Rent-an-Arbitrator

by Deepak Gupta

It's been a pretty busy week for arbitration issues at the Supreme Court. Yesterday, the Court heard oral argument in Rent-a-Center v. Jackson, a potentially very important arbitration case that I've discussed here before. (Disclosure: We're co-counsel for respondents, along with Public Justice and the Hardy Law Firm of Reno, Nevada.)

The question in Rent-a-Center is whether companies that draft forced arbitration clauses can delegate unconscionability challenges -- challenges by consumers and workers to the fairness of the arbitration clause itself -- to the arbitrator rather than the court. If the Supreme Court answers yes, it could mean that the company's hand-picked arbitrator gets to decide whether it's fair for the company to hand pick the arbitrator. You can read the transcript here. All of the briefs are available here.

Justice Scalia's questions yesterday showed that he has little empathy for those who find themselves in the position of signing extremely one-sided arbitration agreements because of unequal bargaining power, often as a precondition of employment or the receipt of essential goods and services. Here's what he said:

JUSTICE SCALIA: you can be a stupid person who voluntarily signs an unconscionable contract. Now, the courts may protect you because you are stupid, but you haven't been coerced.

That's an actual quotation from the argument, not a caricature. I suppose this means that, in Justice Scalia's world, a person who takes a low-wage job as a dishwasher, say, or as a line worker at a chicken processing plant, because it's the only job he or she can get, is simply "stupid" if they sign an employment contract containing various unconscionably one-sided terms.

Thankfully, several other Justices (including Justices Breyer, Sotomayor, Stevens, Ginsburg, and Kennedy, and possibly even Chief Justice Roberts) seemed less sanguine about the prospects of leaving all unconscionability challenges to the arbitrator. Much of the questioning focused on whether the challenge to be decided goes to the whole agreement or only to specific provisions in the agreement, and there was much confusion on that point throughout the argument. I wonder whether these questions stem more from the Justices' unfamiliarity with how state-law unconscionability doctrine works than anything else. Perhaps an amicus brief of contract-law professors could have cleared things up. The reality is that there's not much distinction between the two types of challenges; you challenge the whole clause as unconscionable and it's up to the court whether to sever the bad provisions or not (if they are in fact logically severable).

Here's a sampling of some of the more interesting coverage of the case:

  • Tony Mauro's report on the argument at the National Law Journal quotes my prediction that this will be a "watershed" case if the badguys win, and highlights two amicus briefs that were mentioned during the argument, including the brief of prominent professional arbitrators supporting Mr. Jackson.
  • Marcia Coyle, also of the NLJ, situates Rent-a-Center among the end-of-term blockbuster cases.
  • Dahlia Lithwick at Slate offers her as-always colorful commentary on the argument (including some links to interesting articles on the debate over forced arbitration), but I think she may be misreading the Justices' votes based on some of yesterday's advocacy missteps. My reading of the argument is that the case is actually much closer that she suggests.
  • Elizabeth Wydra of the Constitutional Accountability Center has an excellent blog post on the arguments. She focuses on the same quotation from Justice Scalia that I mention above. She concludes: "If ever there were an oral argument that drove home the need to have a Supreme Court that understands, as President Obama and others have put it lately, how the law affects 'ordinary Americans'—this was it.
  • Laurel Newby focuses on the Justice Breyer's odd "Joe Bananas" hypothetical.
  • The ContractsProf Blog has had running coverage of the case over the past several weeks, including an online roundtable of scholars.
  • Public Citizen President Rob Weissman had this op-ed on the case, which has run in several newspapers. At the Huffington Post, similar sentiments were expressed by Nan Aron of the Alliance for Justice and Anthony Tarricone of AAJ.
  • Stanford law student Aaron Tang at SCOTUSblog offered this preview of the parties' arguments.