Morrison Foerster’s Class Dismissed blog provides insights, recommendations, and timely reports on the latest defense news, developments, and trends in the most current class actions lawsuits and product liability issues that affect consumer-facing companies. Through Class Dismissed, attorneys from our nationally recognized Consumer Class Action and Products Liability practices offer a real-time assessment of the developments in matters that are shaping the industry. This blog examines the full spectrum of consumer-related class action and product liability lawsuits ranging from false advertising, privacy, consumer product safety, ADA, food misbranding, TCPA, environment, retail, and government actions as well as nationwide and multidistrict litigation class actions.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Partner

Julie Park protects her clients’ products no matter what kind of product issue they face—whether it is planning for new product development, recalling an existing product, or defending clients against product liability or consumer class actions. Drawing on her deep technical and legal expertise, Julie counsels clients on consumer product safety regulation and pharmaceutical and medical device preemption while also managing complex and multijurisdictional litigation both in state and federal court.

Julie Y. Park

<div class="videoWrapper"><iframe frameborder="0" class="sticky-video" allowfullscreen="1" title="Meet Penny Preovolos, Litigation Partner" src="https://www.youtube-nocookie.com/embed/hv7hYn-Bl7c?rel=0&showinfo=0;vq=hd1080" title="iframe"></iframe></div>Penelope has served as lead counsel in major consumer class actions and antitrust cases for more than 35 years, successfully representing high-profile defendants in antitrust, consumer fraud, and product defect matters. Her clients span a range of industries, including consumer electronics, technology, retail, publishing, food and beverage, cosmetics, and household products. According to Chambers USA, Penelope has a “great reputation for antitrust and product liability work” and is a “superb all-around antitrust lawyer.”Penelope was named the 2019 Antitrust Lawyer of the Year by the Antitrust, UCL, and Privacy Section of the California Lawyers Association. She was co-chair of MoFo’s antitrust practice for 14 years. She has served as chair of the Antitrust and Trade Regulation Section of the State Bar of California and as a member of the Ninth Circuit Advisory Committee on Local Rules and Operations. She is an editor of and frequent contributor to Morrison & Foerster’s <a href="https://classdismissed.mofo.com/">Class Dismissed blog</a>, as well as a frequent speaker about class action and antitrust issues.More About PenelopePenelope clerked for the Honorable Charles M. Merrill, United States Court of Appeals for the Ninth Circuit. She graduated cum laude from Harvard Law School, where she was executive editor of the Harvard Civil Rights – Civil Liberties Law Review. Penelope was a member of Phi Beta Kappa at the University of California, Berkeley. She was awarded the University Medal, the highest undergraduate honor at the university, as well as the English Departmental Citation (awarded to the outstanding graduate in that department).

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Senior Counsel

Penelope has served as lead counsel in major consumer class actions and antitrust cases for more than 35 years, successfully representing high-profile defendants in antitrust, consumer fraud, and product defect matters. Her clients span a range of industries, including consumer electronics, technology, retail, publishing, food and beverage, cosmetics, and household products.

Penelope A. Preovolos

Claudia focuses her practice on the defense of consumer class actions and on complex commercial litigation, including unfair business competition, false advertising, product liability, and privacy matters. She is currently representing numerous consumer goods manufacturers and retailers in false advertising and mislabeling class action lawsuits. Claudia also regularly counsels clients in the food, cosmetics, retail, and technology industries. She represents companies in false advertising disputes before the National Advertising Division (NAD) of the Council of Better Business Bureaus, Inc.<h5>More about Claudia</h5>Claudia is active in MoFo’s pro bono efforts, and recently traveled to El Paso, Texas, to work with families separated and detained at the border. She is also supervising a pro bono collaboration with Equal Rights Advocates, a nonprofit fighting for gender justice in work places and schools across the country. The initiative will help students who have been victims of sexual assault, attempted assault, or harassment find support and seek justice. Claudia is also a board member of Bay Area Legal Aid and a former board member of Equal Rights Advocates. Claudia is an editor and frequent contributor to MoFo’s <a href="https://classdismissed.mofo.com/">Class Dismissed</a> blog, which provides reports about the latest defense news, developments, and trends in class action lawsuits and product liability issues that affect consumer-facing companies. Her perspectives are also respected in the larger legal community: Claudia has published articles about class action and false advertising issues, and is a co-author of Chapter 7 — “Unfair Competition in California Business Litigation 2016” — of The Recorder. She also regularly speaks at conferences on class action and advertising trends. Claudia is currently serving as a Lawyer Representative for the Northern District of California. She received her J.D. degree in 2004 from Berkeley Law (Boalt Hall School of Law), where she was an associate editor of the Berkeley Technology Law Journal.

