistrate judge’s order. Pet. App. 36a. While noting that the incorporation of

the AAA rules can give rise to a valid delegation of questions of arbitrability to the arbitrator, the court held that

there was no clear and unmistakable evidence of the parties’ intent to arbitrate the question of arbitrability here

in light of the carve-out for actions seeking injunctive relief. Id. at 30a-32a. The court also held, in the alternative,

that any contrary reading of the agreements’ arbitration

provision would be “wholly groundless.” Id. at 33a-35a.

Because the court concluded that the dispute at issue was

not arbitrable, it declined to address the question whether

cross-respondent was entitled to invoke the arbitration

provision under the doctrine of equitable estoppel. Id. at

36a.

2. The court of appeals affirmed. See 878 F.3d 488

(5th Cir. 2017). Citing prior circuit precedent, the court

began from the proposition that “[a]n arbitration agreement that expressly incorporates the AAA Rules ‘presents clear and unmistakable evidence that the parties

4

agreed to arbitrate arbitrability.’ ” Id. at 493 (citation

omitted). The court nevertheless held that it need not

send the question of arbitrability to the arbitrator because

the argument in favor of arbitrability was “wholly groundless.” See id. at 495-497. The court did not resolve the

separate questions whether the arbitration provision contained clear and unmistakable evidence of the parties’ intent to arbitrate the question of arbitrability, or whether

cross-respondent was entitled to invoke the arbitration

provision under the doctrine of equitable estoppel. See id.

at 495, 497-498.

3. Cross-respondent and the other defendants sought

certiorari on the question whether the “wholly groundless” exception conflicted with the Federal Arbitration

Act. See 17-1272 Pet. i. In opposing the petition, crosspetitioner contended that the case was a poor vehicle for

review on the grounds, inter alia, that the asserted delegation of arbitrability issues rested on the incorporation

of the AAA rules and that the lower courts had not addressed the question of equitable estoppel. See 17-1272

Br. in Opp. 22, 24 n.17.

The Court granted certiorari and unanimously vacated the court of appeals’ judgment. 139 S. Ct. 524

(2019). The Court held that “the ‘wholly groundless’ exception” applied by the court of appeals “is inconsistent

with the text of the [Federal Arbitration] Act and with

[the Court’s] precedent.” Id. at 529. The Court then

noted that the court of appeals had not decided whether

the parties had delegated the arbitrability question to the

arbitrator, and it therefore remanded for further proceedings. See id. at 531.

4. On remand, the court of appeals once again affirmed the district court’s denial of the motions to compel

arbitration. Pet. App. 1a-16a. In a footnote in its supplemental brief, cross-petitioner suggested for the first time

5

that, as a general matter, the incorporation of the AAA

rules cannot suffice to delegate questions of arbitrability

to the arbitrator. See Cross-Pet. C.A. Supp. Br. 14 n.6.

Again relying on its prior precedent, however, the court

of appeals reiterated that the incorporation of the AAA

rules in the agreements at issue “presents clear and unmistakable evidence that the parties agreed to arbitrate

arbitrability.” Pet. App. 7a (citation omitted). The court

thus concluded that the agreements “delegat[ed] the

threshold arbitrability inquiry to the arbitrator for at

least some category of cases.” Id. at 8a.

Nevertheless, the court of appeals determined that it

must proceed to interpret the scope of the agreements for

itself. Pet. App. 11a-12a. The court reasoned that “[t]he

plain language incorporates the AAA rules—and therefore delegates arbitrability—for all disputes except those

under the carve-out” for actions seeking injunctive relief.

Id. at 11a. The court of appeals then turned to the merits

of the arbitrability question and determined, based on its

interpretation of the carve-out provision, that the action

was one “seeking injunctive relief ” and was thus exempt

from arbitration. Id. at 12a-16a. As in its prior opinion,

the court of appeals did not address the question of equitable estoppel. Id. at 16a.

