On June 15, 2020, the US Supreme Court granted certiorari again in Henry Schein, Inc. v. Archer & White, Inc. on the question of “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.” The Court did not include whether the incorporation of such arbitration rules satisfies the requirement from First Options of Chicago v. Kaplan that courts decide arbitrability issues unless the parties have “clearly and unmistakably” parties agreed to have an arbitrator decide such matters.
Two days later, the Sixth Circuit held that incorporating the Commercial Arbitration Rules of the American Arbitration Association into the arbitration agreement does indeed satisfy the First Options requirement. Harley Blanton, Derek Piersing, et al v. Domino's Pizza Franchising LLC et al (No. 19-2388, June 17, 2020).
The dispute in Harley Blanton began as a class action against Domino’s Pizza and affiliates for alleged violations of federal antitrust law in the franchise agreements. Domino’s Pizza itself did not sign the franchise agreements, only its affiliates. But Domino’s Pizza sought to enforce the arbitration agreements in those agreements against the franchisees who were the class plaintiffs. The non-signatory issues were deferred to a later stage in the proceedings.
The Court of Appeals started its analysis by considering the law governing the impact of incorporating arbitration rules. Although courts generally look to state law to interpret arbitration agreements, First Options reverses the “usual presumption” in favor of arbitration by requiring that there be “clear and unmistakable” evidence that the parties agreed to have an arbitrator decide which issues are arbitrable.
In the franchise contracts, the franchisees agreed to arbitrate under the American Arbitration Association (AAA) Commercial Arbitration Rules which provide that the arbitrator has the power to decide his or her own jurisdiction “including any objections with respect to the existence, scope or validity of the arbitration agreement.” After noting that it is settled contract law that parties can incorporate outside documents into their agreements, the court held that incorporation of the AAA Commercial Arbitration Rules is “pretty compelling evidence that [the franchisees] agreed to arbitrate ‘arbitrability.’”
The court also found support for its decision in US Supreme Court jurisprudence as well as the prior decisions in the Sixth Circuit. It noted that eleven of the twelve circuits had reached the same result and concluded that “[t]here’s little doubt about the final picture.”