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Claudia focuses her practice on the defense of consumer class actions and on complex commercial litigation, including unfair business competition, false advertising, product liability, and privacy matters. She is currently representing numerous consumer goods manufacturers and retailers in false advertising and mislabeling class actions.

Claudia M. Vetesi

Alexandra Barlow is a partner in the Litigation Department of Morrison Foerster’s San Diego office.Alexandra litigates product liability matters involving medical devices, pharmaceuticals, consumer products, automobiles, and AI. Alexandra's litigation expertise spans the entire case life cycle in both state and federal courts. She handles all phases of discovery, including fact investigation and expert discovery. Alexandra has taken over twenty-five depositions, including experts, plaintiffs, treating physicians, and third-party witnesses. She drafts and argues motions of all types, including motions for summary judgment, motions to quash, and motions for preliminary injunction.Alexandra has significant trial experience. She has first-chaired a one-week jury trial and second-chaired a five‑week jury trial, both involving multiple claims and witnesses. She also has extensive experience in alternative dispute resolution, representing clients at mediations, mandatory settlement conferences, and early neutral evaluations.Alexandra enjoys tracking developments and keeping her clients updated on product liability and personal injury claims, frequently writing or presenting on emerging areas such as autonomous vehicles and smart devices. Alexandra’s experience also extends to professional liability, warranty claims, eminent domain, and construction law.Alexandra earned her J.D. from the University of San Diego School of Law. While in law school, the San Diego Law Review published her comment on the recovery of damages by plaintiffs in a persistent vegetative state, and she also served as a comment editor. She received her B.A. from the University of California, Los Angeles, where she majored in Political Science and minored in Spanish. A San Diego native, she attended a Spanish immersion school through the eighth grade. Alexandra is active in the San Diego community, advising students at a local college. She is also a member of several legal organizations in San Diego, including Lawyer’s Club, the Association of Business Trial Lawyers, and Wallace Inn of Court.

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Alexandra Barlow is a partner in the Litigation Department of Morrison Foerster’s San Diego office. Alexandra litigates product liability matters involving medical devices, pharmaceuticals, consumer products, automobiles, and AI. Alexandra’s litigation expertise spans the entire case life cycle in both state and federal courts. She handles all phases of discovery, including fact investigation and expert discovery. Alexandra has taken over twenty-five depositions, including experts, plaintiffs, treating physicians, and third-party witnesses. She drafts and argues motions of all types, including motions for summary judgment, motions to quash, and motions for preliminary injunction.

Alexandra Barlow is a partner in the Litigation Department of Morrison Foerster’s San Diego office. Alexandra litigates product liability matters involving medical devices, pharmaceuticals, automobiles, AI, and robotics. Alexandra's litigation expertise spans the entire case life cycle in both state and federal courts. She handles all phases of discovery, including fact investigation and expert discovery. Alexandra has taken over twenty-five depositions, including experts, plaintiffs, treating physicians, and third-party witnesses. She drafts and argues motions of all types, including motions for summary judgment, motions to quash, and motions for preliminary injunction.

