main image

Posts Tagged ‘Rent-A-Center v. Jackson’

Some Initial Thoughts on the SCOTUS AT&T Mobility, LLC v. Concepcion Oral Argument

November 16th, 2010 Arbitration Agreements, Arbitration Practice and Procedure, California State Courts, Class Action Arbitration, Class Action Waivers, Practice and Procedure, United States Court of Appeals for the Ninth Circuit, United States Supreme Court Comments Off on Some Initial Thoughts on the SCOTUS AT&T Mobility, LLC v. Concepcion Oral Argument

As many readers know, on Tuesday, November 9, 2010 the United States Supreme Court heard oral argument in AT&T Mobility, LLC v. Concepcion, No. 09-893 (blogged here, here, here and here).  You can find the transcript of the argument, here, and the audio, here. 

After reviewing the oral argument transcript a number of times, and listening to the audio, we still believe it more likely than not that AT&T Mobility will prevail.  We’ll develop that thought further in upcoming installments of our Disputing guest post, “AT&T Mobility LLC v. Concepcion:  Can Discover Bank Withstand Stolt-Nielsen Scrutiny?” (Part I, here).

There have been a number of differing opinions post argument on how the Court will likely rule.  Some believe the argument foreshadows victory for the Concepcions.  Others are not so certain, and still others believe that AT&T Mobility may emerge the victor.  Like all such opinions, they are are really nothing more than educated guesswork, and should be taken with a grain of salt. 

We don’t suggest our take on things is anything more, but we share it for what it is worth.  We think the oral argument was basically a toss-up, and that it mainly confirmed what we already knew or surmised:  That this is a very difficult case, and that the eight Justices who asked questions appear to be split along ideological lines.  We expected no less in light of the 5-3 and 5-4 split decisions in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559  U.S. ___, 130 S. Ct. 1758 (2010); and  Rent-A-Center West v. Jackson, 561 U.S. ___, 130 S. Ct. 2772 (2010). 

The key point on which the argument shed no meaningful light is what Associate Justice Clarence Thomas makes of this case.  Justice Thomas joined the Stolt-Nielsen and Rent-A-Center majority opinions, but those cases, unlike this one, did not concern the preemptive scope of the Federal Arbitration Act. 

Preemption is controversial, and its importance extends far beyond the AT&T Mobility case.    Particularly controversial — and very supportive of AT&T Mobility’s position — is the doctrine of “implied preemption,” also known as “conflict” or “obstacle” preemption. In Federal Arbitration Act cases this doctrine tells us that  state laws or policies that undermine “the goals and policies of the FAA” are preempted by the Act.  Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Univ., 489 U.S. 468, 477-78 (1990).

But Justice Thomas believes that the implied preemption doctrine is unconstitutional.  See Wyeth v. Levine, 555 U.S. ___, 129 S. Ct. 1187, 1205 (2009) (Thomas, J. concurring) (“implied pre-emption doctrines that wander far from the statutory text are inconsistent with the Constitution.  .  .  .”).  He also believes that Congress intended the Federal Arbitration Act to be a procedural statute that applies only in federal court.  See, e.g., Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995) (Thomas, J., dissenting); Buckeye Check Cashing, Inc. v. Cardegna, 546 US 440 (2006) (Thomas, J., dissenting) (“[I]n state-court proceedings, the FAA cannot be the basis for displacing a state law that prohibits enforcement of an arbitration clause contained in a contract that is unenforceable under state law.”). 

He thus believes that state courts can apply state arbitration law as they see fit, irrespective of whether the result would be different had the case been brought in federal court.  While AT&T Mobility — like Stolt-Nielsen and Rent-A-Center — was brought in federal court, and everybody concedes that the Federal Arbitration Act applies, Justice Thomas remains a strong proponent of federalism.  

