RENT-A-CENTER WEST, INC. v. JACKSON
Antonio Jackson filed a complaint in the Nevada federal district court alleging race discrimination and retaliation. The employer, Rent-A-Center West, Inc., moved to dismiss the proceedings and compel arbitration. The district court granted the motion to dismiss and compelled arbitration.
On appeal, the U.S. Court of Appeals for the Ninth Circuit held in part that the district court was required to determine in the first instance whether the coverage and discovery provisions of the arbitration agreement were unconscionable.
Is the district court required in all cases to determine whether an arbitration agreement subject to the Federal Arbitration Act is unconscionable, even when the parties to the contract have clearly and unmistakably assigned the issue to an arbitrator for decision?
Legal provision: Federal Arbitration Act
Yes. The Supreme Court held that under the Federal Arbitration Act ("FAA"), where an agreement to arbitrate includes a provision that the arbitrator will determine the enforceability of the agreement, if a party challenges specifically the enforceability of that particular provision, the district court considers the challenge, but if a party challenges the enforceability of the agreement as a whole, the challenge is for the arbitrator. With Justice Antonin Scalia writing for the majority, the Court reasoned that Mr. Jackson challenged the enforceability of the agreement as a whole, and thus, the determination is left to the arbitrator not the district court.
Justice John Paul Stevens, joined by Justices Ruth Bader Ginsburg, Stephen G. Breyer, and Sonia Sotomayor, dissented. He criticized the majority for adopting a position not proposed by either party during briefing or oral arguments.
ORAL ARGUMENT OF ROBERT F. FRIEDMAN ON BEHALF OF THE PETITIONER
Chief Justice John G. Roberts: We'll hear argument first this morning in Case 09-497, Rent-A-Center West v. Jackson.
Mr. Friedman: Thank you, Mr. Chief Justice, and may it please the Court: The agreement between Antonio Jackson and Rent-A-Center should be enforced as written.
There is no statutory impediment to the enforcement of the clear and unmistakable agreement that gives the arbitrator exclusive authority to decide Jackson's challenge to enforceability, nor is there any language in the Federal Arbitration Act that would prohibit the court from making the determination -- prohibit the arbitrator from making the determination of Jackson's challenge to unconscionability.
Through frequent holdings of this Court going back 50 years to the Steelworkers trilogy, this Court has plainly recognized that parties may delegate issues as to scope and validity to the arbitrator in the first instance.
The district court and--
Chief Justice John G. Roberts: But not to the question of which parties have agreed to arbitrate?
Mr. Friedman: --I'm sorry, Your Honor.
Chief Justice John G. Roberts: Not the question of which parties have agreed to arbitrate?
Mr. Friedman: Which parties can be potentially scope issues and which parties potentially as well.
In this case, the issue is enforceability.
And through the holdings of First Options, Howsam, and Bazzle, going back to previous decisions, this Court has held that parties through clear and unmistakable delegation can give that to the arbitrator in the first instance.
Justice Ruth Bader Ginsburg: But if -- if fraud in the inducement, I take it, is considered -- even if you have a very broad arbitration clause, as we do here, fraud in the inducement is considered a question for the court, not the arbitrator; is that right?
Mr. Friedman: That's correct, Justice Ginsburg.
Justice Ruth Bader Ginsburg: So why should unconscionability be treated differently?
Mr. Friedman: Justice Ginsburg, fraud in the inducement, pursuant to Prima Paint, goes to the making of the agreement, and under section 4, the court retains decisions over the making of the agreement.
Unconscionability is a post-formation attack.
It does not go to the very limited inquiry that is anticipated under section 4, of the making--
Justice Anthony Kennedy: Why is it post-formation?
Arguably, the -- one of the parties has such a strong hand that it forces the other party just to decide.
It's almost like -- duress would certainly be for the court, would it not, if it's a formation issue like Justice Ginsburg indicated?
Mr. Friedman: --In some instances, Justice Kennedy, duress could be; for example, a gun to somebody's head.
But procedural unconscionability does not go to the same issues of making.
And, in fact, under Nevada law and this State's laws--
Justice Anthony Kennedy: Well, I'm not sure what procedural unconscionability, but this is -- as Justice Ginsburg indicates, it's not clear to me why this isn't a formation issue.
Mr. Friedman: --Formation is a very basic existential analysis.
It goes to mutual assent.
Did the parties sign the agreement and indicate the desire to be bound by the agreement?
Justice Antonin Scalia: I guess you could argue that on its face the agreement is so one-sided, so unconscionable, that one of the parties must have been coerced into signing it.
I guess you could make that argument, can't -- couldn't you?
Mr. Friedman: --Justice Scalia, you could make that argument--
Justice Antonin Scalia: Has -- has that argument been made here?
Mr. Friedman: --There was an argument made that it was one-sided, but it was the same type of argument that pertains--
Justice Antonin Scalia: Was the argument made that because it was so unconscionable, the employee must have been coerced into making it?
Mr. Friedman: --No, Justice Scalia.
That argument was not--
Justice Antonin Scalia: I didn't think it -- it had been made.
Mr. Friedman: --Getting back to Justice Ginsburg's question about making--
Justice John Paul Stevens: I'm a little puzzled.
What was the argument that was made?
Why was it unconscionable, if not for that reason?
Mr. Friedman: --Justice Stevens, the argument was that there was unequal bargaining power because Mr. Jackson was the -- a putative employee and Rent-A-Center was the employer.
He also complained about a couple of the provisions in the agreement, one pertaining to discovery, one pertaining to an alleged fee-splitting provision in the agreement.
He did not complain as to the terms that Justice Scalia just referred to.
With respect to making, it is a very limited inquiry, and section 4 is the provision in the Federal Arbitration Act that gives a court the power to enforce the arbitration agreement.
Once the court is satisfied that the making is not an issue and the making is a very basic issue, the court, pursuant to the plain language of section 4, must submit the dispute to arbitration.
Justice Sonia Sotomayor: You have--
Mr. Friedman: Now, in some instances, the courts will make decisions as to attacks such as unconscionability.
But in this sense--
Justice Sonia Sotomayor: --Counsel, is your problem with unconscionability being -- as described by the Chief Justice or Justice Scalia, being forced to or coerced into signing something -- that's okay for the courts, but this type of argument that goes to the unfairness of the process, that's for the arbitrator; is that your position?
Mr. Friedman: --That's -- that's right, Justice Sotomayor.
Justice Sonia Sotomayor: So why -- isn't that an unwieldy rule?
