Tuesday, January 19, 2010

Arbitrability of Arbitrability Determination Under Arbitration Act Hits SCOTUS

What? That title's not clear enough for you? Let me try again, the Supreme Court will determine whether an arbitration clause requiring an arbitrator to determine whether an arbitration agreement is unconscionable is enforceable. OK, still a little confusing.

The case is Rent-a-Center v. Jackson. Let's take it step by step:
  1. An employee filed a racial discrimination and retaliation claim against his employer;
  2. As a condition of employment, the employee signed an arbitration agreement that provided that discrimination claims would be settled through arbitration;
  3. The agreement also specifically provided that
    "The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable;"
  4. The employee argued in Federal District Court that the agreement was unconscionable (which would render it unenforceable);
  5. The District Court dismissed the employee's case and compelled arbitration without determining whether the agreement was unconscionable;
  6. The Ninth Circuit reversed (opinion .pdf), holding that
    "a court must decide the threshold question of arbitrability when a plaintiff challenges an arbitration agreement as unconscionable;"
  7. The Supreme Court granted certiorari (decided they'd hear the case).
Per SCOTUSBlog, the issue is stated as
"Whether the district court is in all cases required to determine claims that an arbitration agreement subject to the Federal Arbitration Act ('FAA') is unconscionable, even when the parties to the contract have clearly and unmistakably assigned this “gateway” issue to the arbitrator for decision."
I'll let you know when they issue an opinion!

BREAKING NEWS: Ross Runkel at LawMemo reports that the Supreme Court has fast tracked this case for a hearing this term, possibly in April.