ARGUMENT

Cross-petitioner contends (Pet. 7-27) that, if the Court

grants cross-respondent’s underlying petition for a writ of

certiorari, it should also grant review on two additional

questions concerning the allocation of responsibility between courts and arbitrators for determining whether the

parties agreed to arbitrate a particular dispute. But the

Court need not resolve either of those questions in order

to resolve the question presented in the underlying petition. And neither of those questions warrants the Court’s

6

review at this time. If the Court grants the underlying

petition, therefore, it should deny this conditional crosspetition.

A. The First Question Presented Does Not Warrant The

Court’s Review

The first question presented by the cross-petition is

whether the incorporation in an arbitration agreement of

arbitration rules that permit the arbitrator to resolve

questions of arbitrability constitutes a clear and unmistakable delegation of those questions to the arbitrator.

See Pet. 9-18. Even if that question were the appropriate

subject of a cross-petition, it does not merit the Court’s

review.

1. As a preliminary matter, the filing of a conditional

cross-petition to present the incorporation question was

unnecessary and improper. In the judgment below, the

court of appeals affirmed the district court’s order denying cross-respondent’s motion to compel arbitration. See

Pet. App. 16a. In so doing, the court of appeals first held

that, because the agreements at issue contained a carveout provision, the parties had not clearly delegated questions of arbitrability to an arbitrator. See id. at 5a-12a.

Addressing the question of arbitrability itself, the court of

appeals then determined that cross-petitioner’s claims

were not arbitrable. See id. at 14a-16a.

The incorporation question thus presents an additional ground for affirmance: an answer to that question

in cross-petitioner’s favor would simply supply an additional reason why the court of appeals was correct in deciding that cross-petitioner’s claims were not arbitrable

(even if it might also preclude the arbitration of other, asyet-hypothetical claims, see Pet. 5 n.2). Where a prevailing party is not seeking to enlarge on the rights estab-

7

lished by the judgment below, no cross-petition for certiorari is needed. See, e.g., Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 39 (1989).

2. There is no valid reason for the Court to give plenary consideration to the incorporation question—

whether by granting the cross-petition or by adding a

question in granting the underlying petition. To begin

with, as cross-petitioner has previously acknowledged,

“[t]his Court need not reach” the incorporation question

in order to resolve the question presented by the underlying petition. 19A766 Opp. 22 n.8. That petition proceeds

on the assumption that the agreements at issue contain

valid delegations of arbitrability, see 19-963 Pet. i—just

like the petition the Court previously granted in this case

regarding the “wholly groundless” exception to the enforcement of delegation provisions. See 139 S. Ct. 524

(2019). That assumption was no impediment to review

then, and it is no impediment now.

More broadly, the incorporation question does not

warrant the Court’s review. Eleven courts of appeals

have addressed the issue, and all of them have held that

the incorporation of arbitration rules that permit the arbitrator to resolve questions of arbitrability is sufficient to

delegate those questions to the arbitrator. See Awuah v.

Coverall North America, Inc., 554 F.3d 7, 11 (1st Cir.

2009); Contec Corp. v. Remote Solution, Co., 398 F.3d 205,

208, 211 (2d Cir. 2005); Simply Wireless, Inc. v. T-Mobile

US, Inc, 877 F.3d 522, 527-528 (4th Cir. 2017), cert. denied, 139 S. Ct. 915 (2019); Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 (5th

Cir. 2012); McGee v. Armstrong, 941 F.3d 859, 865-867

(6th Cir. 2019); Fallo v. High-Tech Institute, 559 F.3d 874,

878 (8th Cir. 2009); Brennan v. Opus Bank, 796 F.3d 1125,

1130 (9th Cir. 2015); Belnap v. Iasis Healthcare, 844 F.3d

1272, 1283-1284 (10th Cir. 2017); Terminix International

8

Co. v. Palmer Ranch LP, 432 F.3d 1327, 1332 (11th Cir.

2005); Chevron Corp. v. Ecuador, 795 F.3d 200, 207 (D.C.

