Reed Smith Client Alerts

In Richardson v. Coverall N. America, Inc. (Richardson)1 and Blanton v. Domino’s Pizza Franchising LLC (Blanton)2 the United States Courts of Appeals for the Third Circuit (Third Circuit) and the Sixth Circuit (Sixth Circuit) respectively held that agreeing to arbitrate under different sets of the American Arbitration Association’s rules (AAA Rules) that afford arbitrators the right to rule on their own jurisdiction clearly and unmistakably delegates arbitrability questions to arbitrators to resolve. Richardson and Blanton are significant, because both the Third Circuit and the Sixth Circuit have now joined the majority of federal appellate courts which hold that agreeing to arbitrate under arbitral rules that recognize competence-competence provides clear and unmistakable evidence that parties have assigned arbitrability questions to arbitrators to decide.

A. Arbitrability and threshold questions of arbitral jurisdiction in the United States

In the United States, questions of arbitral jurisdiction are framed as questions of arbitrability. Since the United States Supreme Court’s 1995 decision in First Options of Chicago v. Kaplan, the rule in the United States has been that courts decide questions of arbitrability, unless the parties have clearly and unmistakably assigned that authority to the arbitrator to resolve.3 Accordingly, under the First Options test, if an arbitration clause is silent as to who decides arbitrability, that power is reserved for courts.

Conversely, under the First Options test, if an arbitration clause “clearly and unmistakably” delegatse arbitrability questions to arbitrators to decide, then U.S. courts must refer arbitral jurisdictional disputes to arbitration.4 As the Supreme Court reinforced in the 2019 Henry Schein, Inc. v. Archer & White Sales, Inc. decision, that remains the case even if the basis for claiming that the dispute is arbitral is “wholly groundless.”5

B. Richardson, Blanton, and arbitrability

While the binary First Options test sounds straightforward, questions have nevertheless arisen over what constitutes clear and unmistakable evidence of the parties’ intent to assign arbitrability questions to the arbitrators. One such question has been whether a clause that selects arbitration rules which allow arbitrators to rule on their own jurisdiction, but is otherwise silent as to arbitrability, has clearly and unmistakably delegated arbitrability to the arbitrators. This is precisely the question that was presented in Richardson and Blanton.

1. Richardson background

Richardson concerned a dispute over whether two franchisees (Plaintiffs) were independent contractors or employees of a master franchisee and a franchisor (Franchise Defendants).6 While the Plaintiffs had signed franchise agreements with the master franchisee that required their disputes to be resolved in arbitration under the AAA Rules, the Plaintiffs nevertheless sought to sue the Franchise Defendants in court for alleged violations of state wage laws.7 After being sued in court, the Franchise Defendants moved to compel arbitration on grounds that the Plaintiffs’ claims were subject to an arbitration clause.8