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Professor Aaron Bruhl’s Analysis of Rent-a-Center, West v. Jackson (No. 09-497)

February 24th, 2010 Arbitrability, Authority of Arbitrators, United States Court of Appeals for the Ninth Circuit, United States Supreme Court No Comments »

Professor Aaron Bruhl, an Assistant Professor of Law at the University of Houston Law Center, recently published in PrawfsBlawg a thought-provoking and insightful article on Rent-a-Center, West v. Jackson (No. 09-497).  (Post here)  Regular readers no doubt remember that the United States Supreme Court recently granted certiorari in Rent-a-Center, and will be hearing argument on April 26, 2010.  (See our prior posts here and here).

Professor Bruhl points out that, in addition to being of interest to those practicing employment, consumer or plain old arbitration law, Rent-a-Center “is just as interesting for those who study federal courts and judicial politics.”   He reminds us that one of the few remaining “safety valves” for challenging arbitration agreements is unconscionability:     

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.

He notes that the United States Supreme Court has consistently denied certiorari in cases where lower courts have invalidated arbitration agreements on state-law unconscionability grounds and the question is whether the invalidation offended the Federal Arbitration Act.  He suspects “the Court has avoided these cases because it feels ill-equipped to resolve whether a lower court is discriminating against arbitration:” 

First, unconscionability analysis often requires a fact-intensive inquiry.  Second, and more important, determining whether a lower court is using unconscionability differently when it comes to arbitration requires an engagement with the details of state law and a comparison of lots of prior unconscionability cases.  Third, and maybe most important of all, a holding that the lower court is applying unconscionability unfairly, especially when the lower court says it is applying the same analysis it applies elsewhere, carries with it some serious expressive baggage.  Essentially, it requires the Supreme Court to say that the lower court is being dishonest.  That happens, but when it does so, it is a big deal (think cases like Bush v. Gore or the cases from the 50s/60s rejecting supposed procedural defaults in the state courts).

 But the Court granted certiorari in Rent-a-Center, a case involving not the merits of a state law unconscionability challenge, but the question who gets to decide unconscionability when the parties clearly and unmistakably submit it to the arbitrators.  Professor Bruhl believes certiorari was granted because addressing the “who” question, and resolving it in favor of arbitration, will cleanly dispose of the unconscionability problem from the standpoint of the federal courts, at least in cases where the parties clearly and unmistakably agreed to arbitrate arbitrability: 

That doesn’t require diving into the weeds of state law and the record. If the Court assigns the issue to the arbitrator, that will be a very easy rule to monitor for compliance (unlike deciding whether the lower court applied unconscionability correctly).  All of those unconscionability cases out there will instantly become not wrong but irrelevant – because courts won’t be deciding the issue anymore.  And it won’t matter whether some lower courts can be trusted to apply unconscionability correctly, because they will be cut out of the picture. Continue Reading »

SCOTUS Oral Argument in Jackson v. Rent-a-Center West, Inc. Set for April 26, 2010

February 17th, 2010 Arbitrability, Authority of Arbitrators, Practice and Procedure, United States Court of Appeals for the Ninth Circuit, United States Supreme Court No Comments »

The United States Supreme Court has set for April 26, 2010 oral argument in Jackson v. Rent-a-Center West, Inc., ___ F.3d ___, slip op. (9th Cir. Sept. 9, 2009), petition for cert. granted  Jan. 15, 2010 (No. 09-497) (oral argument calendar here).  Jackson addresses the question who decides unconscionability of an arbitration agreement when the agreement clearly and unmistakably says arbitrators decide arbitrability.  The Ninth Circuit said the court decides the question, but we think there is a reasonable chance the United States Supreme Court will reverse.   We touched on some of the reasons why in prior posts, here and here. 

We shall keep readers apprised of further developments as and when they occur.  .  .  .

Stolt-Nielsen Oral Argument Analysis, Part V: Should Class or Consolidated Arbitration be Imposed if the Contract is Silent?