Alexandra Barlow

Adam J. Hunt is a partner in the Litigation Department of Morrison Foerster’s New York office. His practice focuses on complex litigation, with an emphasis on class action and commercial litigation.Mr. Hunt has extensive experience representing consumer products companies, financial institutions, and technology firms in class action cases and complex commercial disputes before state and federal trial courts, as well as in arbitrations. Clients seek Mr. Hunt’s counsel for his creative, strategic thinking in high-stakes, high-profile matters. He has represented clients facing claims under false advertising, antitrust, and privacy laws throughout the country, securing wins at the pleading stage, summary judgment, and trial, in addition to negotiating favorable settlements, often early in the case. Representative experience includes successfully securing rulings dismissing two putative false advertising class action cases against one of the best-known consumer electronics companies in the world; obtaining a complete win on summary judgment for a major shipping and logistics company in a multimillion-dollar commercial dispute; appearing as counsel at trial for a leading financial institution in a $100 million commercial dispute, winning a bench trial verdict; and prevailing on motions to dismiss false advertising class actions against a leading Greek yogurt company.Mr. Hunt is also an editor of the firm’s <a href="https://classdismissed.mofo.com/" target="_self">Class Dismissed blog</a>, which provides insights, recommendations, and timely reports on the latest defense news, developments, and trends in the most current class action lawsuits that affect consumer-facing companies.Mr. Hunt maintains an active pro bono practice and is the recipient of the New York State Bar Association’s 2017 President’s Pro Bono Service Award for the First Judicial Department, the 2018 Public Service Award from New York University School of Law, and Morrison Foerster’s Kathi Pugh Award for Pro Bono Services.Mr. Hunt received his B.A. with honors from Swarthmore College and his J.D. cum laude from New York University.

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Adam Hunt is a partner in the Litigation Department of Morrison Foerster’s New York office. His practice focuses on complex litigation, with an emphasis on class action and commercial litigation.

Adam Hunt

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Alexandra Preece Barlow

Adam J. Hunt

The Future of Section 230: Protection Against Product Liability Claims?

New Wave of PFAS Legislation Aimed at Consumer Products

CPSC Releases Annual Report on Deaths and Injuries Involving Nursery Products

CPSC Proposes New Safety Rules for Infant Rockers

CPSC Commissioners Abstain from Retracting Infant Sleep Product Statements

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The Federal Trade Commission (FTC) appears poised to begin testing the scope of its rulemaking authority, including new substantive competition rules for the first time in decades.<a id="_ftnref1" name="_ftnref1" href="https://www.mofo.com/resources/insights/210511-ftc-lays-groundwork-rulemakings.html?utm_source=publication&utm_medium=email#_ftn1" class="anchor" style="box-sizing: border-box;color: rgb(3, 65, 147);text-decoration-line: none;transition-duration: 0.2s;transition-timing-function: ease-in-out;transition-delay: 0s;transition-property: color;font-size: 16px;">[1]</a> On March 25, 2021, FTC Acting Chairwoman Rebecca Slaughter (D) formed a group within the agency’s Office of the General Counsel to centralize FTC rulemakings. In announcing the change, Slaughter said that it was “time for the Commission to activate its unfair methods of competition rulemaking authority,” and that she is “excited for this new rulemaking group to explore all the possibilities.”<a id="_ftnref2" name="_ftnref2" href="https://www.mofo.com/resources/insights/210511-ftc-lays-groundwork-rulemakings.html?utm_source=publication&utm_medium=email#_ftn2" class="anchor" style="box-sizing: border-box;color: rgb(3, 65, 147);text-decoration-line: none;transition-duration: 0.2s;transition-timing-function: ease-in-out;transition-delay: 0s;transition-property: color;font-size: 16px;">[2]</a> Read our <a href="https://www.mofo.com/resources/insights/210511-ftc-lays-groundwork-rulemakings.html?utm_source=publication&utm_medium=email">client alert</a>.  <a id="_ftn1" name="_ftn1" href="https://www.mofo.com/resources/insights/210511-ftc-lays-groundwork-rulemakings.html?utm_source=publication&utm_medium=email#_ftnref1" class="offset" style="box-sizing: border-box;color: rgb(3, 65, 147);text-decoration-line: none;background-color: transparent;transition-duration: 0.2s;transition-timing-function: ease-in-out;transition-delay: 0s;transition-property: color;">[1]</a> See “Discriminatory Practices in Men’s and Boys’ Tailored Clothing Industry,” 16 CFR Part 412 (1968).  Note that this rule was repealed in 1994.  See Notice of Rule Repeal, 59 Fed. Reg. 8527 (Feb. 23, 1994).<a id="_ftn2" name="_ftn2" href="https://www.mofo.com/resources/insights/210511-ftc-lays-groundwork-rulemakings.html?utm_source=publication&utm_medium=email#_ftnref2" class="offset" style="box-sizing: border-box;color: rgb(3, 65, 147);text-decoration-line: none;background-color: transparent;transition-duration: 0.2s;transition-timing-function: ease-in-out;transition-delay: 0s;transition-property: color;">[2]</a> Press Release, Fed. Trade Comm’n, “FTC Acting Chairwoman Slaughter Announces New Rulemaking Group” (March 25, 2021), <a href="https://www.ftc.gov/news-events/press-releases/2021/03/ftc-acting-chairwoman-slaughter-announces-new-rulemaking-group" target="_blank" style="box-sizing: border-box;color: rgb(3, 65, 147);text-decoration-line: none;background-color: transparent;transition-duration: 0.2s;transition-timing-function: ease-in-out;transition-delay: 0s;transition-property: color;">https://www.ftc.gov/news-events/press-releases/2021/03/ftc-acting-chairwoman-slaughter-announces-new-rulemaking-group</a>

