Background
In two thousand and twenty-one, SJH and SDI entered into contracts for property development that included arbitration clauses. SDI conducted business as Dowbuilt. In two thousand and twenty-three, SDI initiated arbitration. SJH filed counterclaims against SDI and Dowbuilt. The arbitrator issued orders clarifying that while some existing counterclaims could proceed against Dowbuilt, new claims against Dowbuilt were not required to be arbitrated because there was no arbitration agreement between SJH and Dowbuilt. Dowbuilt moved to compel arbitration in district court, which was denied. Dowbuilt appealed.
The court’s reasoning
The court reviewed the district court’s decision de novo. Under the Federal Arbitration Act, when parties delegate arbitrability questions to an arbitrator, a court may not override that agreement. The parties agreed that the arbitrator would decide arbitrability. The court found that the arbitrator’s January seventeen order explicitly stated there was no arbitration agreement between the parties for the new claims and that the plaintiff retained the right to pursue those claims in court. The court rejected Dowbuilt’s argument that the arbitrator did not decide arbitrability, noting the order’s clear language and procedural context. Because the arbitrator decided the arbitrability question, the court declined to consider Dowbuilt’s alternative arguments regarding consent and equitable estoppel.
When the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract.
Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63, 68 (2019)
What it means going forward
The ruling reinforces that courts must enforce contractual delegations of arbitrability to arbitrators and cannot re-decide those questions even if the parties dispute the scope of the arbitrator’s authority.
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