Cir. 2015), cert. denied, 136 S. Ct. 2410 (2016); Qualcomm

Inc. v. Nokia Corp., 466 F.3d 1366, 1373 (Fed. Cir. 2006);

cf. Chesapeake Appalachia, LLC v. Scout Petroleum,

LLC, 809 F.3d 746, 763 (3d Cir.) (recognizing the general

rule but concluding that it did not apply to an alleged delegation of class arbitrability), cert. denied, 137 S. Ct. 40

(2016); Commonwealth Edison Co. v. Gulf Oil Corp., 541

F.2d 1263, 1272 (7th Cir. 1976) (holding that the selection

of AAA rules in an arbitration agreement incorporated

those rules into the agreement).

In addition, numerous state courts of last resort have

adopted the same rule. See HPD, LLC v. TETRA Technologies, Inc., 424 S.W.3d 304, 310-311 (Ark. 2012); Eickhoff Corp. v. Warrior Met Coal, LLC, 265 So. 3d 216, 222

(Ala. 2018); James & Jackson, LLC v. Willie Gary, LLC,

906 A.2d 76, 80 (Del. 2006); Ally Align Health, Inc. v. Signature Advantage, LLC, 574 S.W.3d 753, 756 (Ky. 2019);

State ex rel. Pinkerton v. Fahnestock, 531 S.W.3d 36, 4346 (Mo. 2017); West Virginia CVS Pharmacy, LLC v.

McDowell Pharmacy, Inc., 796 S.E.2d 574, 588 (W. Va.

2017); Garthon Business Inc. v. Stein, 86 N.E.3d 514, 514

(N.Y. 2017); Kramlich v. Hale, 901 N.W.2d 72, 78 (N.D.

2017). Not surprisingly, given that formidable phalanx of

authority, this Court has repeatedly declined to grant review on the incorporation question. See Simply Wireless,

Inc. v. T-Mobile US, Inc, 139 S. Ct. 915 (2019); Limited

Liability Co. v. Doe, 569 U.S. 1029 (2013); Dunn v. Nitro

Distributing, Inc., 549 U.S. 1077 (2006); see also Spirit

Airlines, Inc. v. Maizes, 139 S. Ct. 1322 (2019) (denying

review on a similar question concerning class arbitrability).

3. Cross-petitioner does not contend that there is a

conflict on the incorporation question, but instead merely

9

contends that there is “confusion and disagreement” in

the lower courts. See Pet. 9-12. Cross-petitioner is mistaken.

a. Cross-petitioner asserts (Pet. 10) that there is “potential disagreement” among the federal courts of appeals

in one respect: viz., whether the consensus view that incorporations of arbitration rules are sufficient applies to

all arbitration agreements, or only to those between “sophisticated parties.” Yet the cases that cross-petitioner

cites reveal no actual disagreement: in each of those

cases, the parties were in fact sophisticated, and the court

simply noted that it was not deciding whether an incorporation could be insufficient when unsophisticated parties

are involved. See ibid. (collecting cases). Notably, crosspetitioner does not contend that this case presents any occasion to resolve that question, because cross-petitioner

(a dental-equipment company) wisely does not contend it

is an unsophisticated party. See Pet. App. 3a.

b. Cross-petitioner also suggests (Pet. 11-12) that

three state courts of last resort have held that the incorporation of arbitration rules that permit the arbitrator to

resolve questions of arbitrability is insufficient to delegate

those questions to the arbitrator. Yet two of the cited decisions do not stand for that proposition. In one, the Montana Supreme Court (after recognizing that one of the

parties was unsophisticated) refused to send the question

of arbitrability to the arbitrator because the record did

not contain a copy of the incorporated arbitration rules.

See Global Client Solutions, LLC v. Ossello, 367 P.3d 361,

369 (2016); see id. at 375-376 (McKinnon, J., dissenting).

And in the other, the New Jersey Supreme Court refused

to enforce the delegation provision because it did not

clearly state that the arbitration agreement waived the

“right to seek relief in [the] court system” (a rule of dubi-

10

ous vitality in the wake of Kindred Nursing Centers Limited Partnership v. Clark, 137 S. Ct. 1421 (2017)). See

Morgan v. Sanford Brown Institute, 137 A.3d 1168, 1179

(N.J. 2016).

That leaves only a single decision that is arguably to

the contrary. In Flandreau Public School District No.

