Thanks to Jeremy forthe invitation to participate in this discussion. (Full disclosure: I’mcurrently trapped in London after a conference, with limited access to thingslike the internet, and sleep. So I may have missed some of the discussion. Ifso, my apologies.)
The core question in Rent-A-Center is whether courts shouldrespect contract terms that clearly allocate unconscionability questions to thearbitrator. I want to use this post to explain why this strikes me as arelatively easy question in a case like Rent-A-Center,but a more difficult question generally. In Rent-A-Center,Jackson objects that the arbitration clause allows RAC to go to court in somecases, requires him to pay half the arbitrator’s fee (unless the law requiresotherwise), and limits discovery. Importantly, none of these objections impliesthat the arbitrator cannot reach a fair decision on the unconscionabilityquestion. For example, Jackson doesn’t identify any discovery related to thatquestion that will be unavailable to him, and his complaint about fee-splittingseems to ignore the fact that both AAA and JAMS, the providers designated inthe contract, cap employee fees at relatively low amounts.
Once we accept thatJackson’s unconscionability challenge can be resolved as fairly as any otherissue in arbitration, I have trouble understanding why it shouldn’t be resolvedthere. Let’s assume that you and I form a contract that includes an arbitrationclause with various bells and whistles, like discovery restrictions, that weknow can be challenged as unconscionable. We’d prefer to arbitrate thesechallenges, too, so we draft an arbitration clause that encompasses all issuesrelated “to the … enforceability” of our contract or any part of it. Whyshouldn’t our agreement be enforced? There’s nothing illogical about concludingthat we have “made” an agreement to arbitrate that permits the arbitrator todecide whether the “bells and whistles” are unconscionable. After all, anarbitrator who is unbiased and competent enough to resolve complex federalstatutory claims surely can manage to decide whether to enforce a limit ondiscovery. Nor is this like the example of a forged signature on a contract containingan arbitration clause. A party whose signature was forged hasn’t manifestedassent to anything, including arbitration. The forgery claim calls into questionthe very existence of the arbitration agreement and is plainly for the court todecide, whatever the arbitration clause might have to say on the subject. Thatis why RAC correctly concedes that such issues relate to the “making” of thearbitration agreement. But a party who has agreed to arbitrateunconscionability challenges has, well, agreed to arbitrate unconscionability challenges.(As an aside, I mean “agree” in the objective sense important to contract law. Inmany cases, of course, consumers and employees do not actually agree to each contract term. But under current law, ifobjectively manifested assent is good enough to enforce other contract terms, it’s good enough to enforce the arbitrationclause.)
The difficulty ariseswhen the unconscionability challenge cannot be resolved fairly (or at all) inarbitration. Examples might include challenges to clauses that impose very highinitial filing fees, or clauses that require arbitration in remote locations orbefore a biased arbitrator. Given the length of this post already, I won’telaborate on this difficulty here. Suffice it to say that it seems like courtsshould resolve these kinds ofchallenges, even if the contract purports to send them to arbitration. Andthere is a further difficulty: how should courts identify whether anunconscionability challenge is one that cannot be resolved fairly inarbitration? These questions strike me as the difficult ones, and also the oneson which the Court’s decision in Rent-A-Centeris likely to provide the least guidance.
[Posted on behalf of Mark Weidemaier by Jeremy Telman]
