The Mandatory Core of Section 4 of the Federal Arbitration Act

Volume 96

96 Va. L. Rev. Online 1
Download PDF

IN April 2010, the U.S. Supreme Court will hear oral arguments in Rent-a-Center v. Jackson, a case that has profound implications for the future of American dispute resolution. The issue before the Court is not the merits of Antonio Jackson’s civil rights lawsuit against his former employer, nor even the validity of the mandatory arbitration contract that he was required to sign before he could begin work. Instead, the Court must decide whether Jackson—and the hundreds of millions of other employees, consumers, and franchisees who are subject to mandatory arbitration clauses—have a non-waivable right to challenge the fairness of such provisions in federal court. Because the Federal Arbitration Act (“FAA”) allows courts to nullify one-sided arbitration clauses under the unconscionability doctrine, the judiciary has traditionally served as a bulwark against harsh dispute resolution terms. Yet the contract at issue in Rent-a-Center expressly gives the arbitrator, not courts, the sole authority to decide whether “any part of this Agreement is void.” If the Court enforces this clause, it will quickly become boilerplate in many standard form contracts, giving arbitrators the exclusive right to determine whether an arbitration clause is unconscionable, and limiting the judiciary’s role to little more than rubber-stamping motions to compel arbitration.

Every court that has grappled with a similar clause, including the Ninth Circuit in Rent-a-Center, has assumed that parties can delegate the issue of an arbitration clause’s validity to the arbitrator as long as there is “clear and unmistakable” evidence that they wanted to do so. The source of the “clear and unmistakable” criterion is based on dicta in several Supreme Court decisions. These cases begin by noting that because arbitration is, first and foremost, a matter of contract, parties enjoy the freedom to customize the process. Thus parties can agree to arbitrate arbitrability: that is, they can make a contract that entrusts the arbitrator with defining the scope or rules of arbitration. Finally, even though there is a presumption that parties want courts, not arbitrators, to resolve these issues, this presumption will yield to a strong indication to the contrary.

Click on a link below to access the full text of this article. These are third-party content providers and may require a separate subscription for access.