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Tuesday, April 27, 2010

Synopsis of the Rent-A-Center Oral Arguments

The transcript from yesterday's oral argument in Rent-A-Center West v. Jackson is available now here.  I hope that some of our arbitration experts will share their thoughts on how oral argument went.  My inexpert attempt at a synopsis follows:

Rent-A-Center's counsel, friend of the blog Robert F. Friedman, under questioning from Justices Ginsburg, Kennedy, Stevens and Sotomayor, argued that the issue in the case, unconscionability, does not relate to the "making" of an agreement.  It is a post-formation issue and thus one that can be determined by the arbitrator.  This exchange with Justice Sotomayor (on p. 7 of the transcript) strikes me as getting to the heart of things:

Justice Sotomayor:  Counsel, is your problem with unconscionability . . . being forced to or coerced into signing something?  That's okay for the courts, but this type of argument that goes to the unfairness of the process, that's for the arbitrator; is that your position?

Mr. Friedman: That's right, Justice Sotomayor. 

But Justice Scalia, who had been trying to help Mr. Friedman make his case was not buying Mr. Friedman's argument that there is a bright line separating allegations of physical coercion from allegations of substantive unfairness. Justice Scalia suggested that if argument is "that the one-sidedness [of an arbitration agreement] is evidence of that the agreement was not voluntary, I don't see how that's for the arbitrator." (p.10)

A bit later, Justice Breyer makes the distinction between clear and unmistakable language referring an issue to the arbitrator and clear and unmistakable evidence of intent to refer an issue to the arbitrator. (p. 15) Justice Breyer characterized Jackson's claim as one that there was no such intent on his part because of procedural and substantive unconscionability.  Mr. Friedman agreed with Justice Breyer that a court could decide whether there was an agreement to arbitrate in cases in which the employee's signature was forged or if the employee was intoxicated at the time he signed. (pp. 18-19)  Justice Breyer then pressed Mr. Friedman to explain why unconscionability should be treated differently from coercion, forgery or incapacity challenges to the enforcement of an agreement. (p. 20)  Mr. Friedman responded that unconscionability  claims simply did not rise to the same level as claims that a contract had never actually been made due to fraud or coercion.

There follows an interesting exchange between Justices Ginsburg and Scalia (pp. 22-23) about the effect of the court's decision in Hall Street Associates, LLC v. Mattel, Inc. on the validity of the arbitration agreement at issue in this case.  Justice Ginsburg entertained the possibility that Hall Street might require a finding that the parties' agreement was invalid.  Justice Scalia argued that the issue had not been raised below and thus was waived.  Justice Ginsburg stuck to her guns: the parties had had no opportunity to raise the issue because the Hall Street opinion was issued after the District Court decided this case.  

Plaintiff's counsel, Ian Silverberg, then had his chance.  Much of the discussion here focuses on whether Mr. Jackson was seeking to invalidate the entire arbitration agreement or only specific provisions.  Chief Justice Roberts suggested that one might say that a global challenge to the agreement goes to the making of the agreement and thus is for the court to decide, but if only specific provisions are challenged as unconscionable, that goes to enforcement and can be decided by the arbitrator.  (p. 28)  After a lengthy and very confusing exchange, Mr. Silverberg characterized his client's position as follows: "There are certain elements of the arbitration agreement that are unconscionable and under Nevada law, which would render the entire arbitration agreement unconscionable." (p. 42)  

Justice Scalia pointedly rejected Mr. Silverberg's attempt to argue that unconscionability challenges should be treated like challenges to the making of an agreement based on coercion, fraud in the inducement or duress.  "I would say all unconscionability challenges, if you have an agreement that is as clear as this one, would go to the arbitrator."  (p. 47)  A few pages later, Justice Ginsburg asked Mr. Silverberg whether all arbitration agreements could be subject to unconscionability challenges that would have to be decided by a court.  (p. 52)  When Mr. Silverberg suggested that all of them could be, Justice Scalia jumped in with "Kiss good-bye to arbitration."  But Mr. Silverberg gamely replied that his client was simply seeking to retain the status quo.  As the law now stands, parties can get before courts to argue that arbitration agreements that they have signed are unconscionable, and the heavens have not darkened.  Courts quickly dispose of meritless unconscionability challenges and have the option of sanctioning the attorneys who bring them.  (p. 53)

[Jeremy Telman]

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