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Co-chair Global Antitrust Law Practice Group

Alex Okuliar is Co-Chair of Morrison Foerster’s Global Antitrust Law Practice Group. He is the former Deputy Assistant Attorney General for Civil Antitrust Enforcement at the U.S. Department of Justice and a former advisor at the Federal Trade Commission.

Alexander Okuliar

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David Shaw is a partner in Morrison Foerster’s Global Antitrust Law Practice group, where he draws upon his extensive experience across merger clearance litigation, cartel representations, counselin

David J. Shaw

David Shaw

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Joseph Folio is a trial lawyer and partner in Morrison Foerster’s Global Antitrust Law, Crisis Management, and Privacy + Data Security Groups, with more than a dozen years of experience leading complex government investigations and high-profile litigation.

Joseph Charles Folio III

Joseph Folio III

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FTC Lays Groundwork for Rulemakings: Are New Substantive Competition Rules Coming?

AMG Capital v. FTC – SCOTUS Strips the FTC of a Critical Enforcement Tool

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The Federal Trade Commission (FTC) appears poised to begin testing the scope of its rulemaking authority, including new substantive competition rules for the fi

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FTC Lays Groundwork for Rulemakings: Are New Substantive Competition Rules Coming?

In a unanimous decision reversing the Ninth Circuit, the Supreme Court in <a target="_blank" href="https://www.supremecourt.gov/opinions/20pdf/19-508_l6gn.pdf" style="box-sizing: border-box;color: rgb(3, 65, 147);text-decoration-line: none;transition-duration: 0.2s;transition-timing-function: ease-in-out;transition-delay: 0s;transition-property: color;font-size: 16px;">AMG Capital v. FTC</a> ended a federal circuit split and squarely held that the FTC lacks authority to pursue equitable monetary relief in federal court under Section 13(b) of the Federal Trade Commission Act (the “Act”). The Ninth Circuit had upheld a permanent injunction against defendant Scott Tucker’s payday loan business for engaging in unfair and deceptive practices, holding that Section 13(b) allowed for “ancillary relief,” including restitution, and affirming a $1.27 billion restitution and disgorgement award. But the Supreme Court held that Section 13(b), by its language and structure, does not give the FTC the power to seek equitable monetary relief such as restitution or disgorgement. The justices stressed that the FTC remains free to seek restitution through the powers originally granted by the Act (pursuant to Sections 5 and 19), but only after conducting a more onerous proceeding before an agency in-house administrative law judge.Read our <a href="https://www.mofo.com/resources/insights/210430-amg-capital-v-ftc-scotus-enforcement-tool.html">client alert</a>.