February 16th, 2010 Arbitrability, Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Practice and Procedure, United States Supreme Court No Comments »

I.   Introduction

This is the final installment of our five-part series on the Stolt-Nielsen oral argument.  It addresses the fourth issue identified in Part I (here):  what the import of the agreements’ silence is or should be.  It assumes the Court reaches the merits; as explained in Parts III and IV (here and here), the United States Supreme Court may take another “pass” on the question presented (the first pass was taken in Bazzle), and hold that the predicate for granting certiorari was not established because the arbitrators ruled that the agreement was not silent on class arbitration.  

Part I identified two loose “coalitions” of Justices – the “Breyer Coalition”  consisting of Associate Justices John Paul Stevens, Stephen G. Breyer, and Ruth Bader Ginsburg, and the “Roberts Coalition,” consisting of Chief Justice John G. Roberts and Associate Justices Antonin G. Scalia and Samuel A.  Alito, Jr.  The Breyer Coalition appears to be leaning toward either taking a pass or affirming the decision of the United States Court of Appeals for the Second Circuit, which upheld the arbitrators’ award imposing class arbitration, while the Roberts Coalition appears to be leaning toward reversal.   We explore the import of the charter-party agreements’ silence on class arbitration from the standpoint of both coalitions.  Continue Reading »

SCOTUS Update: United States Supreme Court Grants Certiorari in Jackson v. Rent-a-Center West, Inc. Arbitration Unconscionability Case

January 18th, 2010 Unconscionability, United States Court of Appeals for the Ninth Circuit, United States Supreme Court 5 Comments »

On September 23, 2009 we reported on the Ninth Circuit’s decision in Jackson v. Rent-a-Center West, Inc., ___ F.3d ___, slip op. (9th Cir. Sept. 9, 2009), petition for cert. granted  Jan. 15, 2010 (No. 09-497).  (Prior post here)  As reported in Disputing, on January 15, 2010, the United States Supreme Court agreed to hear Rent-a-Center West’s appeal.  (Disputing post here) 

As we discussed nearly four months ago Rent-a-Center concerns an important “who” question that arises in unconscionability cases:  When the parties clearly and unmistakably agree that the arbitrators will decide arbitrability questions, who gets to decide whether the arbitration clause is unenforceable on unconscionability grounds? 

We think the question answers itself.  But the Ninth Circuit, in a 2-1 decision, held that the court decides the unconscionability question irrespective of the parties clearly expressed intent to the contrary.  We argued that the Ninth Circuit should have applied a severability analysis of sorts, and referred the unconscionability question to the arbitrators.  The ”Analysis” section of our prior post is reprinted in pertinent part below:  

There is logic to the rule adopted by the majority in that unconscionability is a state law defense that goes to the enforceability of an agreement.  When a party challenges the enforceability of an arbitration agreement, the court ordinarily decides it – unless the parties clearly and unmistakably agree otherwise.  And while the parties clearly and unmistakably agreed to arbitrate arbitrability,  that agreement was – as is often the case – simply a component of the rest of the arbitration agreement.  If the entire arbitration agreement is unenforceable because of unconscionability, then so too must be the agreement to arbitrate arbitrability. 

The problem with the majority’s logic is that it does not distinguish between the enforceability of the clear and unmistakable agreement to arbitrate arbitrability and the enforceability of the parties’ agreement to arbitrate all other disputes.  The Rent-a-Center parties envisioned that a dispute concerning the enforceability of their agreement to arbitrate all other disputes would be decided by the arbitrators.  That is what the parties’ agreement said, and the United States Supreme Court has said that parties can enter into such agreements, provided they are clear and unmistakable. 