Isn't your quarrel with what the court defined as remissible unconscionability as a legal matter, as opposed to trying to parse out what unconscionability means otherwise?
Mr. Friedman: Well, Justice Sotomayor, unconscionability and fairness attacks go to post-formation issues that -- that are--
Justice Sonia Sotomayor: We just gave you one that didn't: If someone was forced into signing the agreement in an unconscionable way.
Mr. Friedman: --But, Justice Sotomayor, if for example it's fraud in the inducement, such as in Prima Paint, that does go to the section 4.
It does go to the making of the agreement because there would not be mutual assent if somebody was forced to enter into the agreement.
In contrast, unconscionability, and certainly the allegations we've seen here against the agreement, go to post-formation complaints, complaints about the fairness of the agreement.
They do not go to the actual, very limited making of the agreement.
Chief Justice John G. Roberts: But I suppose that the substance of the agreement -- maybe this is just the same question as Justice Scalia's.
I suppose the substance of the agreement is evidence -- could be evidence on the unconscionability at formation.
Mr. Friedman: Well--
Chief Justice John G. Roberts: And that is for the court.
Mr. Friedman: --If -- if there is something in the agreement that would indicate that there was not mutual assent, as in somebody put a gun to somebody's head, somebody forced them to do it, that would be for the court.
Chief Justice John G. Roberts: No, the point is -- it's not that.
It would be the -- the provisions are so one-sided that you may assume from that that the formation was not voluntary.
Mr. Friedman: No, Mr. Chief Justice.
Attacks on the fairness and simply pointing to provisions and saying, well, these are very unfair; it must be an indication of it being forced -- no, that would be for the arbitrator to decide, because it's simply an attack on the fairness and there's speculation as to why somebody entered.
And in this agreement--
Justice Antonin Scalia: I don't agree with that.
I mean, if -- if the argument is made -- I gather it wasn't made here, but if the argument is made that this agreement was not voluntary, and the evidence of that involuntariness is how outrageously unfair it is -- now, I'm not sure that that's enough evidence.
You may need some other stuff as well to -- to persuade a court.
But if that is the argument, that the one-sidedness is evidence that the agreement was not voluntary, I don't see how that's for the arbitrator.
Mr. Friedman: --Justice Scalia, under the section 4 analysis, in the making there needs to be some evidence that it was forced, the gun to the head example.
Simply pointing to the language in the agreement as evidence of that would not be enough.
That is an attack on the language of the agreement after it's been formed.
The section 4 analysis is very, very limited, and it goes to these most basic elements.
So the language of the agreement, while certainly the party opposing it will have the opportunity to make the argument it's unconscionable, but that would be for the arbitrator--
Justice Antonin Scalia: You don't think that could be used along with other evidence?
I think all you're saying is that it is not in and of itself enough, that every unfair agreement is not a coerced agreement.
Mr. Friedman: --It certainly would not in and of itself be enough--
Justice Antonin Scalia: But you could use it as evidence if there's other evidence supporting that.
Mr. Friedman: --Your Honor, you would have to look at the objective manifestation of mutual assent.
For example, in this agreement--
Justice Antonin Scalia: I think you can answer that yes or no.
Can you use that in addition to other evidence to show that the agreement was not voluntary?
Mr. Friedman: --Justice Scalia, I don't think so.
I think you would have to look to what transpired at the time the agreement was actually entered into and was made.
Justice John Paul Stevens: And that's no matter how one-sided?
I mean, suppose the agreement provided that the employee shall pay all the costs of arbitration no matter who wins and also at the end of the arbitration shall pay a penalty if he fails to -- it seems to me you could have a really one-sided -- that would not be admissible on the issue?
Mr. Friedman: Justice Stevens, if there is an issue about arbitral access, as in there is a block at the door, you cannot get a ticket to the show, because of some impediment in getting to arbitration in the first place, under the Court's principles announced in Randolph and in First Options, you must have access to the arbitrator.
So in your example, if there is something prohibiting access to the arbitrator, that would be a different story.
Getting back to Justice Scalia's question about the--
Justice Ruth Bader Ginsburg: What about the specific examples he gave, that the -- just take that the -- that the employee must bear all the costs of the arbitration, win or lose, that's the provision.
Would that provision be enough to make the issue one for the court rather than the arbitrator?
Mr. Friedman: --Justice Ginsburg, if it's simply a complaint about the fairness, it would not be.
If the parties--
Justice Ruth Bader Ginsburg: But is it?
We don't need the "if".
Tell me whether you think a provision saying the employee under any and all circumstances pays all costs -- would that provision make this question of unconscionability one for the court rather than the arbitrator?
Mr. Friedman: --It could, Justice Ginsburg.
It would not be a question of arbitrability if the party opposing arbitration can meet the very heavy burden established in Randolph to show that the fees would be -- would prohibit them from actually getting to arbitration.
It would not be simply an attack as we saw here, with no evidence, that we think a term is unfair.
The party opposing arbitration would have to meet their burden.
They would have to put evidence in.
And, for example, in Randolph the Court stated that in certain instances Mrs. Randolph could have put evidence in, and had she put evidence in, which she did not, much as in this case, if she had met her burden to show that she could not have access to arbitration -- in other words, if arbitration is an illusory remedy -- that could be for the court to decide, because, after all, even in the First Options decision, the anticipation is you have a clear and unmistakably delegation that the arbitrator will make a decision, and implicit in that that there is an arbitrator to make that decision.
Justice Stephen G. Breyer: Yes, that's -- that's true.
The thing I was wondering in this case is there's a -- a dispute that's about racial discrimination and so forth.
There's a clause, and the clause says this is arbitrable, but that is being disputed because the plaintiff in the case says that's an unconscionable provision, so it doesn't really apply.
And then you say but now that dispute is referred to the arbitrator to just read the language.
But the plaintiff says that that language, too, is unconscionable, and as long as that language is unconscionable, then how is it clear and unmistakable that they, he, agreed to do it, because an unconscionable provision is not a provision?
So if we apply First Options -- I mean, it's complicated because of the language; it's not complicated once you think it out, and -- I hope.
But just applying it very literally, it would seem to say that you do not have clear and unmistakable evidence that they agreed to submit this kind of dispute to arbitration for the reason that what you point to is itself according to them a product of unconscionability.
How do you -- how do you respond to that?
Mr. Friedman: Justice Breyer, under section 4, which is the enforcement mechanism, the court is limited to make decisions about the making.
