Rent-A-Center, West, Inc. v. Jackson
2010 U.S. LEXIS 4981, 177 L. Ed. 2d 403, 561 U.S. 63 (2010)
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Rule of Law:
Under the Federal Arbitration Act, a provision within an arbitration agreement that delegates the authority to resolve challenges to the agreement's enforceability to an arbitrator is severable and must be enforced by a federal court unless the party opposing arbitration specifically challenges 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 covered all past, present, or future disputes arising from Jackson's employment, including claims for discrimination.
- The Agreement contained a specific provision, known as a delegation provision, stating that the Arbitrator, not a court, has the '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'.
- Jackson's employment with Rent-A-Center eventually ended.
Procedural Posture:
- Antonio Jackson filed an employment discrimination lawsuit against Rent-A-Center, West, Inc. in the U.S. District Court for the District of Nevada.
- Rent-A-Center filed a motion to dismiss and compel arbitration pursuant to the parties' Mutual Agreement to Arbitrate Claims.
- Jackson opposed the motion, claiming the entire arbitration agreement was unconscionable under Nevada law.
- The District Court (trial court) granted Rent-A-Center's motion, finding that the agreement 'clearly and unmistakably' delegated the question of enforceability to the arbitrator.
- Jackson, as appellant, appealed to the U.S. Court of Appeals for the Ninth Circuit.
- The Ninth Circuit (intermediate appellate court) reversed the District Court, holding that the threshold question of unconscionability is for the court to decide.
- Rent-A-Center, as petitioner, successfully petitioned the U.S. Supreme Court for a writ of certiorari.
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Issue:
Does a district court have the authority under the Federal Arbitration Act to decide a claim that an arbitration agreement is unconscionable, where the agreement contains a provision that delegates the resolution of enforceability disputes to an arbitrator, and the party challenges the agreement as a whole but not the delegation provision specifically?
Opinions:
Majority - Justice Scalia
No. A district court does not have the authority to decide the unconscionability claim when the challenge is to the arbitration agreement as a whole and not specifically to the delegation provision. The Federal Arbitration Act (FAA) establishes that arbitration is a matter of contract and its provisions must be treated as severable. The delegation provision is an additional, antecedent agreement to arbitrate threshold 'gateway' issues of arbitrability, and it is severable from the remainder of the arbitration agreement. Citing the severability doctrine from Prima Paint Corp. v. Flood & Conklin Mfg. Co., the court must enforce this specific 'agreement to arbitrate' unless a party challenges its validity under § 2 of the FAA. Jackson's claims of unconscionability—regarding one-sided coverage, fee-splitting, and discovery limits—were directed at the entire arbitration agreement, not at the specific delegation provision. Because Jackson did not specifically challenge the validity of the delegation provision, the court must treat it as valid and enforce it, leaving the challenge to the overall agreement's enforceability for the arbitrator to decide.
Dissenting - Justice Stevens
Yes. A district court should decide the unconscionability claim before compelling arbitration. The majority unwisely extends the 'fantastic' severability rule of Prima Paint to create infinite layers of severability, like 'Russian nesting dolls'. A claim that a standalone arbitration agreement is unconscionable is a challenge to the 'making' of the agreement itself, which Prima Paint reserves for the court. Furthermore, a claim of unconscionability fundamentally challenges whether a party genuinely assented to the contract's terms. Therefore, a court must first resolve the unconscionability claim to determine if there was the 'clear and unmistakable' intent to delegate arbitrability questions to an arbitrator, as required by First Options of Chicago, Inc. v. Kaplan. Otherwise, the FAA's provision allowing courts to hear contract revocation defenses would be rendered meaningless.
Analysis:
This decision significantly strengthens the enforceability of arbitration agreements by applying the severability doctrine to delegation clauses within them. It establishes a heightened pleading standard, requiring parties who wish to have a court decide the enforceability of an arbitration agreement to specifically attack the delegation clause itself, rather than making a general challenge to the entire agreement. This makes it substantially more difficult for consumers and employees to avoid arbitration, as their general claims of unconscionability or fraud will now be decided by the arbitrator whose authority they are trying to escape. The ruling reinforces the federal policy favoring arbitration and limits judicial intervention in disputes governed by agreements containing such delegation provisions.
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