Arbitration -- Another 5 to 4 decision U.S. Supremes

July 21, 2010

Scalia writes for what some have called the big business wing of the court, that if you signed an unfair arbitration agreement and therefore claim it is unenforceable, you still cannot go to court -- the arbitrator gets to decide if it was unfair.images.jpeg

The main question involved is whether one is able to go to court to determine if an arbitration agreement could be set aside because it was legally unconscionable.

The Supreme Court said if the agreement says the arbitrator is to determine if the agreement is enforceable, then under the Federal Arbitration Act ("FAA"), the arbitrator will make that decision and you cannot go to court. Justice Scalia wrote for the 5 justices that prevailed saying if the challenge was just to a particular part of the agreement rather than the whole, then a court could decide. So if one claimed just part of the agreement was unenforceable a court could decide, but if you claimed the whole agreement was unenforceable the arbitrator got to decide? Interesting!

Justice John Paul Stevens, writing for what some have called the people side of the court dissented and criticized the majority for adopting a position not proposed by either party during briefing or oral arguments. From a legal standpoint it is nearly unheard of for the court to make a decision on an issue or facts not raised by either side. Justices Ruth Bader Ginsburg, Stephen G. Breyer, and Sonia Sotomayor, joined in the dissent.

The lesson for all of us -- reinforced -- Don't sign an arbitration agreement unless you are sure you know what you are doing and understand it will probably cost you more to go to arbitration than to court.

By Gregory S. Cusimano

Docket No.:  09-497
Petitioner:  Rent-A-Center West, Inc.
Respondent:  Antonio Jackson
Decided By:  Roberts Court (2009-2010 )
Opinion:  561 U.S. ___ (2010)
Granted:  Friday, January 15, 2010
Argued:  Monday, April 26, 2010
Decided:  Monday, June 21, 2010