Once the making issue is not an issue -- and it has never been an issue in this case; there has never been an allegation the making has been affected -- the court at that point should enforce the agreement pursuant to its terms.
Justice Stephen G. Breyer: Well, making itself could be, but I think that's a harder question, whether a -- certainly if the person says you see my signature there; that's not mine; that's Joe Banana's, who tries to imitate me -- there is no contract, and no matter what it says, it doesn't go to the arbitrator.
Now, we can argue about whether it is or is not analogous to that when he claims it's unconscionable.
There's a very good argument it is analogous.
There's a very good argument it is like fraud in the inducement, and there are some arguments the other way.
But First Options I think cuts through that, by saying whether that's true or not, unless it's clear and unmistakable that they wanted this matter, the matter of whether the arbitration clause itself is unconscionable referred to the arbitrator, whether or not they wanted that referred to the arbitrator has to be clear and unmistakable.
And they are claiming no, because the lack -- the provision that says that is itself a product of unconscionability.
That's to repeat my question.
But, having repeated the question, why isn't that the simplest, most direct, and four-sentence ground for deciding this case?
Mr. Friedman: Justice Breyer, Jackson, first and foremost, did not ever complain that the arbitrability provision, the clear and unmistakable delegation provision, is unconscionable.
Justice Stephen G. Breyer: He's not saying that this whole arbitration clause is unconscionable?
Mr. Friedman: He's complaining that generally it's unconscionable--
Justice Stephen G. Breyer: Well, all right.
So he's -- he's complaining the whole clause is unconscionable, and that's part of the clause.
Mr. Friedman: --Justice Breyer, this is really very similar to First Options, in which the party said: I'm not party to the agreement; the scope does not cover--
Justice Stephen G. Breyer: Yes, and in First Options, we said it wasn't clear and unmistakable.
Mr. Friedman: --The Court said it was not, but in First Options the Court set out the rule--
Justice Stephen G. Breyer: And the rules were what I just described.
Mr. Friedman: --The rule is -- in this case, there is language that has never been contested, and that language clearly and unmistakably says that the arbitrator has exclusive authority.
That language has never been attacked.
And as to the issue of unconscionability, pursuant to section 4, which gives the court the authority to send the arbitration to the arbitrator, the court should do exactly that.
It should send it to the arbitrator once the making issue is satisfied, and then the arbitrator can make that decision.
Chief Justice John G. Roberts: So your position is that the arbitrator gets to decide questions of unconscionability, but the court gets to decide whether the arbitrator can do that?
Mr. Friedman: In some instances, Justice Roberts -- Mr. Chief Justice, that is correct.
The court must decide whether the agreement is made.
The court must also decide whether there was a clear and unmistakable delegation.
So under First Options and the cases that interpret it and the cases before it, the court must make the initial determination of whether there is a clear and unmistakable delegation.
Justice Anthony Kennedy: Well, do you understand -- and we can ask the Respondent.
But, as you understand Jackson's case, is he saying that part of the clause, part of the arbitration clause, is unconscionable, that the whole clause is unconscionable or that the whole contract is unconscionable?
Mr. Friedman: He has made generalized--
Justice Anthony Kennedy: Because the complaint is a bare-bones complaint, and I don't know if there's anything in the pleadings that reflects what his answer to that question would be.
Mr. Friedman: --Justice Kennedy, he has attacked certain provisions specifically of the agreement.
He is arguing about the discovery provision.
He is arguing about the fees provision.
And he is arguing about certain terms excluding claims, that bilaterally exclude claims.
So he has attacked about three provisions of the agreement specifically.
Justice Ruth Bader Ginsburg: But all of the arbitration agreement, not the employment contract as a whole.
Mr. Friedman: Justice Ginsburg, it is a stand-alone four-page arbitration agreement.
Justice Stephen G. Breyer: So let's go back to that.
Maybe the other way is simpler.
You say you agree that if my defense to this contract, which you are trying to enforce against me or which gives me a right to sue you, look at the argument, you put up this four-page document, and I say: Look, that is not my signature; that is the signature of Joe Bananas.
We agree that's for the court.
Mr. Friedman: --We agree, Justice Breyer.
Justice Stephen G. Breyer: Okay.
Now, we agree it's for the court if my defense is, what he did is he got me drunk, told me a bunch of lies, and I signed it.
I grant it's my signature, but look at how squiggly it is.
And my will was not a free one because I was under the influence of alcohol and lies.
Mr. Friedman: We agree--
Justice Stephen G. Breyer: Okay.
That's Prima Paint.
Mr. Friedman: --because that's part of the fraud issue.
Justice Stephen G. Breyer: Okay?
Now, he says the reason that I did not sign this contract -- I agree it's my signature; I agree it is not squiggly -- but still my will was overborne.
What was it overborne by?
It was overborne by those very situations that lead courts to label contracts unconscionable.
The reason we don't enforce unconscionable contract is because the person who was the victim had no free will.
He did not sign it of his own accord.
And that doesn't -- there's no other reason, and that's the basic reason, and therefore assimilate it to the other two.
What's your response?
Mr. Friedman: No, Justice Breyer, that would be a very different situation.
That would be allegations of procedural unconscionability, unequal bargaining power, and in fact--
Justice Antonin Scalia: Do you agree that a contract cannot be unconscionable unless it was coerced, that a finding of unconscionability is the same as a finding of coercion?
You don't agree with that, do you?
Mr. Friedman: --No, there could be other types of unconscionability.
Justice Stephen G. Breyer: Yes, but that's what I want the answer to.
I know you don't agree with it.
What I want is a list of reasons why.
Mr. Friedman: With respect to procedural unconscionability, issues of unequal economic bargaining power, which is essentially what we have here -- those are non-issues that cannot be addressed by the arbitrator.
And, in fact, under Nevada law, Justice Breyer, an allegation of procedural unconscionability, no matter how procedural--
Justice Stephen G. Breyer: But I'm not interested in arbitration law.
I'm interested in contract law, and I want to know why as a general matter of contract law an allegation of unconscionability, defense of unconscionability, is why is it not enough like the coercion defense or the inducement defense or the "I was in Alaska" defense?
Isn't it enough like that that they should be treated alike?
And now you're going to say no, and I want to know why not.
Mr. Friedman: --It does not rise to the same level as something that's fraudulent or something that is forced with a gun to your head--
Chief Justice John G. Roberts: I would have thought the answer to your -- the answer to your answer would be, well then, the -- you're more likely to win on that question.
