Guest Post by Christopher Drahozal on Rent-A-Center
First, Iagree with Karen that the issue in Rent-A-Centerv. Jackson is not merely about the timing of court review. Rather, if the Supreme Court acceptsRent-A-Center’s position, the arbitrator will have the final say on theunconscionability of the arbitration agreement – or at least provisions in thearbitration agreement. The language ofRent-A-Center’s arbitration clause makes that clear: “The Arbitrator, and not any federal, state,or local court or agency, shall haveexclusive authority to resolve any dispute relating to the interpretation,applicability, enforceability or formation of this Agreement including, but notlimited to any claim that all or any part of this Agreement is void orvoidable.” (emphasis added).
Second,even if the Supreme Court accepts Rent-A-Center’s position, it is notnecessarily the case that current arbitration rules will lead to the sameresult as the Rent-A-Center arbitration clause (although I agree with Karenthat to date courts generally have so held). Unlike the Rent-A-Center clause, those rules give the arbitrator theauthority to rule on jurisdictional issues, but not necessarily the exclusiveauthority to do so. See, e.g., AAACommercial Arbitration Rules, Rule R-7(a) (“The arbitrator shall have the powerto rule on his or her own jurisdiction, including any objections to theexistence, scope or validity of the arbitration agreement.”); CPR Rules, Rule8.1(“The Tribunal shall have the power to hear and determine challenges to itsjurisdiction, including any objections with respect to the existence, scope orvalidity of the arbitration agreement.”).
Thus, asCPR’s Commentary on its rule explains: “ThisRule expresses the generally accepted principle that arbitrator(s) have thecompetence initially to determine their own jurisdiction. Accordingly, any objections to the existence,scope or validity of the arbitration agreement, or the arbitrability of thesubject matter of the dispute, are decided, at least in the first instance, bythe Tribunal consistent with the U.S. Supreme Court’s decision in First Options….” In other words, rules such as thesemake clear that the arbitration can proceed even if a party asserts that itnever agreed to arbitrate (i.e., the arbitrators initially can determine theirown jurisdiction), contrary to several recent (and strongly criticized) statecourt decisions. See, e.g., MBNA Am.Bank, N.A. v. Christianson, 659 S.E.2d 209, 215 (S.C. Ct. App. 2008) (“[O]nceChristianson disputed the existence of an arbitration agreement, the Forum didnot have jurisdiction to enter an arbitration award until MBNA petitioned thecourts to compel arbitration.”), aff’dper curiam, 2010 S.C. Unpub. LEXIS 3 (S.C. 2010); MBNA Am. Bank, N.A. v.Kay, 888 N.E.2d 288, at *8 (
Ind. Ct. App.2008) (same).
[Posted on behalf of Christopher Drahozal by Jeremy Telman]