Excluding injunctive relief from binding arbitration: you might be doing it wrong

15 Oct 22

In binding arbitration clauses, exceptions to the duty to arbitrate for injunctive relief claims are common, especially in confidentiality and technology license agreements. The intention is to ensure that the parties are free to pursue claims for emergency relief in court, notwithstanding that all other claims must be resolved via arbitration.

All too many arbitration clauses, however, fail to articulate the injunctive relief bypass in a way that would allow the parties to actually bypass arbitration and proceed directly to court, given that rules of arbitration universally vest the arbitrator with the power to determine the scope of arbitrability as a threshold matter.

Having to explain to your client that an emergency action to stop threatened misappropriation of trade secrets must be delayed, so that an arbitrator can first decide whether that's appropriate for a court to decide, is not where counsel wants to be.

The lesson of a US Supreme Court case, Henry Schein Inc. v. Archer White Sales, Inc. (US S. Ct. 2018), is that if the intention is to preserve the ability to go directly to court to pursue injunctive relief, without the need to first secure a non-arbitrability ruling from the arbitrator, the parties must make that intention clear.

The lawyers of Redline have exchanged clause work product to accomplish this critical objective. Join the discussion here.

(The intended audience for this post is licensed and practicing lawyers, not laypersons seeking legal advice for their situation. If you are not a lawyer, hire one before using or relying on any information contained here.)