Today in Jackson v. Rent-A-Center West, the Court again confirmed its view that challenges to a contract which contains an arbitration agreement will go to the arbitrator, a view that it has held and repeatedly affirmed since its decision in Prima Paint in the mid 1960s. Under Prima Paint, a party may enforce a potentially valid arbitration agreement contained in a potentially invalid contract. But today the Court went further. In a case where an individual claimed that the arbitration agreement itself was unconscionable and therefore unenforceable, the Court stated that an arbitrator will decide whether a potentially invalid arbitration agreement is enforceable unless the objecting party’s challenge goes to the “delegation provision”, i.e. the portion of the contract that delegates the power to the arbitrator to decide unconscionablility questions. In other words, following Rent-A-Center, a party who wishes to challenge an arbitration agreement must do so with greater specificity than would have satisfied the Court under Prima Paint. A claim that the entire arbitration agreement is unconscionable or invalid for other reasons will no longer be enough to avoid evaluation of the claim by the arbitrator rather than the court. Unless the party challenges the particular provision of the arbitration agreement that delegates the claims to the arbitrator, it will be the arbitrator, not the court, who will decide unconscionability issues.
As with other recent arbitration decisions, Jackson is a victory for businesses who typically draft arbitration provisions in contracts with employees and consumers. Following Jackson, I would expect to see businesses rewriting their contracts to delegate enforceability questions (such as whether the arbitration agreement is unconscionable) to the arbitrator. Now, a party may specifically challenge that provision as unconscionable. But the party will have to prove that permitting arbitrators to decide unconscionability provisions is unfair to the challenging party. Given the general view that arbitrators are unbiased, professional third party decision makers, I would suspect that such a challenge would be very difficult to win (in the absence of evidence that the arbitrator was inherently biased in favor of one side). Thus, it would appear that the road has been paved to permit greater delegation of power to arbitrators, an outcome that businesses but not consumers, employees and their advocates, would prefer.