Today’s “Highlights” has a variety of topics. So, I’ve inserted topic headings to guide you through.  Take a specific look at Archie, though, if you want a template for thinking through the analysis of arbitral enforceability  

Delegation as to Non-Signatories – Sheet Metal Workers Loc. No. 20 Welfare v. CVS Pharm., Inc., 2026 U.S. Dist. LEXIS 21975 (D.R.I. Feb. 3, 2026)(McConnell, J)

In Sheet Metal Workers, the Court addresses a consolidated class action that demonstrates the transformative impact of the First Circuit’s decision in Morales-Posada v. Cultural Care, Inc., 141 F. 4^th 301 (1st Cir. 2025). This case centers on whether CVS, a non-party to contracts between third-party payors (TPPs) and pharmacy benefit managers (PBMs), can invoke delegation clauses in the TPP-PBM arbitration agreements to compel arbitration.

Morales-Posada clarified the legal landscape in the First Circuit by establishing that a nonsignatory’s ability to invoke an arbitration agreement depends on the specific state law governing the underlying contract. This required Judge McConnell to reconsider his prior arbitration orders in this case, in which he held that the question of arbitrability of all claims by non-signatories was delegated to the arbitrator.  The First Circuit decision, Chief Judge McConnell opines, clarified that district courts must apply the applicable state’s test as to non-signatory delegation; only if a nonsignatory satisfies that state’s test may it invoke the arbitration clause, including any delegation provision.

Applying this framework, the court finds that for jurisdictions applying “rely on” or “concerted misconduct” tests, CVS satisfies the threshold to invoke both the arbitration provisions and delegation clauses, sending all arbitrability questions to the arbitrator. These claims are dismissed. However, for six jurisdictions applying the stricter “detrimental reliance” test (Colorado, Illinois, Indiana, New Jersey, Oregon, and Wisconsin), CVS cannot satisfy the state law requirements. Because CVS cannot invoke the arbitration clause itself under these states’ laws, the court never reaches the delegation provision. These claims proceed in federal court.

The decision establishes that for nonsignatories, delegation requires that counsel and the court undertake the potentially tedious process of looking at all relevant state laws to determine the right of a third party, under a variety of standards, to enforce the arbitration agreement.

Walking Through the Arbitration Analysis – Archie v. Crawford & Co., 2026 U.S. Dist. LEXIS 20819 (E.D. Tex. Feb. 2, 2026)(Mazzant, J.)

This FLSA overtime opinion provides a detailed roadmap for analyzing motions to compel arbitration involving both signatory and non-signatory plaintiffs.

Step One: Contract Formation. The court begins by applying Texas law to determine whether valid arbitration agreements exist with the signatory plaintiffs. Finding valid agreements, the analysis proceeds to the next step.[1]

Step Two: Delegation Analysis. The court addresses the plaintiffs’ unconscionability challenge by examining whether the parties delegated such gateway questions to the arbitrator. Under Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63 (2019), when parties clearly delegate arbitrability questions, courts must honor that delegation. The agreement incorporates AAA rules and contains explicit delegation language. Plaintiffs’ unconscionability challenge must be submitted to the arbitrator, as the parties do not challenge the delegation clause specifically, but raise that claim as to the contract as a whole.

Step Three: Stay Analysis for Parties Not Bound by the Arbitration Clause. The court applies the Fifth Circuit’s three-factor test from Waste Management, Inc. v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d 339 (5th Cir. 2004) to determine whether the case should be stayed as to those not bound by the arbitration agreement.  First, do the arbitrated and litigated disputes share the same operative facts? Second, are the claims in the two forums inherently inseparable? Third, will litigation of those claims critically impact arbitration? While the first factor favors a stay, the court finds the second and third weigh against it. Following Vallejo v. Garda CL Southwest., Inc.,  2013 U.S. Dist. LEXIS 167740 (S.D. Tex. Nov. 26, 2013), and Matthews v. Priority Energy Services., LLC, 2016 U.S. Dist. LEXIS 180649 (E.D. Tex. Dec. 2, 2016),  the court holds that because each plaintiff seeks recovery for their own violations, non-signatories’ FLSA claims are not inherently inseparable from those of the arbitrating parties.  Therefore, Judge Mazzant stays the case as to signatory plaintiffs while allowing non-signatories to proceed.