We think courts would better advance the purposes of the Federal Arbitration Act by engaging in a severability analysis of sorts when confronting questions like the one in Rent-a-Center.   When parties agree not only to arbitrate the merits of controversies unrelated to the arbitration clause, but also clearly and unmistakably agree to arbitrate arbitrability, the latter agreement is tantamount to an arbitration agreement within an arbitration agreement.  One agreement concerns who decides disputes concerning the existence, formation or enforceability of the other agreement.  And the other agreement concerns the parties’ obligation to arbitrate all other disputes.  Each should be analyzed separately under Federal Arbitration Act Section 2. 

What the court did in Rent-a-Center was assume that, if any part of the arbitration agreement were unenforceable for any reason, then the entire arbitration agreement – including the clear and unmistakable agreement to arbitrate arbitrability – must fail.  Perhaps ironically, the Court found support for this analysis in the Prima Paint/Buckeye Check Cashing line of cases that hold that an enforceability challenge directed at the contract as a whole – as opposed to the arbitration agreement specifically – must be decided by the arbitrators rather than the court.  Because the challenge here was to a stand-alone arbitration agreement that included a clear and unmistakable agreement to arbitrate arbitrability, the Court simply assumed that Federal Arbitration Act Section 2 required the Court to decide it.  But doing so was inconsistent with the parties’ clearly expressed intent that the arbitrators would decide arbitrability questions, at least arbitrability questions that did not concern the enforceability of the parties’ agreement to arbitrate arbitrability. 

The Court should have limited its inquiry to whether the parties’ agreement to arbitrate arbitrability was substantively unconscionable.  If not, then the Court should have directed that the arbitrators decide the question whether the remainder of the arbitration clause was substantively unconscionable.  Had the Court looked at the problem from that perspective, we believe it would have concluded that the unconscionability defense did not apply to the parties’ clear and unmistakable agreement to arbitrate, and that, accordingly, the arbitrators had to decide whether the challenge to the remainder of the arbitration clause had merit.  

.  .  .  . 

So we think the Court should have enforced the agreement to arbitrate arbitrability by committing to the arbitrators the question whether the parties’ agreement to arbitrate all other claims was unconscionable because it was allegedly one-sided.  Had it done so, it would have given full force and effect to the parties’ clearly expressed intentions, the pro-enforcement policies of Federal Arbitration Act Section 2, and the letter and spirit of First Options.

 We shall keep readers apprised of developments as and when they occur.  It will be interesting to see how the United States Supreme Court decides this case.

Stolt-Nielsen Oral Argument Analysis: Part IV

January 6th, 2010 Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Practice and Procedure, United States Supreme Court 1 Comment »

Introduction

Stolt-Nielsen turns on the allocation of power between courts and arbitrators.   No matter how thoroughly and neatly you parse the issues, the question that repeatedly and continuously begs for an answer is:  who decides?  Answer that question as it relates to one issue and it pops up again in relation to the next. 

Up until Bazzle the Supreme Court did an admirable job of delineating the bounds of arbitral versus judicial authority.  The lines were blurred in Bazzle, where under the peculiar facts there was a question whether the agreement precluded class arbitration.  (See our Disputing guest post here.)  The question required interpretation of ambiguous contract language – a task arbitrators have both the authority and the competence to perform – so it was remanded to the arbitrators.  The four-Justice plurality said the question was not one of arbitrability, but concerned the “kind” of arbitration to which the parties agreed.  

But many of the lower courts — including the United States Court of Appeals for the Second Circuit — read Bazzle to mean that arbitrators have the authority under a broad arbitration agreement to determine whether the parties agreed to class arbitration when their agreements say nothing about class or consolidated arbitration.   That is a very different question from whether an arbitration agreement precludes class arbitration, and it is not one that the parties in Stolt-Nielsen clearly and unmistakably submitted to the arbitrators.      