50-3 v. G.A. Johnson Construction, Inc., 701 N.W.2d 430

(2005), the South Dakota Supreme Court held that an arbitration agreement that incorporated rules permitting

the arbitrator to determine questions of arbitrability did

not clearly and unmistakably delegate questions of arbitrability to the arbitrator. See id. at 436-437. The court

reached that conclusion primarily by comparing the parties’ agreement to an agreement in a federal district-court

decision cited by the defendant. See ibid. The court addressed the incorporation question only in a footnote, stating that the district-court decision “d[id] not support a per

se finding of intent to arbitrate arbitrability based solely

upon the incorporation” of the applicable rules. Id. at 437

n.6. No subsequent decisions in South Dakota appear to

rely on the footnote, and the overwhelming consensus on

the incorporation question mostly postdates the South

Dakota Supreme Court’s decision. See pp. 7-8, supra.

Any thin thread of a disagreement does not warrant the

Court’s review.

4. The consensus view on the incorporation question

is in all events plainly correct.

a. The incorporation question arises when an arbitration agreement expressly provides that a set of arbitration rules will govern arbitrations under the agreement.

“[A]rbitration is simply a matter of contract,” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995),

and it is black-letter contract law that a document incorporated by reference into a contract “shall be taken as

part of ” the contract, as if the referenced document were

11

“set out at length therein,” Schenkel & Shultz, Inc. v. Hermon F. Fox & Associates, P.C., 658 S.E.2d 918, 921-922

(N.C. 2008) (citation omitted); see generally 11 Richard A.

Lord, Williston on Contracts § 30:25, at 304-306 (4th ed.

2012) (Williston). Accordingly, when parties incorporate

arbitration rules in an arbitration agreement, “the two

form a single instrument” and should be interpreted as

such. 11 Williston § 30:25, at 304; see id. at 306. This

Court has resolved a number of arbitration cases that

turned in part on the incorporation of arbitration rules

into an arbitration agreement, and it has never expressed

doubt that those rules are fully binding on the parties.

See, e.g., Preston v. Ferrer, 552 U.S. 346, 361-362 (2008);

C&L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma, 532 U.S. 411, 418-419 (2001);

Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S.

52, 60-61 (1995).

In the specific context of whether parties have agreed

to have an arbitrator decide the question of arbitrability,

this Court has made clear that there must be “clear and

unmistakable evidence” of the parties’ intent to do so.

Henry Schein, Inc. v. Archer & White Sales, Inc., 139

S. Ct. 524, 531 (2019) (citation omitted). But here, the

agreements at issue unambiguously state that disputes

“arising under or related to” the agreements “shall be resolved by binding arbitration in accordance with” the

AAA rules, 17-1272 J.A. 58, and those rules unambiguously provide that “[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,” AAA Commercial Rule R-7(a). That is

“about as ‘clear and unmistakable’ as language can get.”

Awuah, 554 F.3d at 11; see, e.g., Brennan, 796 F.3d at

1130-1131 (collecting cases); cf. C&L Enterprises, 532

12

U.S. at 418-419, 423 (relying in part on the incorporation

of the AAA rules in an arbitration agreement to conclude

that an Indian tribe “clearly” waived its sovereign immunity).

b. Cross-petitioner’s contrary arguments (Pet. 14-18)

are unpersuasive. At bottom, cross-petitioner mostly objects to the principle that a document incorporated in a

contract by reference is binding on the parties. See, e.g.,

Pet. 14-16 (objecting that many parties do not read incorporated arbitration rules). But that principle is a broader

(and venerable) principle of state contract law. See pp. 1011, supra. And to the extent that cross-petitioner is suggesting that federal law somehow displaces state law governing contract interpretation in this context, that argument runs headlong into the rule that “the interpretation

of a contract is ordinarily a matter of state law to which

[the Court] defer[s].” DIRECTV, Inc. v. Imburgia, 136

S. Ct. 463, 468 (2015).

Cross-petitioner further contends that arbitration

rules empowering arbitrators to resolve questions of arbitrability “do not give arbitrators the exclusive right to

determine their own jurisdiction.” Pet. 16; see Bermann

Br. 13-21. But if that were true, such rules would serve

little purpose. After all, such rules become relevant only

when the parties disagree that the arbitrator can resolve

questions of arbitrability; otherwise, the parties could

simply consent to the arbitrator’s determination, rules or

no rules. See, e.g., William Charles Construction Co. v.

