The U.S. Supreme Court's Decision in Rent-A-Center, West, Inc. v. Jackson, 2010 U.S. LEXIS 4981 (2010)

The U.S. Supreme Court's Decision in Rent-A-Center, West, Inc. v. Jackson, 2010 U.S. LEXIS 4981 (2010)

The U.S. Supreme Court held in Rent-A-Center, West, Inc. v. Jackson, 2010 U.S. LEXIS 4981 (2010) that a challenge to the validity of an arbitration agreement that contains a provision delegating to the arbitrator exclusive authority to resolve threshold issues relating to the validity of the arbitration agreement is to be decided by the arbitrator, not a court, unless the challenge is specifically made to the delegation provision itself.

The author writes:

In Rent-A-Center, West, Inc. v. Jackson, 2010 U.S. LEXIS 4981 (decided June 21, 2010), the United States Supreme Court not only affirmed its long-standing commitment to arbitration as a preferred method of dispute resolution, it also constructed an additional barrier that needs to be overcome before a party may seek judicial intervention to determine the validity of an agreement to arbitrate. The Supreme Court held that a challenge to the validity of an arbitration agreement that contains a provision delegating to the arbitrator exclusive authority to resolve threshold issues relating to the validity of the arbitration agreement is to be decided by the arbitrator, not a court, unless the challenge is specifically made to the delegation provision itself.

Pre-Rent-A-Center

To understand the Rent-A-Center decision, it is necessary to consider its context. It has long been settled that a challenge to the validity of an agreement containing an arbitration clause is decided by the court, as opposed to the arbitrator, only if the challenge goes to the validity of the agreement to arbitrate. If, on the other hand, the challenge goes to the validity of the entire agreement, which agreement happens to contain an agreement to arbitrate, the controversy is decided by the arbitrator.

Justice Black famously labeled the decision that fashioned this rule, Prima Paint Corp. v. Flood & Conklin Mfg., 388 U.S. 395 (1967) [enhanced version available to lexis.com subscribersunenhanced version available in lexisONE Free Case Law], as "fantastic." After all, why should an arbitrator have the right to decide an issue if the agreement purporting to confer that right is invalid? Such a rule seems to contravene Federal Arbitration Act (FAA) §2: "A written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. §2

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