Stolt-Nielsen presents the United States Supreme Court with a unique opportunity to draw a sharper and stronger line between the arbitrable and non-arbitrable in cases concerning class or consolidated arbitration.  Whether or not the Court will seize it is an open question, because, as explained in Part III, AnimalFeeds has articulated a plausible argument that Stolt-Nielsen has not established the predicate for the Court’s grant of certiorari:  that the parties’ agreements were silent on class arbitration.  If at least five justices are satisfied with the (we believe, unsatisfactory) status quo concerning class arbitration, or otherwise believe that the best course is to allow class arbitration to continue (and even flourish), then AnimalFeed’s argument may provide an interpretive path for a ruling that the case is not properly before the Court.   

Today we explain why accepting AnimaFeeds’ argument would contravene the letter and spirit of the Federal Arbitration Agreement, breed further litigation, and undermine confidence in arbitration as an effective alternative dispute resolution mechanism.   More to the point, we discuss why and how the Court can reach the merits of Stolt-Nielsen consistently with how Stolt-Nielsen presented the question.     Continue Reading »

Stolt-Nielsen Oral Argument Analysis: Part III

December 23rd, 2009 Arbitrability, Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, United States Supreme Court 2 Comments »

On December 9, 2009 the United States Supreme Court held oral argument in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) (oral argument transcript here).  Stolt-Nielsen concerns whether class or consolidated arbitration may be imposed on parties whose contracts are silent on that point, and we have written extensively on it, including an ongoing series of guest-post articles for our friend Karl Bayer’s  Disputing blog.  (Posts available here,  here, here, here, here, here, here, here and here.)  

On December 16, 2009 we posted Part II of our analysis of the oral argument (Parts  I, here, Part II, here).   In this Part III we focus on what transpired with respect to the second of four key interrelated issues raised at oral argument and identified in Part I:  What exactly did the arbitrators decide?  Continue Reading »

Stolt-Nielsen Oral Argument Analysis: Part II

December 16th, 2009 Arbitrability, Authority of Arbitrators, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, United States Supreme Court 3 Comments »

Introduction

On December 9, 2009 the United States Supreme Court held oral argument in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) (oral argument transcript here).  Stolt-Nielsen concerns whether class or consolidated arbitration may be imposed on parties whose contracts are silent on that point, and we have written extensively on it, including a series of guest-post articles for the Disputing blog.  (Posts available here,  here, here, here, here, here, here, here and here.)  

Former Solicitor General Seth Waxman, a partner of the prestigious law firm of Wilmer Cutler Pickering Hale & Dorr LLP, and Chair of the firm’s Appellate and Supreme Court Litigation Practice Group, represented the Stolt-Nielsen petitioners before the Court (Mr. Waxman’s bio is here).  Georgetown University Law Center Professor Cornelia T.L. Pillard represented respondent AnimalFeeds.  (Professor Pillard also represented the Bazzle respondents in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003)).  Both attorneys did a very admirable job of presenting their cases on behalf of their clients. 

On December 13, 2009  we posted Part I of our analysis of the oral argument (Part I here).   In this Part II we focus on what transpired with respect to the first of the four key, interrelated issues raised by the Justices and identified in Part I:  The scope of the submission and the corresponding scope of the arbitrators’ authority.  We shall address the remaining three in one or more future posts.  Continue Reading »

Stolt-Nielsen Oral Argument Analysis: Part I

December 13th, 2009 Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Practice and Procedure, United States Supreme Court 3 Comments »

On December 9, 2009 the United States Supreme Court heard oral argument in the one Federal Arbitration Act case it has agreed to review this Term:  Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) (oral argument transcript here).  Stolt-Nielsen concerns whether class or consolidated arbitration may be imposed on parties whose contracts are silent on that point, and we have written extensively about the case, including a series of guest-post articles for the Disputing blog.  (Posts available here,  here, here, here, here, here, here, here and here.)