Obviously, you are going to lose on the gun to the head, but if it's simply the economic inequality or whatever, under the State law you're probably going to prevail, and they will say there is a valid contract.
I thought the -- your -- your whole point was simply it's all or nothing.
The courts get to decide is there a valid contract or is there not.
And once they decide there is, then everything else about unconscionability of particular clauses is for the arbitrator.
Mr. Friedman: --Mr. Chief Justice, most everything is for the arbitrator, and I want to distinguish between unconscionability, as Justice Breyer is referring to, and access issues and issues that go to the making, because there is a very bright line.
Making issues go to the actual formation, mutual assent, and there is obviously no mutual assent if you have a gun to your head.
But issues such as, well, this is unfair, I may have to do this, speculation is simply not enough to -- to pertain to the making of the agreement, nor is an issue about an impossibly burdensome access to the arbitration.
Justice Antonin Scalia: Can you--
Justice Ruth Bader Ginsburg: Mr. Friedman, this contract is -- is unusual in that, as Judge Hall said, it was more employee-friendly than most.
It had a clause -- it had a provision for back-end review with the court.
The review -- at the end of the line, there was to be court review, and as the parties said, it should be just like review of a district court decision, a much -- much more focused review than would be in the case of an arbitration agreement.
Now, that clause comes out because of our decision in Hall.
That leaves the -- the arbitration agreement in -- in an imbalance.
There was court review assured at the back end.
So why isn't it reasonable to say the parties contemplated vigorous court review; if it can't be had at the back end, it should be had at the front end?
Mr. Friedman: Justice Ginsburg, there will be court review at the end pursuant to section 10.
As a result of Hall Street, section 10 is now the exclusive basis on the tail end--
Justice Ruth Bader Ginsburg: But it was very limited review.
But the parties to this agreement put in a clause that provided for the standard review, not the very limited review that the Arbitration Act calls for.
Mr. Friedman: --That's correct, Justice Ginsburg.
But by operation of law and because of this Court's decision in Hall Street, now the parties will receive the section 10 review, much as they would in the First Options case.
Justice Antonin Scalia: --Once again, has this argument been made here?
I thought that the only basis was unconscionability.
I suppose you could have made the argument that the contract is void because one of its essential provisions has been rendered unlawful and, therefore -- and is not severable, and, therefore, the whole contract fails.
I suppose you could make that argument.
That hasn't been made, has it?
Mr. Friedman: Justice Scalia, that's absolutely correct.
There has been no argument, in fact, at no time -- and it would have -- the proper place would have been the district court -- was any evidence ever put into the record--
Justice Ruth Bader Ginsburg: How could it be in the district court?
We didn't decide Hall Street until after the district court was finished in this case.
Mr. Friedman: --But, Justice Ginsburg, at the district court no evidence of any sort attacking any provision.
The only attacks here on the provisions are the arguments that were made by my colleague in the brief--
Justice Ruth Bader Ginsburg: I thought you were making, in answer to Justice Scalia, the question -- he said, well, they didn't raise it.
They didn't raise that with this provision out, it was an essential provision, so the contract was void.
They had no reason to make that in the district court because Hall Street was not yet decided.
Mr. Friedman: --Justice Ginsburg, my point simply is they put in no evidence of any sort attacking anything.
Justice Antonin Scalia: Can they make it here now?
Can they make -- I mean, even if they had -- you know, even if there was no reason to make it in the district court, is the law--
Mr. Friedman: --I -- I--
Justice Antonin Scalia: --that since they didn't have an opportunity to make it in the district court, they can make it in the Supreme Court?
Mr. Friedman: --Justice Scalia, they could make that argument before the arbitrator, and the arbitrator could make that decision.
Under the clear and unmistakable delegation, that issue, like other issues, should be decided by the arbitrator.
Nobody is contesting -- at least certainly nobody contested prior to us getting to the Supreme Court -- both the district court and the Ninth Circuit held that the language was clear and unmistakable.
There was never any contest to that issue until we got here.
And because of the clear and unmistakable language and because the agreement does not implicate the making, we asked the court to enforce the terms of the agreement as written and pursuant to Bazzle and Howsam.
In particular, in Bazzle the Court recognized that issues as to scope and issues as to validity can go to the arbitrator in the first instance.
Here, there can be no doubt -- and certainly there was no doubt at the district court level and Ninth Circuit -- that the parties clearly and unmistakably gave the arbitrator exclusive authority.
And we're asking the Court to give effect to that language.
The -- the -- the primary purpose of the Federal Arbitration Act is to enforce arbitration agreements pursuant to their terms.
Here, there's no real dispute about what the terms are.
Under section 4, a limited inquiry, once we have satisfied section 4 the court should proceed to send us to the arbitrator.
Nobody is arguing that Mr. Jackson can't make these challenges once he gets to arbitration.
In fact, he certainly can.
And the arbitrator will make that decision.
And the arbitrator may decide that it is unconscionable, in which case he'll set it down.
Or he may decide -- or he or she may decide that it's not unconscionable, or he or she may decide that certain terms are problematic and to sever those.
At this point, if there's no other questions, I'd like to reserve my remaining my time.
Chief Justice John G. Roberts: Thank you, counsel.
ORAL ARGUMENT OF IAN E. SILVERBERG ON BEHALF OF THE RESPONDENT
Mr. Silverberg: Thank you, Mr. Chief Justice, and may it please the Court: The Petitioner would have the Court adopt a rule whereby agreements to arbitrate are presumed enforceable before their validity has been determined by a court under section 2 of the Federal Arbitration Act.
They would have people like Mr. Jackson waive their right to go to court through the use of a clause delegating this judicial function to the arbitrator.
Justice Sonia Sotomayor: Could you describe for us what is unconscionable about this contract?
What is your claim of unconscionability?
He says it's not arbitration per se; it's just certain of the provisions here; if you change the provisions, I'm happy with arbitration.
Is that your position?
Mr. Silverberg: Yes, Your Honor, that -- that what is unconscionable about this is it's unusually one-sided in that the issues that are most important to Mr. Jackson, such as his racial discrimination case, he is required to arbitrate, but those issues that might be most important to the Petitioner, such as trade secrets and unfair competition, they are not bound to arbitrate.
Chief Justice John G. Roberts: I would have thought the issue would be -- it's odd to say, I think, that if you have 10 provisions, some are unconscionable and some are not.
The issue would be whether there is unconscionability in the making of the whole contract.
In other words, it's the same question I asked your friend: Why isn't it all or nothing?
If it was -- if there was no unconscionability in the making, then the arbitrator decides.
