USSC rules in arbitration of arbitration disputes

By Steve Korris | Jul 23, 2010


WASHINGTON – When an agreement to arbitrate disputes contains an agreement to arbitrate disputes over arbitration, an arbitrator and not a judge must determine the validity of the entire agreement, the U.S. Supreme Court ruled in June.

Five Justices decided Rent-A-Center can enforce a provision in an employment agreement delegating resolution of arbitration disputes to arbitration.

Former employee Antonio Jackson wanted U.S. District Judge Larry Hicks of Nevada to hear his claim that he signed an unconscionable agreement.

Hicks ordered arbitration in 2007, but Ninth Circuit appeals judges in San Francisco reversed him last year.

In reversing the Ninth Circuit, Justice Antonin Scalia wrote that a court might have considered a challenge to the delegation provision, if Jackson had challenged it.

"Jackson, however, did not make any arguments specific to the delegation provision," he wrote.

"In his brief to this Court he raised a challenge to the delegation provision for the first time, but that is too late and will not be considered," he wrote.

For four dissenters, Justice John Stevens wrote that a challenge to the contract is necessarily a challenge to the provision.

"I do not think an agreement to arbitrate can ever manifest a clear and unmistakable intent to arbitrate its own validity," he wrote.

The decision carries greater weight than the narrow circumstances suggest.

Stevens wrote that it "lies at a seeming crossroads in our arbitration jurisprudence."

At least one employment case took a sharp turn at the crossroads the next day.

At federal court in Bluefield, W.Va., former Long John Silver's restaurant worker Angela Dyson moved to compel arbitration of a sexual harassment claim.

Her lawyer, Kathryn Reed Bayless of Princeton, W.Va., conceded that the validity of an arbitration agreement is subject to arbitration.

Senior District Judge David Faber granted the motion on July 7.

In the Supreme Court case, Rent-A-Center hired Jackson in 2003.

He sued in 2007, alleging racial discrimination and retaliation.

He claimed Rent-A-Center passed him over for promotions and terminated him.

Rent-A-Center moved to compel arbitration, and Hicks granted it.

"When there is an agreement to arbitrate, the court cannot hear challenges to the contract as a whole," Hicks wrote.

He found an apparent lack of evidence suggesting an unconscionable agreement.

Ninth Circuit judges Sidney Thomas and Thomas Nelson reversed Hicks, finding he didn't address all Jackson's arguments on unconscionability.

Thomas wrote that when a party asserts he could not meaningfully assent to an agreement, "the threshold question of unconscionability is for the court."

Dissenting Judge Cynthia Hall wrote, "This case concerns an arbitration agreement more favorable to the employee than most this court sees."

"Jackson's allegations of unconscionability are also vaguer than most," she wrote.

At the Supreme Court, Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas, and Joseph Alito sided with Scalia.

Scalia wrote that none of Jackson's unconscionability claims were specific to the delegation provision.

Dissenter Stevens asked, "Does the arbitration agreement at issue clearly and unmistakably evince petitioner's and respondent's intent to submit questions of arbitrability to an arbitrator?"

"The answer to that question is no," he wrote. "The fact that the agreement's delegation provision suggests assent is beside the point, because the gravamen of respondent's claims is that he never consented to the terms in his agreement."

Justices Ruth Ginsburg, Stephen Breyer and Sonya Sotomayor joined the dissent.

Ian Silverberg of Reno represented Jackson.

Suellen Fulstone of Reno represented Rent-A-Center at district court, and Michael Garone of Portland, Oregon, represented it on appeal.

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