Teamsters, 827 F.3d 672, 681 (7th Cir. 2016).

Under cross-petitioner’s interpretation, where a disagreement does arise, the party seeking to avoid arbitration could simply run to court to obtain a binding judicial

determination on the question of arbitrability. That would

effectively render superfluous any rule permitting the ar-

13

bitrator to decide arbitrability, thereby violating a “cardinal principle of contract construction.” Mastrobuono, 514

U.S. at 63. And a similar problem would arise if, as crosspetitioner suggests, incorporated rules apply only when a

dispute is in fact arbitrable. See Pet. 15; 19-963 Br. in

Opp. 25-26.2

*

*

*

*

*

There is no good reason for the Court to consider the

incorporation question in this case. Resolution of that

question is unnecessary to resolve the question presented

in the underlying petition, and the lower courts have overwhelmingly reached the same (correct) answer. Whether

on the cross-petition or as an additional question on the

underlying petition, the incorporation question does not

warrant the Court’s plenary review.

B. The Second Question Presented Does Not Warrant The

Court’s Review

The second question presented by the cross-petition is

whether an arbitration agreement that delegates questions of arbitrability to an arbitrator requires that the arbitrator decide the question whether a non-signatory to

the agreement can compel arbitration. See Pet. 18-27.

That question, however, presupposes an answer to the

Cross-petitioner also relies on the reporter’s note in a tentative

draft of the Restatement of the U.S. Law of International Commercial and Investor-State Arbitration, which, it claims, “reject[ed] the

majority line of cases [on the incorporation question] as based on a

misinterpretation of the institutional rules being applied.” Pet. 11 (citation omitted); see Pet. 13, 16, 17. But the reporter’s note in the final

Restatement omitted that entire discussion, including the statement

that the consensus view was incorrect. See Restatement of the U.S.

Law of International Commercial and Investor-State Arbitration

§ 2.8, reporter’s note b(iii), at 207-209 (proposed final draft Apr. 24,

2019; approved May 20, 2019).

2

14

question presented in the underlying petition; it comes

into play only if there has been a determination that the

arbitration agreement validly delegates questions of arbitrability to the arbitrator. The court of appeals has twice

reserved the non-signatory question, and cross-petitioner

offers no colorable reason for this Court to decide it in the

first instance. That question, too, does not merit the

Court’s review at this time.

1. Neither the district court nor the court of appeals

reached the non-signatory question in this case. Both before and after this Court’s remand, the court of appeals

reserved the non-signatory question after holding that a

court, and not the arbitrator, should decide whether

cross-petitioner’s claims were subject to arbitration. See

Pet. App. 16a, 36a; 878 F.3d at 497-498. When this Court

“reverse[s] on a threshold question,” it typically “remand[s] for resolution of any claims the lower courts’ error prevented them from addressing.” Zivotofsky v. Clinton, 566 U.S. 189, 201 (2012). Accordingly, if the Court

grants the underlying petition and ultimately reverses,

the ordinary course would be for the Court to remand for

the court of appeals to consider the non-signatory question in the first instance. (Of course, if the Court affirms,

the non-signatory question would be moot.)

There is no reason for the Court to deviate from its

ordinary practice. Contrary to cross-petitioner’s suggestion, the second question presented is in no way “tied up”

in the dispute regarding delegation, nor is it a “threshold”

question. Pet. 5, 8. Quite to the contrary, as the crosspetitioner simultaneously recognizes, the second question

presented “assum[es]” that “delegation exists.” Pet. 5;

see Pet. 19. In other words, the non-signatory question

becomes relevant only if the answer to the question presented in the underlying petition is that the agreement

15

clearly and unmistakably delegates arbitrability to an arbitrator. Consideration of the non-signatory question was

unnecessary the last time the Court granted review in this

case, and it is still unnecessary now.

