Rent-A-Center v. Jackson
(2010)
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Rule of Law:
Under the Federal Arbitration Act, an agreement to arbitrate that contains a provision delegating the authority to determine the agreement's enforceability to an arbitrator is valid and must be enforced, unless a party specifically challenges the validity of the delegation provision itself.
Facts:
- On February 24, 2003, Antonio Jackson signed a Mutual Agreement to Arbitrate Claims (Agreement) as a condition of his employment with Rent-A-Center, West, Inc.
- The Agreement provided for the arbitration of all disputes arising out of Jackson's employment, including claims for discrimination.
- The Agreement also contained a 'delegation provision' stating that the Arbitrator, and not any court, has 'exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement.'
- This delegation provision explicitly included 'any claim that all or any part of this Agreement is void or voidable.'
- After his employment with Rent-A-Center ended, Jackson sought to bring an employment-discrimination claim against the company.
Procedural Posture:
- Antonio Jackson filed an employment-discrimination suit against Rent-A-Center, West, Inc. in the U.S. District Court for the District of Nevada (a federal trial court).
- Rent-A-Center filed a motion to dismiss and compel arbitration, citing the Mutual Agreement to Arbitrate Claims signed by Jackson.
- Jackson opposed the motion, arguing that the entire arbitration agreement was unconscionable under Nevada law.
- The District Court granted Rent-A-Center’s motion, holding that the agreement's delegation provision gave the arbitrator exclusive authority to decide the unconscionability issue.
- Jackson, as appellant, appealed to the U.S. Court of Appeals for the Ninth Circuit.
- A divided panel of the Ninth Circuit reversed, holding that the threshold question of unconscionability is for the court to decide, not the arbitrator.
- The U.S. Supreme Court granted certiorari to review the decision of the Ninth Circuit.
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Issue:
Under the Federal Arbitration Act, may a district court decide a claim that an arbitration agreement is unconscionable if the agreement contains a provision that gives the arbitrator the exclusive authority to resolve such enforceability disputes?
Opinions:
Majority - Justice Scalia
No. A district court may not decide the unconscionability of an arbitration agreement if that agreement contains a valid delegation provision giving the arbitrator exclusive authority to decide the issue, unless the party specifically challenges the delegation provision itself. The Federal Arbitration Act's severability principle treats the delegation provision as a distinct, antecedent agreement to arbitrate threshold issues, separate from the larger arbitration agreement. A party's challenge to the validity of the contract as a whole, or even the arbitration agreement as a whole, does not suffice to prevent a court from enforcing a specific delegation provision. Here, Jackson challenged the entire arbitration agreement as unconscionable but failed to lodge any specific challenge against the delegation provision itself. Therefore, under the precedent of Prima Paint, the delegation provision is severable and must be enforced, requiring that his unconscionability claim be decided by the arbitrator.
Dissenting - Justice Stevens
Yes. A court, not an arbitrator, should decide whether an arbitration agreement is unconscionable, even when the agreement contains a delegation clause. A claim that an arbitration agreement is unconscionable is a claim that there was no meaningful assent to its terms, which undermines the 'clear and unmistakable' intent required to delegate questions of arbitrability in the first place. The majority improperly extends the severability doctrine from Prima Paint to create infinite layers of severability, like 'Russian nesting dolls.' When, as here, a party makes a good-faith challenge to the validity of the entire stand-alone arbitration agreement, that issue must be resolved by a court before it can compel arbitration of any issue, including the issue of arbitrability.
Analysis:
This decision significantly strengthens the enforceability of arbitration agreements by embracing a doctrine of 'super-severability.' By treating a delegation clause as a separate mini-contract within the larger arbitration agreement, the Court makes it substantially harder for parties to have a court decide gateway questions of validity like unconscionability. The ruling establishes a high pleading standard, requiring litigants to specifically isolate and challenge the delegation provision itself, rather than attacking the arbitration agreement as a whole. This has the practical effect of shifting many fundamental contract-formation disputes from courts to arbitrators, reinforcing the national policy favoring arbitration.
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