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Jackson v. Rent-A-Center, West, Inc.

United States Court of Appeals for the Ninth Circuit · 2009 · Civil Procedure

Civil ProcedureArbitrationUnconscionabilityArbitrabilityFAA9 U.S.C. § 29 U.S.C. § 4arbitrability

Facts

Jackson worked for Rent-A-Center and, as a condition of employment, signed a stand-alone Mutual Agreement to Arbitrate Claims that expressly covered discrimination claims. The agreement also stated that the arbitrator, not any court, had exclusive authority to resolve disputes about the interpretation, applicability, enforceability, or formation of the agreement, including claims that any part was void or voidable. After Jackson filed a federal race discrimination and retaliation action, the employer moved to compel arbitration based on that agreement. Jackson argued the agreement itself was unconscionable, asserting substantive unconscionability based on one-sided claim coverage, discovery, and fee-sharing provisions, and procedural unconscionability because the form contract was imposed as a non-negotiable condition of employment.

Issue

When an arbitration agreement expressly delegates questions of enforceability to the arbitrator, must a court nevertheless decide a party's claim that the arbitration agreement itself is unconscionable? Also, did the district court correctly reject Jackson's substantive unconscionability challenge on the present record?

Rule

When a party specifically challenges an arbitration agreement or its arbitration provisions as unconscionable and therefore invalid, the court must decide that threshold enforceability question under ordinary state-law contract principles, even if the agreement expressly delegates validity or arbitrability to the arbitrator. Under Nevada law, arbitration provisions may be invalidated only if they are both substantively and procedurally unconscionable.

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Lena Ortiz was hired by Cascadia Parcel Logistics in Portland, Oregon. On her first day, she signed a stand-alone arbitration agreement stating that the arbitrator had exclusive authority to decide any dispute about the agreement's validity or enforceability; later, she sued in federal court for sex discrimination and argued that the arbitration agreement itself was unconscionable because it was imposed as a nonnegotiable condition of employment and sharply limited discovery.

Who should decide Lena's unconscionability challenge?

Explanation. When a party specifically challenges the arbitration agreement itself as unconscionable, the court must decide that threshold enforceability issue under ordinary state-law contract principles, even if the agreement expressly delegates validity or arbitrability questions to the arbitrator. The key is that the attack is directed at the arbitration agreement itself, not merely at some larger contract. (Derived from Jackson v. Rent-A-Center, West, Inc. (n.d.).)