Indeed, cross-petitioner emphasized in its briefing below that the court of appeals “should not reach estoppel”

because it could affirm the district court’s judgment on

the ground that the arbitration provision was inapplicable. Cross-Pet. C.A. Supp. Br. 21; see Cross-Pet. C.A. Br.

40. Having urged the court of appeals not to reach the

non-signatory issue, cross-petitioner offers no compelling

reason why this Court should reach it and resolve it in the

first instance.

Finally on this point, even if the Court were to decide

the non-signatory question in cross-petitioner’s favor—

and thus hold that a court must decide whether a non-signatory can compel arbitration—a remand would still be

necessary for the lower courts to consider whether crossrespondent can invoke the agreements at issue under the

principle of equitable estoppel. There is thus little efficiency to be gained from reviewing cross-petitioner’s second question presented at this stage, as opposed to remanding for the lower courts to have a first crack at the

question.

2. What is more, the non-signatory question does not

implicate an entrenched conflict among lower courts that

warrants the Court’s immediate review. Cross-petitioner

contends (Pet. 18-20) that five appellate courts have held

that, even in the face of a valid delegation of questions of

arbitrability to an arbitrator, a court must decide whether

a non-signatory can compel arbitration. In fact, three of

those courts either did not address that question or have

16

reached conflicting results in different opinions.3 Only

two appellate courts have seemingly rejected the majority

rule that a delegation requires the arbitrator to decide

whether a non-signatory can compel arbitration. See

Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1127 (9th

Cir.), cert. denied, 571 U.S. 818 (2013); Jody James

Farms, JV v. Altman Group, Inc., 547 S.W.3d 624, 629

(Tex. 2018). Any conflict is therefore substantially less

developed than cross-petitioner suggests.

3. The real reason cross-petitioner asks the Court to

consider the non-signatory question, as it all but admits

(Pet. 23-24), is that the Fifth Circuit recently adopted the

majority rule that a delegation requires the arbitrator to

decide whether a non-signatory can compel arbitration.

See Brittania-U Nigeria, Ltd. v. Chevron USA, Inc., 866

F.3d 709, 715 (5th Cir. 2017). On remand from this Court,

cross-respondent cited that decision in arguing that the

Fifth Circuit should send to the arbitrator the question

whether cross-respondent can invoke the agreements at

issue. See Cross-Resp. C.A. Supp. Br. 9 n.1.

If the Court grants the underlying petition and ultimately reverses, the Fifth Circuit may well rely on that

recent decision and rule in cross-respondent’s favor on the

non-signatory question. But there is little reason for the

See Belnap, 844 F.3d at 1293 n.16 (declining to address an argument raised in the reply brief that it was for the arbitrator to decide

whether a non-signatory can compel arbitration); Microchip Technology Inc. v. U.S. Philips Corp., 367 F.3d 1350, 1353, 1358-1359 (Fed.

Cir. 2004) (considering whether a signatory could compel arbitration

with a non-signatory and providing no discussion of whether the

agreement clearly and unmistakably delegated questions of arbitrability to the arbitrator); compare Contec, 398 F.3d at 209-211 (holding

that the arbitrator must decide whether a non-signatory can compel

arbitration), with Republic of Iraq v. BNP Paribas USA, 472 Fed.

Appx. 11, 13 (2d Cir. 2012) (holding that the court must decide that

question).

3

17

Court to short-circuit the ordinary process and to deny

the Fifth Circuit the opportunity to decide that question

in the first instance. Like the incorporation question, the

non-signatory question does not warrant the Court’s review here. If the Court grants the underlying petition,

therefore, it should deny this conditional cross-petition.

CONCLUSION

The conditional cross-petition for a writ of certiorari

should be denied.

Respectfully submitted.

PAUL F. SCHUSTER

CYNTHIA KEELY TIMMS

LOCKE LORD LLP

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Suite 2800

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Chicago, IL 60654

APRIL 2020

KANNON K. SHANMUGAM

STACIE M. FAHSEL

WILLIAM T. MARKS

PAUL, WEISS, RIFKIND,

WHARTON & GARRISON LLP

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