Who determines whether a contract is illegal – Steven Huynh v. Boom Shakalaka, Inc., 2026 U.S. Dist. LEXIS 21628 (C.D. Cal. Jan. 28, 2026) (Vera, J.)[2]

In this daily fantasy sports case, plaintiff argues the entire contract is void because it provided access to an illegal gambling platform under California law, arguably rendering both the contract and arbitration clause unenforceable. The court applies Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), and holds that challenges to contract illegality affect “the contract as a whole” rather than the arbitration provision specifically. Under the Supreme Court’s framework, enforceability questions, the court holds, must be decided by the arbitrator in the first instance when, as the court finds here, a valid delegation provision exists. The court distinguishes formation issues (which courts decide) from enforceability issues (which arbitrators decide), finding the illegality challenge falls in the latter category.

Incorporating the AAA’s rules satisfies the FAA requirement that the parties’ arbitration agreement provide that a court may confirm the award – Scanlon v. VerAleo, LLC, 2026 U.S. Dist. LEXIS 21184 (D.D.C. Feb. 2, 2026) (Sooknanan, J.).

Section 9 of the Federal Arbitration Act provides that parties may seek confirmation of an arbitration award where, inter alia, they have “agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration. . . .”   After losing in arbitration, VerAleo moved to dismiss the petition to confirm, arguing the parties’ arbitration clause does not expressly provide for judicial confirmation. The court disagrees, holding that agreeing to AAA arbitration inherently incorporates AAA rules, including Rule 54(c) which provides that the parties consent to judicial confirmation. Citing the Second Circuit’s reasoning in Idea Nuova, Inc. v. GM Licensing Group, Inc., 617 F.3d 177 (2d Cir. 2010), the court opines that “AAA arbitration is arbitration conducted according to AAA rules.” Judge Sooknanan closes her opinion by throwing a little shade on the Respondent. “The Court strongly suspects that had VerAleo initiated an arbitration against the Petitioners and prevailed, its position would be that the award is confirmable.  Although VerAleo may be unhappy that it lost in arbitration, that is not a reason for a different result.”

The No Surprises Act does not provide for confirmation of an award from the IDR process – Worldwide Aircraft Servs., Inc. v. Aetna Life Ins. Co., 2026 U.S. Dist. LEXIS 22848 (M.D. Fla. Feb. 4, 2026) (Mizelle, J.)

Aetna denied a portion of an air ambulance claim by Petitioner, allowing only $165,517.94 of a $235,782 charge.  Worldwide won an IDR proceeding under the No Surprise Act and, here, seeks to confirm that arbitration. The court holds that the NSA’s independent dispute resolution (IDR) process does not create a private right of action to confirm arbitration awards. Following the Fifth Circuit’s decision in Guardian Flight, L.L.C. v. Health Care Services Corp., 140 F.4th 271 (5th Cir. 2025), the court holds that the NSA contains no express right of action to enforce or confirm IDR awards. The statute, Judge Mizelle holds, expressly bars judicial review of IDR awards “except in a case described in” FAA § 10(a), which addresses only vacatur for fraud or arbitrator misconduct—not confirmation. The court finds this language dispositive; if Congress wanted to incorporate FAA § 9 (which provides for confirmation), it could have done so explicitly as it has in other statutes. Instead, Congress chose to reference only § 10(a)’s limited vacatur provisions. The term “judicial review” is broad enough to include confirmation orders, and the NSA’s express prohibition on review except for § 10(a) purposes precludes confirmation petitions. Additionally, the petition fails under § 9 of the FAA because the parties have no agreement providing for judicial confirmation – a specific requirement for FAA jurisdiction. The court dismisses with prejudice, holding that IDR awards under the NSA are enforceable only through administrative penalties, not private judicial actions. One might cynically wonder about what drove Congress’ decision to foreclose medical providers from an easy way of getting payment on their IDR awards or whether this is just careless statutory drafting.  The case is also a reminder to counsel drafting an arbitration clause which will not be institution-based that it is crucial to include a sentence allowing a court to confirm the award.

Have a good weekend – and, go Seahawks.  As a disgruntled Jets follower (is there any other kind?), I have to root for their cast-off Sam Darnold to, once again, make Big Green look bad.

David A. Reif, FCIArb
Reif ADR
Dreif@reifadr.com

[1] The parties agreed that the FAA applies to the transaction, so the court skipped that analysis.

[2] Even if there weren’t any value to the case, I would be including it just for the defendant’s name. .