Prawfsblawg: Allocating Power Between Courts and Arbitrators – and Why Scholars of Federal Courts Should Care

Aaron Bruhl (pictured left) Professor at the University of Houston Law Center, has posted this interesting commentary at the Prawfsblawg yesterday about Rent-A-Center v. Jackson, the upcoming U.S. Supreme Court case about whether courts or arbitrators should decide the issue of unconscionability. (previously discussed here). Here is an excerpt:

The Federal Arbitration Act makes arbitration agreements as enforceable as all other contracts. In April, the Supreme Court will hear argument in Rent-A-Center v. Jackson, which concerns the question of who – court or arbitrator – decides a claim that an arbitration agreement is unconscionable and thus unenforceable. In this case, the arbitration agreement itself assigns (or at least purports to assign) that power to the arbitrator. The Ninth Circuit, however, held that unconscionability was an issue for the court. This case holds obvious interest for those who study ADR, consumer law (most consumer contracts have arbitration clauses, whether or not you know it), and employment law (this case is an employment discrimination suit). What I hope to show you is that it is just as interesting for those who study federal courts and judicial politics. Beneath the surface, the case is, in a sense, more Bush v. Gore than Williams v. Walker-Thomas Furniture.

To see why the case is so intriguing, one has to appreciate what one might call its strategic context. The Supreme Court is strongly pro-arbitration. Some state and federal courts are not quite so enthusiastic, at least when it comes to consumer and employment contexts with their largely adhesionary contracts. (Please note that I’m not discussing whether the Court’s decisions in this area, and its broader pro-arbitration stance, reflect sound interpretations of the relevant statute, good policy, etc.) Over the course of the last couple of decades the Supreme Court has shut off most avenues for challenging arbitration agreements at the wholesale level – state law cannot declare particular fields like consumer transactions off limits from arbitration, courts cannot deem arbitration per se violative of public policy, etc. All such arguments are preempted by the Federal Arbitration Act. What remains, though, is the possibility for retail-level challenges to particular arbitration clauses under section 2 of the Act, which allows ordinary contract defenses that would invalidate any contract. So arbitration itself cannot be questioned, but a particular arbitration clause might be invalidated as the product of duress, fraud, etc.

In the last few years, as other routes for challenging arbitration have been closed off, unconscionability has become a surprisingly common and surprisingly effective way of attacking arbitration agreements. The challenges do not attack arbitration per se – federal law favors arbitration – but instead target various aspects of a particular arbitration process: a given clause might forbid class arbitrations, bar punitive damages or otherwise restrict remedies, sharply curtail discovery, require a consumer to pay hefty arbitrator’s fees, etc. There have been many cases on these topics in recent years, and a good number of them sustain the challenge to the arbitration clause.

Read the entire post here.