Justice Thomas’ deference to state law is problematic for AT&T Mobility.  Perhaps AT&T Mobility’s best argument is that the Federal Arbitration Act impliedly preempts the Discover Bank rule for the reasons set forth in Stolt-Nielsen.   Apparently concluding that the Justices in the Stolt-Nielsen majority — including Justice Thomas —  are the ones most likely to support AT&T Mobility’s position, AT&T Mobility deliberately downplayed the implied preemption issue, although it made clear that it believes the Federal Arbitration Act both expressly and impliedly preempts the Discover Bank rule. 

That was a wise strategy given Justice Thomas’ rejection of implied preemption.  Its wisdom was borne out by what transpired at the argument:  of the eight Justices that asked questions, the four more liberal ones (Associate Justices Ruth Bader Ginsburg, Stephen G. Breyer, Sonia M. Sotomayor and Elena Kagan) appear to be leaning in favor of finding that the Federal Arbitration Act does not preempt the Discover Bank rule, while the four more conservative ones (Chief Justice John G. Roberts, and Associate Justices Antonin G. Scalia, Anthony M. Kennedy, and Samuel J. Alito, Jr.) appear to be leaning in favor of finding that the Federal Arbitration Act preempts Discover Bank.      

That means Justice Thomas is likely to hold the deciding vote, but where he’ll ultimately cast it, nobody knows (at least outside the Supreme Court).  We believe there are equally plausible reasons why he might vote  for or against preemption.  

We’ll explore all of this and more in our Disputing guest post.  In the meantime, keep an eye out for our next Forum article on AT&T Mobility, which will focus on the highlights of the oral argument and tie them into the express and implied preemption issues that this critically important case presents.    

Introducing Guest Blogger John (Jay) McCauley

June 23rd, 2010 Arbitrability, Arbitration Practice and Procedure, Authority of Arbitrators, Guest Posts, Practice and Procedure, Unconscionability, United States Supreme Court Comments Off on Introducing Guest Blogger John (Jay) McCauley

Today we are pleased and honored to feature an article by our good friend John (Jay) McCauley, a distinguished arbitrator, mediator, attorney and professor of arbitration law.  Jay’s article is entitled “A Commercial Arbitrator’s Take on Rent-A-Center v. Jackson,” and can be found here. 

Jay debunks the media hype surrounding the United States Supreme Court’s recent decision in Rent-A-Center v. Jackson, ___ U.S. ___, slip op. (June 21, 2010), and argues (persuasively) that the case is a reasonable, natural and modest interpretation of the Court’s prior Federal Arbitration Act jurisprudence.  With one minor caveat we agree wholeheartedly with his insightful and pragmatic view of the case.

Our view of the decision may differ very slightly in that we believe that its scope is broader than the holding might suggest.  Jay is absolutely correct when he says that the decision permits parties to challenge delegation agreements (agreements to arbitrate arbitrability) on unconscionability grounds.  He says that there may be “dozens” of grounds on which to make such a challenge, and we think he is right about that, too. 

But we think that it will be very difficult to mount a successful challenge specifically directed at a delegation agreement.  And if we are right about that, then the practical effect of the decision will be that delegation agreements will usually be enforced, enabling arbitrators to decide most unconscionability challenges.  The scope of the decision is, in our view, therefore quite broad. 

We nevertheless agree with Jay that the decision makes perfect sense in light of the Court’s prior Federal Arbitration Act jurisprudence, and apart from our caveat about the decision’s scope, we are otherwise on the same page as Jay.  Of course, it may turn out that challenges to delegation agreements prove more successful than we think they will.

Jay is an American-Arbitration-Association certified arbitrator and mediator, and serves on the AAA’s Large Complex Case Panel.  He is a Fellow of the College of Commercial Arbitrators and a Distinguished Fellow of the International Academy of Mediators.   He offers arbitrator and mediator services through Judicate West and Professional Mediation Associates. 

