In Rent-A-Center, West, Inc., v. Antonio Jackson, the U.S. Supreme Court addressed the issue of whether, under the Federal Arbitration Act (“FAA”), a federal court has the authority to address a party’s claim that an arbitration agreement is unconscionable, where the agreement explicitly delegates that decision to the arbitrator.  The Supreme Court held that courts lack the power to do so, where the party asserting unconscionability does not specifically challenge the delegation provision.

Jackson filed an employment-discrimination suit against his former employer Rent-A-Center, West, Inc (“Rent-A-Center”).  As a condition to his employment, Jackson had signed a Mutual Agreement to Arbitrate Claims (the “Agreement”), which provided for arbitration of all “past, present or future” disputes arising out of Jackson’s employment.  The Agreement also contained a “delegation provision” stating that “[t]he Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable.”

Rent-A-Center filed a motion under the FAA to stay the lawsuit and compel arbitration, which Jackson opposed on the grounds that the Agreement was unconscionable and thus unenforceable under Nevada law.  The district court granted the motion to compel, holding that the Agreement clearly gave the arbitrator exclusive authority to decide the Agreement’s enforceability.  The U.S. Court of Appeals for the Ninth Circuit then reversed, holding that the question of unconscionability was for the court to decide.

In a 5-4 decision, the Supreme Court held that the arbitrator, and not a court, had the authority to address any challenge as to whether the arbitration agreement was unconscionable.  Specifically, the court noted that Jackson’s challenge focused on the Agreement as a whole, not the delegation provision.  As such, the court found it was bound to enforce the delegation provision as valid under Section 2 of the FAA, and any dispute concerning the validity of the Agreement was to be determined by the arbitrator.

Click here to review a copy of the Supreme Court’s decision, captioned Rent-A-Center, West, Inc. v. Jackson, No. 09-497 (2010).