The U.S. Supreme Court's pro-arbitration trend appears intact after oral arguments Monday in a key case asking whether it should be courts or arbitrators themselves who rule on the enforceability of an arbitration agreement.
Consumer groups say the outcome of the case, Rent-A-Center, West v. Jackson, could determine whether courts have any role in overseeing arbitration clauses in labor agreements, which they see as biased toward employers. Business groups, for their part, don't want courts second-guessing what they see as validly agreed-upon arbitration agreements.
"If companies win, this really will be a watershed case," said Deepak Gupta, an attorney for Public Citizen, which asserts that arbitrators rule against consumers 94 percent of the time.
During the past two decades, the high court has generally ruled to strengthen the enforceability of arbitration agreements. On Monday, few justices appeared eager to change that trend, though several seemed to believe that courts should play some role in checking especially egregious agreements. Dallas lawyer Robert Friedman of Littler Mendelson, representing the business side of the case, urged the Court to continue its practice of "sending very, very complicated matters to the arbitrator" rather than the courts.
But Ian Silverberg of Hardy & Associates in Reno, Nev., who argued for the employee, cast doubt on the impartiality of arbitrators -- so much so that, when Justice Antonin Scalia asked whether an arbitrator could enforce with impunity a "Shylock contract" that allows an employer to "exact a pound of flesh," Silverberg implied that could happen because there is "no adequate review."
Silverberg represented Roberto Jackson, an account manager at a Nevada branch of Rent-A-Center, a rental company. Jackson, who is African-American, claimed he was not promoted because of his race. His employment agreement called for the dispute to go to an arbitrator.
Jackson filed suit in federal court in Nevada nonetheless, arguing the agreement was one-sided and "unconscionable," and therefore could not be enforced. The trial court dismissed the case, finding that, under the arbitration agreement, even the question of its enforceability went to the arbitrator. But the 9th U.S. Circuit Court of Appeals ruled (pdf) for Jackson, holding that the issue of unconscionability should be decided by the courts.
On Monday, Justice Stephen Breyer appeared sympathetic to the employee, asking whether, as a matter of contract rather than arbitration law, an unconscionable agreement warranted court review.
But Chief Justice John Roberts Jr. and Scalia seemed more favorable to employers, with Scalia citing a U.S. Chamber of Commerce brief (pdf) contending that unconscionability claims in courts had snowballed. The brief was written by Donald Falk of Mayer Brown's Palo Alto, Calif., office.
In response, Silverberg cited a brief filed on behalf of "some of the most prestigious arbitrators in the country" who sided with the employee and said courts have a "vital role in maintaining the fairness of the arbitration process." The brief by Kevin Russell of Howe & Russell in Bethesda, Md., said that if issues of arbitrability are not reviewed by courts, arbitration won't have the benefit of precedential court decisions, which help to increase public trust in its fairness.