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Bonnie helps clients navigate internal and government antitrust investigations, enforcement proceedings, and class action litigation in federal and state courts. She leverages her over 15 years of exp

Bonnie Lau

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Megan E. Gerking is a partner in Morrison & Foerster’s Global Antitrust Law Practice, where she specializes in government-facing antitrust matters. Megan represents companies in criminal and civil con

Megan Gerking

Megan E. Gerking

Adam Hunt is a partner in the Litigation Department of Morrison Foerster’s New York office. His practice focuses on complex litigation, with an emphasis on class action and commercial litigation.

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Associate

Michael Ahern is an associate in the Litigation Department of Morrison Foerster’s New York office.
Prior to joining Morrison Foerster, Mr. Ahern clerked for the Honorable Eileen Bransten in the Comm

Michael G. Ahern

Michael Ahern

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AMG Capital v. FTC – SCOTUS Strips the FTC of a Critical Enforcement Tool

In a unanimous decision reversing the Ninth Circuit, the Supreme Court in AMG Capital v. FTC ended a federal circuit split and squarely held that the FTC lacks 

The Henry Schein arbitration battle is making its way to the Supreme Court again. The Court recently <a href="https://www.supremecourt.gov/docket/docketfiles/html/public/19-963.html">granted</a> Henry Schein, Inc.’s certiorari petition to answer 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.” Henry Schein, Inc. v. Archer & White Sales, Inc., No. 19-963 (2019). In other words, if an arbitration agreement carves out certain claims (like injunctive relief), does that create a loophole that allows the district court to decide the arbitrability of those claims?Round 1As we <a href="https://classdismissed.mofo.com/consumer-products/leave-arbitration-to-the-arbitrator/">explained</a> last year, the case started when Archer & White Sales, Inc., a small business that distributes dental equipment, sued a dental equipment manufacturer and Schein, a major distributor of the equipment, for alleged antitrust violations. The parties’ agreement provided that disputes “arising under or relating to” the agreement “shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association [AAA].” Henry Schein, Inc. (“Schein”) invoked the FAA and sought to compel arbitration. In opposition, Archer & White relied on a court-created exception permitting the court to decide arbitrability—notwithstanding a contractual delegation to the arbitrator—where the court finds the argument for arbitration to be “wholly groundless.” The trial court agreed and denied arbitration, and the Fifth Circuit <a href="http://www.ca5.uscourts.gov/opinions/pub/16/16-41674-CV0.pdf">affirmed</a>, 878 F.3d 488 (5th Cir. 2017). The Supreme Court vacated the decision, unanimously <a href="https://www.supremecourt.gov/opinions/18pdf/17-1272_7l48.pdf">concluding</a> that the “wholly groundless” exception was inconsistent with the FAA and the Court’s precedents, 139 S. Ct. 524 (2019). The decision suggested that the Court as constituted remains firmly on a pro-arbitration path and will continue to strictly adhere to the FAA.Round 2 On <a href="http://www.ca5.uscourts.gov/opinions/pub/16/16-41674-CV1.pdf">remand</a>, the Fifth Circuit again refused to compel arbitration, 935 F. 3d 274 (5th Cir. 2019). The Fifth Circuit acknowledged that the parties had delegated at least some questions of arbitrability to the arbitrator. But because the arbitration agreement carved out injunctive relief claims, the agreement did “not clearly and unmistakably delegate[] the question of arbitrability to an arbitrator.” The Fifth Circuit therefore concluded that the court—and not the arbitrator—was responsible for determining the arbitrability of the claims at issue. It then held that the action was one “seeking injunctive relief” and thus exempt from arbitration under the parties’ agreement.  Schein filed a <a href="https://www.supremecourt.gov/DocketPDF/19/19-963/130539/20200131112522163_Henry_Schein_cert_petition.pdf">petition for writ of certiorari</a>, which the Supreme Court granted.[1]As Schein’s petition pointed out, courts are divided on the question presented. Some hold that the question of whether the provision exempts a particular claim from arbitration is itself a question of arbitrability, and the arbitrator must decide that question once the moving party has demonstrated the existence of a clear and unmistakable delegation. Others, like the Fifth Circuit, hold that the presence of a carve-out provision negates an otherwise clear and unmistakable delegation. Schein argues that this approach “threatens to render even the clearest and most unmistakable delegation ineffective,” allowing courts to easily override a contract’s delegation of authority to the arbitrator. The Supreme Court’s decision is expected to provide much-needed clarity in this matter. In the meantime, Morrison & Foerster’s <a href="https://www.mofo.com/capabilities/class-actions-mass-torts.html">Class Actions and Mass Torts</a> attorneys can provide further insight on the implications of this action.[1] The Court denied a cross-petition by Archer & White Sales, which asked the Court to decide (1) whether an arbitration agreement that identifies a set of arbitration rules to apply if there is arbitration clearly and unmistakably delegates to the arbitrator disputes about whether the parties agreed to arbitrate in the first place; and (2) whether an arbitrator or a court decides whether a nonsignatory to an arbitration agreement can enforce the arbitration agreement through equitable estoppel.

