GUEST-POST | Professor Alan Scott Rau Comments on Rent-A-Center, West, Inc. v. Jackson

By Alan Scott Rau

One really needs a few days to absorb the importance of cases like this—I know instant punditry is increasingly de rigueur, but I’m quite uneasy with it. Anyway, with that caveat, one could say the following: The doctrinal importance of the case seems swamped by the overwhelming reality that arbitration, at least in adhesion contracts, has become something of a political football: Apparently “to decide that classwide arbitration is permitted” is not within the province of arbitrators without some explicit authorization (Stolt-Nielsen), but “to decide that an arbitration clause is unconscionable” is not within the province of courts, as long as the parties have incorporated a boilerplate AAA clause. (Rent-A-Center). It doesn’t take much of an infusion of Legal Realism to see that the conservative proclivities of the 5-justice majority, and the interests of drafting businesses, are in both cases driving the engine.

On the purely doctrinal point, I think Scalia, surprisingly, has the best of the argument. (I say “surprisingly,” because Justices Stevens and Breyer have over the years been by far the most sensible and knowledgeable justices on arbitration matters). Justice Stevens, astonishingly, goes so far as to doubt the validity of the Prima Paint “separability” doctrine, a cornerstone of arbitration learning—calling it “erroneous” and “fantastic” and a mere “pleading standard.” Rent-A-Center is not, of course, about separability at all, but it is about the First Options case: With nothing in the contract, the question of the “unconscionability” of the arbitration clause—here, unconscionability because of “one sidedness,” and because of “limitations on discovery”—would indeed be a matter for the court; however, First Options suggests that this question can be delegated to the arbitrators, and the Court holds that that’s exactly what happened here. Now, it’s not coherent to suggest that everything can be delegated to the arbitrators—it’s meaningless to suggest that a contract could delegate to the arbitrators the power to decide whether an arbitration clause is valid over the objection that one of the parties was insane, or that the arbitration clause was induced by a gun to the head. The “delegation” there is faulty. But that’s not this case, and I see no logical impediment to the parties delegating to the arbitrators the power to decide whether the one-sided operation of the clause is enforceable.

The fault line then, the key to the Scalia opinion —-which follows from the previous paragraph—is Scalia’s distinction between “the very existence of an agreement, the very existence of consent,” on the one hand, and the ” validity of that consent” on the other. He holds that this is a matter for the arbitrator because the former question is not implicated. This is a distinction which is the key also to Scalia’s opinion in the Cardegna case. I have written about this—it seems a rather fine distinction—but as long as the parties could entrust the arbitrators with this decision, First Options would seem satisfied.

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Alan Scott Rau is the Burg Family Professor of Law at The University of Texas at Austin School of Law. He received his BA and LLB from Harvard University. Professor Rau teaches and writes in the areas of Contracts and Alternative Dispute Resolution (particularly Arbitration). He is co-author of Processes of Dispute Resolution: The Role of Lawyers (3rd ed., 2002); ADR and Arbitration: Statutes and Commentary (West, 1998), and Cases and Materials on Contracts (West, 2nd ed. 1992), and the author of several articles, including most recently “The Arbitrability Question Itself” (American Review of International Arbitration, 1999); “La Contractualisation de l’Arbitrage: Le Modele Americain” (Revue de l’Arbitrage, 2001), and “All You Need to Know About Separability in Seventeen Simple Propositions” (American Review of International Arbitration, 2003). He serves on the Commercial and International Panels of the American Arbitration Association, and has been a visiting faculty member at the University of Toronto, China University of Political Science and Law in Beijing, Willamette University College of Law, the University of Geneva; and the Universities of Paris-I and Paris-II. Some of Professor Rau’s scholarly papers may be downloaded at the Social Science Research Network.

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