One to Watch: Should an Arbitrator Decide Enforceability?
The U.S. Supreme Court yesterday heard oral argument in Jackson v. Rent-A-Center West, Inc., which poses the question whether the enforceability of an arbitration agreement should be decided by an arbitrator or by a court.
In Jackson, plaintiff Antonio Jackson, a former employee of defendant Rent-A-Center West, sued alleging race discrimination and retaliation. Rent-A-Center moved to dismiss and to compel arbitration, based on the parties' arbitration agreement which provided, among other things, that the arbitrator had exclusive authority to decide any issue related to the "interpretation, applicability, enforceability or formation" of the arbitration agreement. Jackson asserted that the arbitration agreement was unconscionable and therefore unenforceable. The district court granted defendant's motion to dismiss and entered an order compelling arbitration, holding that the issue of enforceability of the arbitration agreement was for the arbitrator to decide. The district court also issued an alternative holding that Jackson had not shown the agreement was substantively unconscionable. Jackson appealed.
The Ninth Circuit reversed, holding that the issue of whether the arbitration agreement was enforceable was for a court, not an arbitrator, to decide. Specifically, the Court held that where "when a party specifically challenges the validity of arbitration provisions within a larger contract, apart from the validity of the contract as a whole, a court decides the threshold question of the enforceability of the arbitration provisions," notwithstanding the fact that the agreement provides that an arbitrator should make that decision. The Ninth Circuit remanded for the Court to consider all of Jackson's arguments that the agreement was unconscionable.
The Supreme Court granted review to consider whether an arbitrator or a court should decide enforceability of an arbitration agreement.
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