If there was unconscionability in the making, then -- then the arbitrator doesn't decide anything.
Questions 1 through 10, not simply, you know, 1, 8, and 9.
Mr. Silverberg: --If I understand Your Honor's question, the -- the threshold determination must first be made by the court under section 2 as to whether there is unconscionability either of the entire agreement or any of the provisions.
It would then, assuming that were found, that some provisions were in fact unconscionable, it would be on State law to determine whether or not the entire agreement gets thrown out--
Chief Justice John G. Roberts: No, my point is that once you get past that gateway question of whether the formation of the contract was not unconscionable, then claims that particular provisions were unconscionable are by definition for the arbitrator to decide.
Mr. Silverberg: --No, we would disagree with that, and here's why, Your Honor, and I think this goes to something that Justice Sotomayor asked, which is it creates a very difficult rule to deal with.
The Petitioners here, one, they have made a huge concession, we believe, in their reply brief by saying that if there's an illusory remedy, that that is a section of unconscionability that the court can hear and must hear.
But all these other--
Justice Ruth Bader Ginsburg: Why is that -- why is that a big concession, because I thought, as the First Circuit said, if argument is the -- the contract is illusory, that goes to the court, but here the only claim is unconscionability.
That's a question of fairness.
It doesn't go to the court.
Mr. Silverberg: --The -- the reason it's a concession is because that's not their original position and that's not the question that they presented to this Court.
Justice Ruth Bader Ginsburg: But if they -- if they made that concession, so what, under the First Circuit's reading?
Mr. Silverberg: The First Circuit, Your Honor, we believe did not interpret this correctly.
They have, we believe, carved out a section of unconscionability law at the exclusion of all other unconscionability law.
We know that States and Federal courts have routinely applied State unconscionability law, and they would have a rule whereby all this jurisprudence of the States delineating unconscionability law would in essence be preempted.
Justice Antonin Scalia: Is that -- is that right?
Is the arbitrator free to decide unconscionability in a vacuum without taking into account State law at all?
And doesn't he get reviewed afterwards by the State court on the basis of a much more lenient standard than -- than if the court decided it de novo.
But can he really disregard State law regarding unconscionability?
Mr. Silverberg: Well, the problem is, Your Honor, and if I understand Your Honor's question correctly, that determination must of course be made by the court, because the arbitrator doesn't have any authority to do anything until the requirements of section 2 are met.
And I hope I'm understanding Your Honor's question.
Justice Antonin Scalia: No -- I mean, you -- I thought you were saying that if we allow this to go to the arbitrator, the arbitrator can simply disregard the question of unconscionability.
Mr. Silverberg: That -- in essence, yes.
Justice Antonin Scalia: And that's not my understanding.
My understanding is that he's -- he is obliged to take account of State law regarding unconscionability, but it's going to be his call, as it would be the district judge's call if this had gone to court, whether in fact this is unconscionable.
Afterwards, there will be court review.
And if he has totally disregarded all State law regarding unconscionability, wouldn't -- wouldn't you have a basis to set aside the -- the arbitration?
Mr. Silverberg: Respectfully, I -- I disagree with that, and here's why, Your Honor: The back-end review -- presumably it would be, I believe, under section 10(a)(4) that he exceeded his authority.
And once the arbitrator is empanelled under the Federal -- under section 2, once he is authorized to make any decisions at all, including the issue that the Petitioner would have him decide of unconscionability and arbitrability, it would be impossible for anyone to say he has exceeded his authority.
Justice Antonin Scalia: That doesn't mean -- does that mean he can disregard -- let's assume the contract is a contract to maim.
I mean, it -- you know, it's -- it's like -- it's a Shylock contract, okay?
He's going to be able to exact a pound of flesh.
Now, there are State laws which invalidate contracts to maim.
Do you think that the arbitrator can ignore that, and say, well, you know, I don't really think it's so bad; a pound of flesh sounds reasonable to me?
Mr. Silverberg: I think the concern is, Your Honor, and it's hard to draw the line--
Justice Antonin Scalia: Can he ignore the State law?
Mr. Silverberg: --I think there's no adequate review if he chooses to without the court's review of--
Justice Antonin Scalia: Is that right?
You don't think a State court would in the blink of an eye set aside an arbitration that allowed a -- a pound of flesh?
Mr. Silverberg: --Your Honor, I would hope they would, but I -- in reading the narrow review of section 9, 10, and 11, I don't think we have that guarantee.
Justice Antonin Scalia: I think you have a misunderstanding of the law, then, if that's what you believe.
I -- I think there's no doubt what would happen in that case.
Justice Stephen G. Breyer: What is -- what I'm not sure about what you are arguing now is my -- as I came into this, I thought there were three situations.
Situation 1 is common in labor arbitration.
It's an arbitration agreement that says wages, hours, and working conditions disputes will be arbitrated, and we have a question about whether a particular dispute is or is not full within the definition.
Mr. Silverberg: Right.
Justice Stephen G. Breyer: As to that one, we assume that the parties intended the question of arbitrability to be arbitrated; we assume it.
Normally, that's the rule.
It's the scope of the arbitration agreement.
That's a little hard to distinguish, but sometimes that's not the argument.
The argument could be: Well, there are four different provisions in the arbitration section, and we think one of them is void because it's, say, unconscionable, but the others are okay.
Now, that one, I mean, normally, you could if it's clear enough say I want that one to go to arbitration.
And the third one is that you have a contract, and it's an arbitration contract, and it's on four separate pieces of paper, and what you're saying is, I was in Alaska, or the equivalent, and maybe unconscionability is the equivalent.
On that one I'm with you.
I don't see how you can submit -- agree to submit that to the arbitrator, because there's no agreement, or at least no valid one, at least no valid one under State law.
But what are you arguing?
That this is that case or this is the other case I just mentioned, that middle case where you have 10 provisions and you're saying that this one over here is unconscionable but that one isn't; and -- but I did sign a valid arbitration agreement.
I agree with that.
It's just that certain provisions of it are invalid because they're unfair.
What are you arguing in this case?
Mr. Silverberg: That -- Your Honor, it would be the second one.
That there are issues--
Justice Stephen G. Breyer: Well, the second one -- I don't see how you get there, because if it's the second, one you concede that there is an arbitration agreement that's valid.
And if you concede that there is a valid arbitration agreement between you and your client, and you're arguing over the scope of different provisions or whether certain provisions within it are valid or invalid, why can't you submit that to an arbitrator if it's clear enough?
