THE POWER OF ARBITRATORS TO DECIDE ARBITRABILITY â DELEGATION CLAUSES AND LESSONS FROM CASELAW
Written by Robert S. Amador*
Mandatory binding contractual arbitration clauses are ubiquitous in American commerce today. They are found in the agreements of many common businesses, including real estate, healthcare, construction, insurance, retail sales and rental, cell phones, telecommunications, credit cards, and investments, among many others. They are also very common in employment agreements, regardless of the industry. Their popularity stems from the many perceived desirable benefits of arbitration versus court litigation, namely confidentiality, lower expense, more efficiency, and more conservative awards than jury verdicts.
Arbitration clauses in these agreements usually delegate to the arbitrator the power to decide so-called "gateway" or "arbitrability" issues, including whether the arbitration provision governs the dispute at issue, whether the agreement is valid and enforceable, and whether the party against whom the agreement is being enforced is bound by it. Delegation clauses are enforceable according to their terms under both federal and California law. (Henry Schein, Inc. v. Archer & White Sales, Inc. (2019) 139 S.Ct. 524; First Options of Chicago, Inc. v. Kaplan (1995)