Jay also serves as an adjunct professor of arbitration law at Pepperdine Law School, the University of Missouri-Kansas City Law School and the Werner Institute of Creighton Law School.  An AV-rated attorney, he is a member of the California bar and is admitted to practice before the United States Supreme Court.  He is listed in “Best Lawyers in America” for ADR, and in “Southern California Super Lawyers,” also for ADR.  You can visit his website here.

We hope you enjoy Jay’s article.

Guest Post: A Commercial Arbitrator’s Take on Rent-A-Center v. Jackson

June 23rd, 2010 Arbitrability, Arbitration Practice and Procedure, Authority of Arbitrators, Practice and Procedure, Unconscionability, United States Supreme Court Comments Off on Guest Post: A Commercial Arbitrator’s Take on Rent-A-Center v. Jackson

By John (Jay) McCauley

Despite all the alarmist reaction already showing up in the press, the holding in Rent-A-Center v. Jackson, ___ U.S. ___, slip op. (June 21, 2010) is both modest and predictable.   Arbitration agreements always do one thing:  take decisions from judges and give them to arbitrators.  Ever since 1925, such agreements have always been enforced to exactly the same extent as any other agreement is enforced.   Not less so, but also not more so.  Are they enforced even when the decision in question is the “gateway” decision of whether the parties must arbitrate their dispute?  Yes, as long as the agreement delegating even that decision to the arbitrator is explicit and unmistakeable.  Is that news? No. See, e.g., First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (dictum).

Should it matter that this delegation language is physically located within the challenged arbitration agreement itself?  No.  (If the answer were “Yes,” any contract drafter could “solve” the problem by plucking out the delegation provision and pasting it onto another sheet of paper to be separately executed as the “delegation agreement.”)  What does matter is whether the challenge brought against the arbitration agreement is the kind that goes to the enforceability of the delegation provision itself.  Are there such challenges in theory?  Sure, dozens of them.  Does that fact put severe brakes on the implications of the Rent-a-Center holding for other cases?  Yes, that’s the point.  Were there any such challenges in the Rent-a-Center case?  No.  None whatsoever.  As the Court noted, the party challenging arbitration in this particular case did not even attempt to raise one.  Would the Court have been open to listening to such a challenge?  Yes.  Not just by implication.  It expressly said it would.

Some of the alarmist commentary stands on the cynical premise that law is pure politics, such that the statement “the outcome of this case is pro-business” is thought to serve as a principled basis the court should have used to distinguish the precedent it is required to honor.  Some of these commentaries, remarkably enough, even come from lawyers.

The more sophisticated of the alarmist commentaries made a more sophisticated mistake.  They took the way Justice Scalia framed the issue in the first sentence of the decision, and leaped to the conclusion that that sentence could serve as the entire holding.

Justice Scalia said:  “We consider whether.  .  .  a district court may decide a claim that an arbitration agreement is unconscionable, where the agreement explicitly assigns that decision to the arbitrator.”

His answer (the holding) was not exactly “It may not.”  His answer was really, “It may not, unless, of course, the provision assigning the decision to the arbitrator is itself subject to any challenge whatsoever  (including unconscionability) recognizable to anyone familiar with the common law of contracts.

To which I would only add the not very dramatic commentary:  “Nothing very remarkable about that.”

 

EDITOR’S NOTE: John (Jay) McCauley is an American-Arbitration-Association certified arbitrator and mediator, and serves on the AAA’s Large Complex Case Panel.  He is a Fellow of the College of Commercial Arbitrators and a Distinguished Fellow of the International Academy of Mediators.   He offers arbitrator and mediator services through Judicate West and Professional Mediation Associates. 

Jay also serves as an adjunct professor of arbitration law at Pepperdine Law School, the University of Missouri-Kansas City Law School and the Werner Institute of Creighton Law School.  An AV-rated attorney, he is a member of the California bar and is admitted to practice before the United States Supreme Court.  He is listed in “Best Lawyers in America” for ADR, and in “Southern California Super Lawyers,” also for ADR.  You can visit his website here.

Our post introducing Jay is here.