Consumer, Beaten and Robbed, and then Forced to Arbitrate

Forced arbitration clauses are in all sorts of consumer contracts.  Even though readers of this blog know what they are, this case (Johnson v. Rent-a-Center) might surprise you.  An 88 year- old man, Kenneth Johnson, leased a refrigerator from Rent-A-Center under a Rental-Purchase Agreement which contained an arbitration agreement.  The arbitration agreement contained a provision which provided that an arbitrator should decide any dispute relating to the “interpretation, applicability, enforceability, or formation” of the arbitration agreement.  Rent-A-Center sent an employee, Eric Patton, to Johnson’s home to service the refrigerator on several previous occasions.  Patton then showed up at Johnson’s house, in uniform, to service the leased appliance.  This time, Patton seriously beat and robbed Johnson.  Johnson sued Rent-A-Center claiming negligence in their hiring and supervision of Patton.  Rent-a-Center filed a Motion to Compel Arbitration and Stay Action.  Johnson argued that under Missouri law, his claims were not arbitrable because they did not have a meaningful relationship to the Rental-Purchase Agreements.  Johnson did not, however, address the delegation issue.  The circuit court agreed with Johnson and denied the motion to compel arbitration, finding that the tort claims were independent of the contract terms. 

The Missouri Court of Appeals, however, reversed and found that the threshold issue regarding arbitrability was for the arbitrator.  Citing to the U.S. Supreme Court decision in Rent-A-Center West, Inc. v. Jackson, the court stated that the issue will go to the arbitrator “unless the party challenges the particular sentences that delegate such claims to the arbitrator, on some contract ground that is particular and unique to those sentences.” Because Johnson did not assert “specific challenges to the delegation provisions contained within the Arbitration Agremeents,” the court stated that the threshold issues should be determined by the arbitrator. 

This is one of the times when I can’t help but think – Wait a minute, how is this right?  Does this mean that if an arbitration agreement contains a clause delegating arbitrability to the arbitrator that, even if the consumer is arguing that she never entered into the contract, that the arbitrator makes that determination — unless the plaintiff argued specifically that the delegation clause was not formed?  And what would be “particular and unique” to those sentences – if the issue is lack of formation, wouldn’t that apply to the entire contract including the delegation clause? This all seems to make contesting arbitration a game of choosing precisely the right words.  Furthermore, as Paul Bland notes in this post discussing the case, because an arbitrator has financial incentives, there may be moral hazard issues in having the arbitrator make this threshold determination. 

(H/T to John Crabtree for pointing me to the case and blog post).