Who Determines Arbitrability?

Who, in Minnesota or elsewhere, determines whether a dispute is arbitrable, and which provisions in a contract are subject to arbitration?

In the case of Glacier Park Iron Ore Properties, LLC v. United States Steel Corporation (No. A19-1923 (Minn. App. 7/27/20), the Minnesota Court of Appeals recently upheld a District Court decision concluding that current laws “clearly establish that a court, not arbitrators, must decide whether a particular issue is arbitrable, unless the parties have agreed otherwise.  (emphasis added)

The arbitration provision in question also described four clauses which did not include plaintiff’s breach-of-fiduciary-duty claim, and as such, the Appellate Court concurred with the District Court’s decision.

These issues, which are dividing courts of appeals and state high courts across the U.S, will ultimately be addressed by The United States Supreme Court, which agreed on June 15, 2020 to take on two relevant issues – who ultimately determines arbitrability of a dispute and which claims are expressly carved out of the arbitration agreement. 

This highlights the importance of careful negotiation and the crafting of agreements which clearly define whether an arbitrator or court should determine the arbitrability of disputes, and which conflicts are subject to arbitration. In addition, transactional lawyers and litigators should both closely monitor developing case law, as well as the pending Supreme Court decision, in order to best represent the interests of their clients and maximize the effectiveness of the arbitration process.