Arbitration Might be Better Than Litigation, If It Weren't For All the Litigation Surrounding Arbitration

Qualcomm Incorporated V. Nokia Corporation, [06-1317] (Fed. Cir. 2006)[PROST, Newman, Schall] The Federal Circuit vacated the district court’s decision denying Nokia’s motion to stay the litigation pending arbitration between the parties.
SIGNIFICANCE: When the parties incorporate the AAA Rules, they are vesting primary authority to determinarbitrabilityty with the arbitrator.
BRIEF: At issue, ironically is who should decide the arbritrability of a dispute the district court or the arbitrator. To stay the litigation, the district court must be "satisfied" of the arbitrability of an issue pursuant to section 3 of the FAA. To make this decision the district court should first inquire as to who has the primary power to decide arbitrability under the parties' agreement. If the court concludes that the parties did not clearly and unmistakably intend to delegate arbitrability decisions to an arbitrator, the general rule that the "question of arbitrability . . . is . . . for judicial determination" applies and the court should undertake a full arbitrability inquiry in order to be "satisfied" that the issue involved is referable to arbitration. If, however, the court concludes that the parties to the agreement did clearly and unmistakably intend to delegate the power to decide arbitrability to an arbitrator, then the court should perform a second, more limited inquiry to determine whether the assertion of arbitrability is "wholly groundless."
The Federal Circuit concluded that the parties did intend to give primary power to determine arbitrability to the arbitrator, and thus the district court should have, but did not, consider whether the assertion of arbitrability was "wholly groundless." Thus the Federal Circuit remanded the case for this determination.