AAJ Response to Jackson v. Rent-a-Center SCOTUS Decision

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For Immediate Release: June 21, 2010

Contact: Jamie Hammon
American Association for Justice
202-965-3500 x8369
AAJ Press Room

AAJ Response to Jackson v. Rent-a-Center SCOTUS Decision

Washington, DCThe U.S. Supreme Court today ruled in Jackson v. Rent-a-Center, a case that challenges the validity of forced arbitration clauses and whether they must be decided by the arbitrator instead of the courts. The following is a statement from American Association for Justice President Anthony Tarricone:

“The Supreme Court today gave corporations yet another free pass to submit employees and consumers to abusive forced arbitration proceedings.

“Corporations now have nearly unchecked authority to write, enforce and judge the fairness of their own forced arbitration clauses. The fox is guarding the hen house – at the expense of citizens’ access to the civil justice system.

“It is imperative that Congress pass the Arbitration Fairness Act (S. 931 / H.R. 1020), which would protect consumers and employees from these abusive practices.”

If you would like to speak to an AAJ spokesperson further about the implications of this decision, certainly let me know.

Jackson v. Rent-a-Center: The Case

On April 26, the U.S. Supreme Court will hear arguments for Jackson v. Rent-a-Center, an employment discrimination case involving a challenge to a forced arbitration clause. Antonio Jackson alleged race discrimination and retaliation on the part of his former employer, Rent-a-Center West, Inc. (RAC). RAC said the complaint must be resolved via forced arbitration, per the arbitration contract Jackson signed when hired.

Jackson argued that the forced arbitration clause was unconscionable, and that the issue of unconscionability must be decided by a court, rather than an arbitrator. He says the agreement is unconscionable because:

  • it contains one-sided coverage and discovery provisions;
  • it mandates that the arbitrator’s fee is to be equally shared by the parties (with no fee cap, meaning RAC could drag the arbitration out indefinitely and make it prohibitively expensive for the plaintiff);
  • and because the form contract was presented to him as a non-negotiable condition of his employment.

The district court ruled in favor of RAC. The U.S. Court of Appeals for the Ninth Circuit court reversed the ruling, agreeing that Jackson’s unconscionability challenge should be heard by the court.

Jackson v. Rent-a-Center: The Implications

This case has enormous civil rights implications for workers and consumers. A ruling against the plaintiff in Jackson v. Rent-Center may remove the only legitimate recourse American citizens have in challenging the fairness of forced arbitration contract terms. However unfair and anti-consumer the current arbitration system is, the high court’s decision in this case could make it immeasurably worse.

Though arbitration clauses are generally enforceable, under current law, workers and consumers have the right to go to court and ask a judge to strike down a particularly unfair term by deeming it “unconscionable.” Court review is limited, but this at least weeds out the very worst abuses.

But if the Supreme Court rules in favor of Rent-a-Center, corporations would have free reign to write the courts out of the equation entirely. They could keep all unconscionability challenges under their purview and out of the courts by simply writing into the contract that arbitrators are to handle challenges to forced arbitration clauses. Arbitrators would be the deciders of whether their own systems are fair.

Fox Guards The Hen House

The conflict of interest created would be astounding, as it is obviously in the arbitrators’ best interests to rule in favor of their own systems. If companies have free reign to write forced arbitration terms, enforce the terms, and judge the fairness of the terms, citizens will have no other place to turn. The fox would be guarding the hen house.

Here are three examples of unconscionability challenges that could be affected by this ruling:

  • If an individual wants to challenge that the arbitrator chosen by the company is unfairly biased toward that company, this ruling could mean the same arbitrators would decide whether they are biased.
  • If an individual wants to challenge the fairness of having to fly across the country for the arbitration, this ruling could dictate that he fly across the country to challenge whether it’s unfair to have to fly across the country.
  • If an individual wants to challenge the fairness of having to pay excessive costs for the arbitration, this ruling could require her to pay for the arbitration to ask the arbitrators whether the fee is unfair.

 

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