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.
All of this assumes that the Court will hold that the arbitrators decide arbitrability where the parties clearly and unmistakably so agree. But Professor Bruhl reminds us that there may be reasons why the Court should not necessarily venture down that path: “it might be that judicial review for unconscionability operates as a sort of safety valve that makes arbitration of consumer and employment disputes palatable.”
Professor Bruhl’s article also acknowledges that the doctrine of severability (a/k/a “separability”) is a double-edged sword in this case. The employee relies on severability principles because they say that an attack on the arbitration agreement itself must be decided by the Court. But severability also supports the argument that the agreement to arbitrate arbitrability should be considered separately from the agreement to arbitrate everything else. Since the employee’s unconscionability challenge does not directly relate to the agreement to arbitrate arbitrability, that agreement should remain enforceable, allowing the arbitrators to decide whether the unconscionability defense undermines the rest of the arbitration agreement in whole or in part. (See our prior posts here and here.)
Professor Bruhl is somewhat skeptical of Rent-A-Center’s putative severability argument, remarking that it “slic[es] separability pretty thinly. . . .” But, with all due respect to Professor Bruhl’s excellent analysis of this case, we believe that the argument is a forceful one, and one that, if made to the Court, would provide a clear interpretive path to an outcome we believe (but cannot be certain) is likely in Rent-A-Center.
Tags: Federal Arbitration Act Section 2, Own Jurisdiction Rule, Professor Aaron Bruhl, Rent-a-Center West v. Jackson, Separability, severability, Unconscionability, United States Court of Appeals for the Ninth Circuit, United States Supreme Court