This multi-part post considers what transpired at oral argument and provides our take on it.  Familiarity with the background facts is presumed and, if necessary, can be gleaned here, here, and here.  Continue Reading »

United States Supreme Court Update: Union Pacific Railroad Co. v. Brotherhood of Locomotive Engineers & Trainmen (08-604)

December 10th, 2009 United States Supreme Court, labor arbitration No Comments »

On October 11, 2009 we reported on two labor arbitration cases pending before the United States Supreme Court:  Union Pacific Railroad Co. v. Brotherhood of Locomotive Engineers & Trainmen (08-604) (arising under the Railway Labor Act (“RLA”), 45 U.S.C. §§151 et seq.) and Granite Rock Co. v. International Brotherhood of Teamsters (08-1214) (arising under Labor Management Relations Act (”LMRA”) Section 301).  (Post here)  On December 8, 2009 the Supreme Court issued its unanimous opinion in Union Pacific (here).

The Court affirmed the decision of the United States Court of Appeals for the Seventh Circuit to the extent it held that the National Railroad Adjustment Board (the “Board”)  failed “to conform or confine” its orders “to matters within … the [Board’s] jurisdiction.  .  .  .”  See 45 U.S.C. § 153 First (q).  As readers may recall from our previous post, the Board had denied for lack of subject matter jurisdiction certain employee grievance claims on the ground that the claimants had not complied with a Board rule requiring them to prove that the pre-grievance, statutory requirement of a “conference” between the parties had been met, even though there was no bona fide dispute that conferences had taken place.  See 45 U.S.C. §§ 152.  The Seventh Circuit ruled that the Board not only acted outside its jurisdiction, but violated due process.  The Court ruled that the Seventh Circuit should not have reached the due process question, including whether an RLA arbitration award can be overturned solely on the ground that it violated due process.  

As we observed in our October 11, 2009 post, Union Pacific is not a contractual arbitration case, but effectively an administrative law one, and the Court’s ruling will likely have little or no effect on Federal Arbitration Act jurisprudence.  The Granite Rock case – which does involve contractual arbitration, albeit under Section 301 of the LMRA – is still pending before the Court, with oral argument slated for January 19, 2009.

United States Supreme Court Update: Union Pacific and Granite Rock Labor Arbitration Cases

October 11th, 2009 Authority of Arbitrators, United States Court of Appeals for the Ninth Circuit, United States Court of Appeals for the Seventh Circuit, United States Supreme Court, labor arbitration 1 Comment »

Introduction

So far the United States Supreme Court has agreed to hear only one arbitration case governed by the Federal Arbitration Act:  Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198), which has been set for oral argument at 10:00 a.m. Eastern Standard Time, December 9, 2009.   (See Russ Kunkel’s LawMemo Arbitration Blog  here.)  We have written extensively on Stolt-Nielsen, which concerns whether class arbitration may be imposed on parties whose contracts are silent on that point.  (Posts available here,  here, here, here, here, here, here, here and here.)

The Supreme Court has also agreed to hear two labor arbitration cases.  The first is Union Pacific Railroad Co. v. Brotherhood of Locomotive Engineers & Trainmen (08-604), which is governed by the the Railway Labor Act (“RLA”), 45 U.S.C. §§151 et seq.  The RLA, among other things, requires arbitration before the National Railroad Adjustment Board (“the Board”) of labor disputes involving railway workers.  Union Pacific, for all practical purposes, is therefore not a contractual arbitration case, but an administrative law one, and the outcome will likely have  little or no effect on Federal Arbitration Act jurisprudence.  The Court held oral argument on October 7, 2009.  (Oral argument Tr. here) 

The second is Granite Rock Co. v. International Brotherhood of Teamsters (08-1214), which arises under Section 301 of the Labor Management Relations Act.  The Court is expected to set argument for later this Fall.  (See Russ Kunkel’s LawMemo Employment Law Blog here.)   Though not governed by the Federal Arbitration Act, Granite Rock, unlike Union Pacific, is a contractual arbitration case.  And the outcome may be relevant to cases falling under the Federal Arbitration Act. 

We briefly summarize below the issues the Court will presumably address in these labor arbitration cases and discuss why Granite Rock may be more controversial than it appears at first blush.    Continue Reading »

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