Henry Schein Inc. v. Archer and White Sales Inc.: A Case Study By Wyatt Bone
Arbitration is as common as court verdicts in America today. It is practiced in everything from corporate disputes to employment issues. Federal arbitration law was codified in the Federal Arbitration Act (FAA) of 1925, which applied to both state and federal courts. The FAA regulated the arbitration process, including arbitrator selection, normal courts’ role in the process, and award regulations [1]. However, its growth was gradual over decades, until the 2010s, when the practice of arbitration was massively expanded. Fig. 1 shows a timeline of major arbitration cases.
In 2012, Archer and White Sales Inc., a Texas dental equipment distributor, made a deal with the company Peloton and Crane to distribute their dental equipment. However, Archer and White Sales eventually alleged that Peloton and Crane had broken several antitrust laws and sued for damages and injunctive relief against its successor-in-interest and Henry Schein, Inc. collectively. However, the original contract stated that disputes between the two companies were to be settled by arbitration, except in issues of injunctive relief. Both parties agreed to arbitration, and the magistrate judge presiding over the case affirmed the motion. However, the district court vacated the motion due to the original contract’s stipulation against arbitration in matters of injunctive relief. This was affirmed by the Fifth Circuit Court, which cited the “wholly groundless” exception, which states that claims of arbitrability are valid unless cited on perceived “wholly groundless” reasons [2]. From here, the case was brought to the Supreme Court.
The legal issue involved in this case was not whether or not the initial case had valid claims of arbitrability, but who decides claims of arbitrability: the courts or the arbitrator? The lower courts devised the “wholly groundless” exception, which was untested by the Supreme Court. Arbitration gradually spread, but courts still had major influence in the arbitration process. The Supreme Court delivered a unanimous decision striking down the “wholly groundless” exception, with their opinion written by Justice Kavanaugh. The court’s opinion voids “wholly groundless” exceptions primarily on an originalist argument that no such exception exists in the FAA, nor was that the intention of Congress when drafting it. For Justice Kavanaugh, “arbitration is a matter of contract”, which means enforcing the contract terms, not interpreting it. The Supreme Court found the claim that courts can decide arbitrability claims because they also deliver verdicts on excess of arbitrators’ power an invalid redesign of the FAA. Justice Kavanaugh argues that the “wholly groundless” exception brings excessive litigation and wastes time on frivolous issues [2]. This decision completely upended arbitration.
The court’s verdict was a tremendous advancement for arbitration. The Supreme Court had given a number of verdicts before affirming arbitration’s merits, which helped its practice to become more widespread in the United States. However, the courts still decided its merits prior to Schein, limiting its expansion. However, Schein delegating claims of arbitrability to arbitrators allowed the practice to greatly expand and become an organized system parallel to the court system, meaning an increasing number of corporate law cases ended in arbitration and deals. This increased the power of corporations in the legal system. Since then, arbitration has only grown as a practice. Many companies put clauses in consumer and employment contracts relegating legal issues to individual arbitration, limiting the effectiveness of class action lawsuits and giving corporations greater negotiating power in the process [3]. Court cases such as Epic Systems Corp v. Lewis, affirmed arbitration’s power and expansion in employment contract issues involving labor conflicts [4].
I have mixed feelings on the case and its broader implications. I am broadly in favor of arbitration. In many instances, it serves as a more efficient means of resolving corporate issues than the regular court system in terms of both time and money. Many of these conflicts can be resolved through negotiating a deal, making litigation unnecessary. Arbitration suits these purposes better, as the courts are better equipped for issues that involve major judicial questions or massively impactful verdicts. The arbitrator is usually more knowledgeable on corporate law matters than a judge, which leads to a more informed outcome. I agree with the striking down of the “wholly groundless” exception too, and agree with Justice Kavanaugh that this exception leads to excessive litigation over what qualifies as “wholly groundless”, which defeats the purpose of arbitration. However, I have issues with the expansion of individual arbitration in consumer protection and labor cases. Corporations have vast resources in these cases, which is acceptable in inter-corporate cases where both parties hold relatively equal power. However, in cases involving individuals, corporations hold much more bargaining power than most individuals, which leads to unequal outcomes. The purpose of class action lawsuits and collective action is to give people equal legal representation to the companies. Class action bans and individual arbitration cases diminish the power of common citizens in the legal system, which I am uneasy with. However, I agree with the Schein verdict and arbitration’s merits in solving corporate disputes.
Figure 1 - A timeline of major arbitration cases
Bibliography
9 U.S.C. § 1-16 (1925).
Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. (2019)
Jessice Silver-Greenberg & Robert Gebeloff, Arbitration Everywhere, Stacking the Deck of Justice, The New York Times, (Nov. 1, 2015).
Epic Systems Corp. v. Lewis, Oyez, https://www.oyez.org/cases/2017/16-285 (last visited Jun 10, 2025).