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Schein On: Supreme Court to Decide Key Arbitration Delegation Question

U.S. Supreme Court’s Decision to Review a Pair of FTCA Cases Could Spell a Sea Change in FTC’s Enforcement Authority

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The Henry Schein arbitration battle is making its way to the Supreme Court again. The Court recently granted Henry Schein, Inc.’s certiorari petition to answer 

Schein On: Supreme Court to Decide Key Arbitration Delegation Question

The United States Supreme Court continued the pro-arbitration trend in its jurisprudence, as well as its strict construction of the Federal Arbitration Act, in its unanimous decision in Henry Schein, Inc. v. Archer & White Sales, Inc., No. 17-1272, 2019 WL 122164 (U.S. Jan. 8, 2019).  Resolving a division in the Circuits on the issue, the Court held that where the parties delegate the “gateway” issue of arbitrability to the arbitrator, the court may not apply a judicially created “wholly groundless” exception to avoid delegation.<a name="_ftnref1" href="#_ftn1">[1]</a>Case BackgroundArcher and White Sales, Inc., a small business that distributes dental equipment and the plaintiff below, sued a dental equipment manufacturer and Schein, a major distributor of the equipment, for federal and state law antitrust violations.  The relevant agreement between the parties provided that disputes “arising under or relating to” the agreement “shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association [AAA].”  Schein invoked the FAA and sought to compel arbitration.Archer and White opposed, relying on an exception in the arbitration provision for actions seeking injunctive relief.  It argued that because its complaint sought injunctive relief in addition to damages, the dispute was not arbitrable.  Schein argued that because the AAA rules provide that arbitrators have the power to resolve threshold issues of arbitrability, under applicable case law the contract required that the arbitrator, not the court, decide whether the dispute was subject to arbitration.In response, Archer and White relied on a court-created exception recognized in the Fifth Circuit (and several other Circuits) permitting the court to decide arbitrability, notwithstanding a contractual delegation to the arbitrator, where the court finds the argument for arbitration to be “wholly groundless.”  The trial court agreed and denied arbitration, and the Fifth Circuit affirmed.The DecisionWith Justice Kavanaugh writing his first opinion for the Court, the Supreme Court vacated the decision and remanded.  The opinion emphasizes strict interpretation under the FAA:  “We must interpret the Act as written, and the Act in turn requires that we interpret the [arbitration] contract as written.”  Schein, 2019 WL 122164, at *4.  The Supreme Court had held in prior opinions that who decides whether a dispute may be arbitrated is itself a matter of contract, and the parties thus may agree that an arbitrator and not the court will decide.  See, e.g., Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 68-70 (2010).The Court concluded in Schein that the “wholly groundless” exception was inconsistent not only with the express terms of the FAA, but with the Court’s precedents.  Justice Kavanaugh noted that AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 649-50 (1986), held that the FAA precludes a court from ruling on the merits of a dispute that has been delegated to an arbitrator, even if the claim appears to be wholly frivolous.  Justice Kavanaugh concluded that this principle applied with equal force to the issue of arbitrability:  just as the court cannot decide a merits claim that the parties have delegated to an arbitrator, neither can it decide an arbitrability claim that the parties have similarly delegated.  