Mr. Silverberg: --But we don't concede that, Your Honor.
That's the whole point, is that the court must make that threshold determination.
Justice Stephen G. Breyer: As to each provision?
As to each bit of -- why?
Mr. Silverberg: Because that's the mandate of section 2.
The arbitrator derives his authority--
Justice Stephen G. Breyer: But suppose you and your -- your client -- rather, your client and the other side have absolutely agreed, clear as could be, under the arbitration agreement: We want arbitrated too whether the provision that these words are contained in is unconscionable.
Can't they agree to that?
Mr. Silverberg: --Your Honor, the parties are -- don't necessarily have to take every issue to court, but should a party challenge that issue as unconscionable, that door should remain open.
This case is not so much -- it is about our case here, but there's a bigger picture here.
Justice Stephen G. Breyer: Okay.
Let me say it more easily.
We have agreement number one, four pages, and within it is a question of -- which just looks like this one.
Agreement number two: The two parties agree that if any dispute should arise as to whether any words in agreement number one are unconscionable, they will go to the arbitrator.
Agreement number two is concededly valid.
Now do you want to say that agreement number one -- those words have to be decided by the court?
Mr. Silverberg: Your Honor, it is our position that -- that the threshold determination as to the validity of the contract--
Justice Stephen G. Breyer: Right, but if you're going to say yes--
Mr. Silverberg: --would go the court.
Justice Stephen G. Breyer: --then I think if you're going to say yes to that, then it's contrary to First Options, I think.
I'm not sure, but I don't see why not.
Mr. Silverberg: Well, Your Honor, I think that what Your Honor is describing is the first part of First Options that looked -- and that's what the Petitioner would like to rely on, is objective contract language.
But then the Court adds the entire other section which says we don't presume that parties intend to arbitrate certain matters and -- because we're not yet at that scope -- but we want clear and unmistakable language, not just objective language in the contract.
And there's an important reason for that, because it's impossible to draw the line.
You're carving out certain issues of unconscionability--
Justice Anthony Kennedy: After this--
Mr. Silverberg: --saying both--
Justice Anthony Kennedy: --After this suit was filed and both parties are going up the steps to the court, could the attorneys and the parties stop and say let's arbitrate this issue of unconscionability and pick an arbitrator?
Could they do that?
Mr. Silverberg: --They -- I think the answer there would be yes, but the door needs to be open in case there is a challenge, Your Honor.
Certainly, nobody is--
Justice Anthony Kennedy: No, then -- then the--
Mr. Silverberg: --required to go to court.
Justice Anthony Kennedy: --Then the employee loses.
He says: Oh, you have to have an open door; this was -- this was not properly before the arbitrator.
Mr. Silverberg: I think if Your Honor is asking--
Justice Anthony Kennedy: Because, you see, if you say yes, that they can arbitrate this, then the question is why can't they do it when the contract's signed?
Mr. Silverberg: --Again, Your Honor--
Justice Anthony Kennedy: Let's assume that the answer to my question is yes, they can put that to an arbitrator.
If that's so, how can you prevail in this case if the agreement clearly comprehends submission of this issue to the arbitrator?
Mr. Silverberg: --Well, we don't concede that it clearly does that.
We -- what our position is--
Justice Anthony Kennedy: I'm -- I'm asking, assume you do?
Mr. Silverberg: --I don't think that gets us around the requirements of section 2, Your Honor, that says the court and the doors to the court must always remain open for that.
Chief Justice John G. Roberts: I thought your--
Mr. Silverberg: I hope I'm understanding your question.
Justice Ruth Bader Ginsburg: Mr. Silverberg, the section 2 on which you place much emphasis just says that agreements are enforceable save on such grounds as exist in law or equity for revocation of a contract.
But the section 2 doesn't say any -- anything about who decides that question.
Mr. Silverberg: That's true, Your Honor, the -- but the logical reading of that statute would indicate that these three elements -- a writing, in interstate commerce, and not revocable at law and equity -- would have to be met before the arbitrator has any authority to do anything.
And as Your Honor mentioned in the -- in the Doctor's Associates case, there are certain issues that are certainly involved, and unconscionability is one of those issues that can be presented to the court without violating section 2, as well as fraud and duress, I believe, were the other ones that the Court had -- had delineated in that case.
Justice Stephen G. Breyer: I read your -- I promise you I'll go back to First Options, which I thought was of gem-like clarity--
And I am apparently the only one in the world--
Mr. Silverberg: That's because it was well argued.
Justice Stephen G. Breyer: --the only one in the world who thinks that.
And I'll go back to--
Justice Antonin Scalia: You wrote that, didn't you?
Didn't you write that opinion?
Justice Stephen G. Breyer: --I'll go back to that and look at it.
But the -- the--
Looking at your response to their motion to arbitrate--
Mr. Silverberg: Yes.
Justice Stephen G. Breyer: --it seemed to me you said here that -- that because of your -- your position, your client's position, that the whole thing is unconscionable.
You didn't say that?
Mr. Silverberg: Well, we said that -- it was certainly my position that the entire agreement was unconscionable based on Nevada law--
Justice Stephen G. Breyer: Yes.
Mr. Silverberg: --And that it was so incredibly one-sided, and also the limited discovery provisions, and also because, frankly, we are not looking to treat this anything other than like we would ordinary contract law that also strikes one-sided provisions in -- for example, in Nevada, the Fick case, which would strike down a one-sided prenuptial agreement, or lease agreements that have one-sided attorney fee provisions are routinely struck down as one-sided.
So their position--
Justice Anthony Kennedy: But which is the stronger case for arbitration?
Case one, you attack the arbitration clause only, part of the arbitration contract only, as being unconscionable.
Case two, you attack the whole agreement as being unconscionable.
Do those both stand on the same footing, or is one a stronger case for submission to the court than the other?
Mr. Silverberg: --I think this Court has made clear in the severability cases that challenges to the contract as a whole would go to the arbitrator to decide.
We have here, as Petitioner admits to--
Justice Anthony Kennedy: I find that somewhat paradoxical, but I -- I agree that that -- that that's the law.
Mr. Silverberg: --So the stronger one would be an -- as this case, which we believe is very strong, an attack--
Justice Anthony Kennedy: So if you do go to the State court, suppose the State court says: I can't really decide this question about the one clause unless I determine the conscionability or the unconscionability of the entire contract, and I now proceed to do that.
Do you have to wait and say: Stop, you can't do that?
