Summary
The Fourth Circuit reversed and remanded the district court's denial of a motion to compel arbitration, holding that the parties' brokerage service agreements delegated threshold arbitrability questions to an arbitrator. Because the district court erroneously decided whether the dispute fell within the scope of the arbitration clauses instead of referring that question to the arbitrator, the appellate court vacated the judgment and instructed the lower court to compel arbitration. The decision reinforces that courts must enforce clear delegation clauses under the Federal Arbitration Act even when disputing the applicability of the agreement to specific claims.
Topics
Practice areas
Questions Presented
- Whether the district court erred by deciding the arbitrability of the dispute despite a clear delegation clause
- Whether the arbitration agreements in the 2002 and 2003 BSAs delegate arbitrability questions to an arbitrator
- Whether the district court should have compelled arbitration of the threshold arbitrability question
Holdings
- The district court erred; when the parties’ contract delegates arbitrability to an arbitrator, the court possesses no power to decide the arbitrability issue and must compel arbitration.
Key quotations
“When the parties’ contract delegates the arbitrability question to an arbitrator, a court possesses no power to decide the arbitrability issue.” (at 9)
“The district court erred, therefore, when it proceeded to decide for itself whether the arbitration provisions of the 2002 or 2003 BSAs apply to any claims in this case.” (at 13)
Factual background
Berkeley County School District sued HUB and related entities over insurance‑related claims. The parties had brokerage service agreements (BSAs) dated 2002‑2011 containing arbitration clauses that incorporated the AAA commercial rules. The dispute centered on whether those clauses delegated arbitrability questions to an arbitrator.
Procedural history
The district court denied the defendants' motions to compel arbitration three times. The Fourth Circuit reversed the third denial, vacated the prior denials, and remanded with instructions to compel arbitration.
Remand instructions
Remand to the district court with instructions to compel arbitration of the threshold arbitrability question under the 2002 and 2003 BSAs.