Schein, 2019 WL 122164, at *4.Schein summarily rejected each of respondent’s additional four arguments:<ul><li>Respondent argued that §§ 3 and 4 of the FAA, which respectively set forth the standards for the court’s determination to stay litigation pending arbitration and for compelling arbitration, mean that a court must always make an initial determination of arbitrability. But “that ship has sailed” in light of the Court’s consistent holdings that threshold arbitrability issues can be delegated to the arbitrator.  2019 WL 122164, at *4.</li><li>Respondent’s reliance on § 10 of the FAA, which provides for “back-end” judicial review if the arbitrator has exceeded his or her powers, was similarly misplaced. Congress designed the statute in a specific way, and the Court had no power to redesign it.</li><li>The argument that it is inefficient to send a matter to an arbitrator where the argument for arbitration is “wholly meritless” fared no better. The Court could not engraft its own exceptions on the FAA.  Moreover, the Court was “dubious” that the “wholly groundless” exception would save time, since it would likely spark time-consuming collateral litigation.  Nor was it proper to assume that if a court would find the basis for arbitration “wholly frivolous,” so would an arbitrator, rendering referral to the arbitrator a waste of time.  “It is not unheard-of for one fair-minded adjudicator to think a decision is obvious in one direction but for another fair-minded adjudicator to decide the matter the other way.”   at *5.</li><li>Finally, the argument that the “wholly groundless” exception was necessary to deter frivolous motions to compel arbitration failed, among other reasons, because the Court may not rewrite the statute to accommodate policy concerns, and because arbitrators can dispose of frivolous cases by quickly holding the dispute non-arbitrable and may be able to award sanctions.</li></ul>The Court thus rejected the “wholly groundless” objection.  The Court expressed no view about whether the contract at issue in fact delegated the arbitrability determination to the arbitrator.  Indeed, Justice Kavanaugh emphasized that courts “should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.”  Id. at *6 (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 994 (1995).Key TakeawaysAlthough the decision in Schein was not a surprise, it confirms that the Court as constituted will remain firmly on a pro-arbitration path and will continue to strictly adhere to the provisions of the FAA.  The decision also suggests that parties who desire arbitration may want to expressly delegate the gateway issue of arbitrability to the arbitrator.  (Incorporation of the AAA rules likely has that effect, but the Supreme Court has not ruled on the issue.)  Unlike a court, the arbitrator’s decision is not subject to review, which will give some potential litigants pause.  Nonetheless, the Schein opinion suggests that for parties who strongly desire arbitration, this may be a benefit.<a name="_ftn1" href="#_ftnref1">[1]</a> Just one week later, however, in New Prime Inc. v. Oliveira, No. 17-340, 2019 WL 189342 (U.S. Jan. 15, 2019), the Supreme Court held that a court, not an arbitrator, must decide the threshold question of whether the contract at issue is within the scope of the FAA and not within an exception.  Because §§ 3 and 4 of the FAA confer authority on a court to stay litigation and compel arbitration only where the contract comes within the scope of the FAA as defined in § 2 of that Act, the court must first resolve the scope issue even where the contract otherwise delegates arbitrability determinations to the arbitrator.  In New Prime, because the Supreme Court concluded that the transportation worker exception contained in § 1 of the FAA applied to independent contractors, the matter was not arbitrable.

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Leave Arbitration to the Arbitrator: No “Wholly Groundless” Exception Where Contract Delegates Arbitrability Determination to the Arbitrator