Mr. Silverberg: --I think that's what sections 3 and 4 contemplate, is for -- and they have been in existence since the passage of the Act -- for parties to come in and make their case as to whether or not the FAA would apply or not apply.
Justice Anthony Kennedy: But suppose the State court judge says that he has to look at the whole contract.
Do you say: Oh, I'm sorry to bother you; we have to go back to the arbitrator now?
Mr. Silverberg: That's not the situation in this case, but assuming it were--
Justice Anthony Kennedy: What's your -- no, it's a hypothetical case.
Mr. Silverberg: --I understand.
Justice Anthony Kennedy: What would your position be in the hypothetical case, representing your client?
Mr. Silverberg: Representing my client, who is Mr. Jackson, I would want the court to look at the whole thing, but if I were in the Petitioner's shoes I think I would have an argument that, based on this Court's precedent--
Justice Anthony Kennedy: And what do you think the judge should decide as between those two possibilities?
Mr. Silverberg: --If it's an attack on the contract as a whole, it should go to the arbitrator.
I think that's clear from many of the Court's cases; whereas, if the attack is to the arbitration clause itself, that is something for the court to decide and determine--
Justice Sonia Sotomayor: Counsel, I think I heard Justice Kennedy's question to be -- let's not confuse the contract as a whole.
There's only one contract here.
Mr. Silverberg: --Correct.
Justice Sonia Sotomayor: It's an agreement to arbitrate.
Mr. Silverberg: Yes, Your Honor.
Justice Sonia Sotomayor: So an attack on the -- as I think Justice Breyer noted, you -- an argument that it's one-sided goes to the entire arbitration agreement.
I don't want to arbitrate because that's not what I chose to do freely.
Mr. Silverberg: Correct.
Justice Sonia Sotomayor: That, you say, is for the court.
Mr. Silverberg: Yes, Your Honor.
Justice Sonia Sotomayor: The difference here is that there are provisions within how the arbitration is going to be held that, standing alone, you think are unconscionable, even though the agreement to arbitrate is not.
Am I correct in understanding your allegation?
Mr. Silverberg: No, Your Honor.
Respectfully, it's our position that both are present.
There are certain elements of the arbitration agreement that are unconscionable and, under Nevada law, which would render the entire arbitration agreement unconscionable.
Justice Sonia Sotomayor: You see, that's what I'm confused by, because when I first asked you this question, you said: I would be happy to arbitrate if the court struck the discovery provision and, I guess, the fees provision.
Which answer are you giving me?
Mr. Silverberg: I'm giving you the one I just gave you, I think, Your Honor, which is we've got both certain provisions that are unconscionable, that under Nevada law render the entire agreement unconscionable--
Justice Sonia Sotomayor: Okay.
Mr. Silverberg: --and that's what the Court is to rely on.
Justice Sonia Sotomayor: --Okay.
That -- now I understand that part of your argument.
But let's assume that that wasn't Nevada law, that Nevada law would say severability works, and there is an agreement to arbitrate, and all we have to or could do is strike the unfair provisions.
Let's assume that situation.
Who decides whether to strike the unfair provisions?
Mr. Silverberg: That would be the court under our position, Your Honor, and that--
Chief Justice John G. Roberts: --No, that can't be right.
The -- how can you say there's no problem agreeing to arbitrate, no imbalance in bargaining authority whatever, but then say, oh, but these procedures are unconscionable?
It seems to me that the procedures are there, and the party, the employee, whatever, can look at those.
And if he says, well, that's unconscionable, you don't sign the agreement as a whole.
But once you are -- in for a penny, in for a pound.
If you agree to arbitrate, then it's at least for the arbitrator to decide particular provisions, whether they're unconscionable.
Mr. Silverberg: --Well--
Chief Justice John G. Roberts: I know you're arguing in the alternative.
But the one argument that we get to pick out the provisions we don't like and say those are unconscionable, but the agreement as a whole is not -- that seems to me illogical.
Mr. Silverberg: --Your Honor, that is our position.
I hope I am understanding your question.
But this is a matter of State law as to which provisions would render the entire agreement unconscionable.
And I think that body of unconscionability law is not so varied that we would have unwieldy results.
I think State--
Chief Justice John G. Roberts: Well, it's a matter -- it may be a matter of State law, but the open question is who gets to decide it.
Mr. Silverberg: --Right, and our--
Chief Justice John G. Roberts: Arbitrators decide matters of State law all the time.
Mr. Silverberg: --Certainly, they do.
Certainly, they do.
But before they have that authority to even do that, the requirements, again, of section 2 have to be met.
And that is our position in this matter.
Justice Antonin Scalia: Let's assume Nevada law says you cannot -- you cannot fire somebody for coming in late to work any fewer than 10 times, all right?
And an individual is fired.
He goes to arbitration, or at least the company tries to take him to arbitration on it.
And he says, no, because I was fired in violation of Nevada law.
Now, is it your position that that -- that that case would have to go immediately to court and could not submit to the arbitrator the issue of whether indeed he was fired for coming less than 10 times, and indeed whether if he was coming in less than 10 times, that would be an invalid basis for a dismissal?
Mr. Silverberg: --No, Your Honor, and here's why: I think Your Honor has described a situation similar to -- I believe that was the Green Tree situation, where there was an allegation that the entire contract was illegal, the usurious contract.
But there was no question as to the making of the agreement to arbitrate.
So, in Your Honor's hypothetical, if there is no dispute as to the arbitration agreement being subject to a ground of revocation at law or at equity as defined in section 2, then I would -- I would concede that that was something that would go to the arbitrator, Your Honor.
Justice Antonin Scalia: Well, your -- your position seems to be that unconscionability is the same as coercion in the making of the agreement.
And I don't know that that's true.
Mr. Silverberg: Well, Your Honor, respectfully, in Doctor's Associates, I think the Court spoke very clearly that fraud, duress, and unconscionability are there and are part of something that can be raised under section 2.
And also the Court's hold in Prima Paint--
Justice Antonin Scalia: No, I don't care what we--
Mr. Silverberg: --where fraud--
Justice Antonin Scalia: --I don't care what we said in dictum.
It doesn't seem to me that unconscionability is the same as duress or the same as fraud--
Mr. Silverberg: --To -- oh, I'm sorry.
Justice Antonin Scalia: --that you can -- you can be a stupid person who voluntarily signs an unconscionable contract.
Now, the courts may protect you because you're stupid, but you haven't been coerced.
Is there no distinction between unconscionability and coercion?
Mr. Silverberg: Not under section 2, Your Honor.
