We are proud to be one of the rare law offices in the State of Nevada to have practiced before the United States Supreme Court. On April 26, 2010, this office presented oral arguments before the United States Supreme Court in the case of the case of Rent-A-Center v. Jackson, 130 S.Ct. 2772 (2010).
This office represented Antonio Jackson, filing a lawsuit on his behalf in Federal court against his employer, Rent-A-Center, alleging racial discrimination and retaliation. As a condition of his employment, Mr. Jackson had signed a Mutual Agreement to Arbitrate Claims (“Arbitration Agreement”), which required arbitration for all disputes arising out of Mr. Jackson’s employment. The Arbitration Agreement also included a clause (the “delegation clause”) specifically providing that the arbitrator, not a court, had the exclusive authority to resolve any dispute with respect to the enforceability of “all or any part of” the Arbitration Agreement.
Rent-A-Center asked the Federal Court to dismiss the lawsuit and compel arbitration based on the Arbitration Agreement. Mr. Jackson argued that the Arbitration Agreement was unenforceable because it was unconscionable under Nevada Law. The Federal Court interpreted Mr. Jackson’s argument as a challenge to the entire agreement and, consistent with Supreme Court precedent, ruled that those types of challenges were to be decided by the arbitrator, thus siding with Rent-A-Center and dismissing the case.
The Ninth Circuit Court of Appeals reversed the Federal Court’s decision, however, the Ninth Circuit ruled that when the person opposing arbitration claims that he or she could not have meaningfully consented to the agreement, the question of whether the original contract was fair must be decided by the court. The case was then appealed to the United States Supreme Court.
In a very controversial split decision, the United States Supreme Court decided that the arbitrator – not the court — has the exclusive authority to decide the “gateway” question of whether an arbitration agreement is enforceable, unless the delegation provision in that agreement is specifically challenged. In this case, Mr. Jackson was discriminated against on the basis of race and challenged his employment-related arbitration agreement on the grounds that he could not have meaningfully consented to it. The United States Supreme Court held that Mr. Jackson failed to specifically challenge the provision within the agreement requiring that challenges to the validity of the agreement be decided by the arbitrator. As a result, the United States Supreme Court viewed Mr. Jackson’s claim as a challenge to the whole contract, which pursuant to the contract and judicial precedent, had to be decided by the arbitrator.
The practical effect of the Rent-A-Center decision is that arbitration agreements can legally delegate gateway enforceability questions to an arbitrator. Today, more and more businesses include arbitration provisions in their agreements with customers, employees, vendors, and more. Essentially, the Rent-A-Center decision serves to encourage businesses to specifically include in their arbitration agreements a provision that specifically delegates all enforceability questions to the arbitrator.
For those looking to challenge an arbitration provision, this decision acts as a warning that any such challenge should be very carefully crafted. It is no longer enough to claim that the arbitration agreement is unenforceable. If the agreement contains a specific delegation provision, that provision must be explicitly and separately challenged. This creates an uphill battle for those seeking to make such challenges, because it effectively requires the challenging party to prove that permitting arbitrators to decide whether arbitration agreement provisions are unconscionable or otherwise unenforceable is unfair to the challenging party. Absent evidence of an inherent bias on the part of the arbitrator, this might be very difficult to prove, since professional arbitrators are generally considered to be unbiased objective third parties.
Read the opinion here.