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Posts Tagged ‘Clear and Unmistakable Rule’

The United States Supreme Court Adopts Severability Analysis in Rent-A-Center v. Jackson

June 21st, 2010 Arbitrability, Arbitration Practice and Procedure, Authority of Arbitrators, Class Action Arbitration, Class Action Waivers, Practice and Procedure, Unconscionability, United States Court of Appeals for the Ninth Circuit, United States Supreme Court No Comments »

Yesterday the United States Supreme Court decided Rent-A-Center West v. Jackson, ___ U.S. ___, slip op. (June 21, 2010).  Rent-A-Center raised the question whether “a district court may decide a claim that an arbitration agreement is unconscionable, where the agreement explicitly assigns that decision to the arbitrator.”  The United States Court of Appeals for the Ninth Circuit had said “yes,” but the Supreme Court said “no.”

In a 5-4 opinion by Associate Justice Antonin Scalia, joined in by Chief Justice John G. Roberts, Jr. and Associate Justices Anthony M. Kennedy, Clarence Thomas and Samuel A. Alito, Jr , the Court held that the employee had to arbitrate its claim that certain provisions of an arbitration agreement were allegedly unconscionable because the parties clearly and unmistakably agreed to arbitrate arbitrability questions, and the employee did not specifically claim that that agreement was unconscionable.  The Court said that the parties’ clear and unmistakable agreement to arbitrate arbitrability was, as a matter of federal law, severable from the other provisions of the arbitration agreement, including the ones the employee said were unconscionable.  

Prior to the decision we had advocated in the Forum (here and here), and in our cover story published in the March 2010 issue of Alternatives to the High Cost of  Litigation (blogged here), that the Court should resolve the case in favor of Rent-A-Center using a severability analysis of sorts derived from Buckeye Check Cashing v. Cardegna, 546 U.S. ___ (2006) and Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967).   And that’s exactly what happened, even though neither side advocated or addressed the severability argument before the Court, a point made by Associate Justice Stevens’ dissenting opinion, which was  joined in by Associate Justices Ruth Bader Ginsburg, Stephen G. Breyer and Sonia Sotomayor.  See Dissenting Op. at 1.  (The district court’s analysis, however, which was reversed by the Ninth Circuit, was, according to the Court, consistent with the Buckeye Check Cashing and Prima Paint severability principle.  See Slip op. at 9.)  Continue Reading »

When Do Cost Provisions in an Arbitration Agreement Effectively Deny a Party a Forum in Which to Vindicate Statutory Rights?

April 6th, 2010 Arbitrability, Authority of Arbitrators, Employment Arbitration, New York Court of Appeals, United States Supreme Court No Comments »

Introduction

Under the federal Federal Arbitration Act statutory claims are generally arbitrable if they fall within the scope of the arbitration agreement, but arbitrator and arbitration-service-provider fees that may impose undue financial burdens on employees or other individuals seeking to vindicate those rights.   Cost provisions in arbitration agreements allocate these fees and costs, and even when the allocation is 50-50, disputes may arise concerning whether they are so burdensome as to effectively deny one of the parties a forum in which to pursue his or her claims.   

In Green Tree Financial Corp v Randolph, 531 U.S. 79 (2000), the United States Supreme Court acknowledged that “the existence of large arbitration costs could preclude a litigant from effectively vindicating her federal statutory rights in the arbitral forum.”  531 U.S. at 90.  And it said that “where, a party seeks to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the likelihood of incurring costs that would deter the party from arbitrating the claim.”  531 U.S. at 92.   While the Court did not purport to enunciate the standards courts should apply in evaluating challenges to cost provisions, it held that the “risk” of  “prohibitive costs is too speculative to justify the invalidation of an arbitration agreement.”  531 U.S. at 91. 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.  .  .  .

The AAA Commercial Rules and the Pig in a Poke: Gilbert Street Developers, LLC v. La Quinta Homes, LLC

June 24th, 2009 Arbitrability, Authority of Arbitrators, California State Courts, Grounds for Vacatur 3 Comments »

Introduction

Under the Federal Arbitration Act and federal labor law, arbitrators can decide arbitrability questions subject only to deferential review, provided the parties “clearly and unmistakably” delegate that power to them.  California’s state arbitration law follows this familiar federal rule. 

On June 11, 2009 the California Court of Appeal, Fourth District, Division 3, held that the parties to an arbitration agreement did not “clearly and unmistakably” agree to arbitrate arbitrability by incorporating the Commercial Rules of the American Arbitration Association into their contract, because at the time the parties agreed to arbitrate, the rules were silent on whether arbitrators could decide arbitrability questions.  See Gilbert Street Developers, LLC v. La Quinta Homes, LLC, ___ Cal. Rptr.3d ___, slip op (Cal. App. 4th Dist. June 11, 2009) (certified for publication) (copy available here).  The Court so held even though the parties agreed that the arbitration would be “conducted in accordance with the Rules of the American Arbitration Association existing at the date [of the arbitration].  .  .  . ,” and by the date of the arbitration the rules had been amended to provide expressly that the arbitrators had the authority to determine their own jurisdiction.  See slip op. at 2-3.  The Court also held that the operation of a “buyout” clause in the parties’ agreement did not fall within the scope of the parties’ arbitration clause because it involved discretionary matters, which were expressly excluded from arbitration.  See slip op. at 15-16.  Continue Reading »