I think the -- the definition that the Petitioner would have this Court adopt, that narrow view of making -- again, something Justice Sotomayor brought up -- would create a rule where certain unconscionability challenges went to the court--
Justice Antonin Scalia: Why is that?
Mr. Silverberg: --and other unconscionability challenges didn't go to the court.
Justice Antonin Scalia: Why is that?
I would say all unconscionability challenges, if you have an agreement that's as clear as this one, would go to the arbitrator.
Which ones would have to go to the court?
Mr. Silverberg: All of them should go to the court, Your Honor, based on this Court's holding both in Doctor's Associates and Prima Paint, in that both fraud in the inducement, like in Prima Paint, and unconscionability envision a situation where you've got a formed contract that people can choose to opt out of.
I may be subject to a contract that was induced by fraud, but I may like the benefit of that bargain.
So I may be able to go ahead with that.
And same with an unconscionability challenge.
We've got an agreement that was made that -- that the innocent party can decide to opt out of.
And I think that's very consistent with this Court's holding and with what the various State courts have been doing in reliance on those holdings.
Justice Stephen G. Breyer: But not every contract.
I mean, I'll take that argument.
I'd like to know about that argument.
I'd like to know what really is the underlying, which I've never looked up.
What is the underlying rationale in contract law of setting aside contracts as unconscionable?
Why do courts do it?
What's the theory?
I'd like to know that.
Mr. Silverberg: My understanding is that it's so unfair that it couldn't really be said that a party assented to -- to that.
And I think that's what--
Justice Stephen G. Breyer: See, that's what I wonder, that last part -- is it that the basic theory is we want to protect a group of people by -- who voluntarily entered into contracts by giving them the right to opt out, or is is that we don't think that they really meant to do it?
Mr. Silverberg: --It's the latter, Your Honor.
I think if they really chose to--
Justice Stephen G. Breyer: Okay.
On that question, or any other question, is, I would imagine, where we have agreement one, and the argument is maybe agreement one was unconscionable.
And then we enter into agreement two, and the parties in agreement two agree to -- to arbitrate their unconscionability dispute in agreement one, and there's nothing wrong with agreement two, I would think that's then the question of unconscionability is for the arbitrator.
Mr. Silverberg: --If I understand your question--
Justice Stephen G. Breyer: You said "all", and I just don't think you meant all.
But maybe you did.
That's why I asked the question.
Mr. Silverberg: --I -- I think that the safe thing to do is to keep the door open to people, especially in situations like this, where there is such unequal bargaining power, where people are presented with a nonnegotiable term of their employment--
Justice John Paul Stevens: May I ask this kind of elementary question?
Mr. Silverberg: --Yes, Your Honor.
Justice John Paul Stevens: Are there cases out there that hold that an agreement can be partially unconscionable, that it's unconscionable for some clauses but not in its -- in its entirety?
Mr. Silverberg: Certainly.
And I think that would be matter of State law, again, to determine when there--
Justice John Paul Stevens: But there are cases that -- that draw that distinction?
Mr. Silverberg: --I'm sorry.
Justice John Paul Stevens: There are cases drawing that very elementary distinction?
Mr. Silverberg: I believe so, Your Honor.
I think in Nevada you would -- if we had maybe just one unconscionable clause, that the court might sever and send the rest to the -- and validate the rest of the arbitration agreement.
But then when -- certain -- any number of clauses, depending on State law, would make the entire agreement to arbitrate unconscionable.
Chief Justice John G. Roberts: Does it make a difference in response to Justice Stevens's hypothetical that there is a provision saying the arbitrator will decide the conscionability of all clauses?
The arbitrator may decide that clauses 2 and 8 are unconscionable, but if there's an agreement and it's not unconscionable that the arbitrator will decide, then the arbitrator decides all of them, right?
Mr. Silverberg: If the agreement -- I think I understand your question.
If the agreement to arbitrate itself is not--
Chief Justice John G. Roberts: Right.
Mr. Silverberg: --there's no unconscionability challenge to that, and there's no other fraud in the inducement or any other thing that the court has mentioned it would go to the broader view of making the grounds for revocation, if those grounds for revocation are not present, then I believe the arbitrator would be empowered to make those decisions, Your Honor.
Chief Justice John G. Roberts: Can I ask you just a follow-up on Justice Breyer's hypothetical to you where he had the first agreement and then the issue to the second?
You said you've got to leave the door open.
The door open on the second agreement or on the first agreement?
Mr. Silverberg: I think the door should be open on all the agreements, because until that door is open under section 2 -- as long as that door is open under section 2, then we don't have the concern about parties making the terms of arbitration so onerous or burdensome that they would not be able to even access the arbitral forum.
And that's really a huge concern in -- in not just in this case, but in the bigger picture.
Courts must remain open to protect people.
I would venture to say that there are many people in this room who are subject to arbitration agreements, and they don't even know, through--
Justice Ruth Bader Ginsburg: Mr. Silverberg--
Mr. Silverberg: --Yes, Your Honor.
Justice Ruth Bader Ginsburg: --on that, underlying your whole case I think is the notion that this is an adhesion contract; it's a take-it-or-leave-it contract, very common in consumer, credit card agreements, in employment contracts, that one party has no say except to sign or not to sign.
Are all those contracts subject to the unconscionability argument that you're making or only some of them?
And if only some, which ones?
Mr. Silverberg: I would suggest, Your Honor, that they all are subject to that.
And then we look to State law to determine, whether, for example, in Nevada if you've got great procedural unconscionability they have the sliding scale approach based on the D.R. Horton case, which we have briefed, where you would require less of a showing of substantive unconscionability--
Justice Antonin Scalia: Not much use signing an arbitration agreement then, not much use for the employer.
He's going to end up in court anyway.
Every one of them will be acknowledge as unconscionable.
So what's the use?
Mr. Silverberg: --Well, Your Honor--
Justice Antonin Scalia: I mean, kiss good-bye to arbitration.
Mr. Silverberg: --Not at all, Your Honor.
Justice Antonin Scalia: No?
Mr. Silverberg: That door's been open under section 3 and 4 since the inception of the Act.
We are advocating the status quo be maintained here, Your Honor, and there is no reason to suggest that there will be some rush to court on this.
Courts are quite capable to do this in a summary fashion.
If a party comes before the court with a baseless unconscionability challenge, I would imagine not only will the court dispose of it quickly, but if an attorney makes a routine practice of bringing baseless motions to the court, he'll have his own issues to deal with.
So, I don't -- I -- I disagree that there will be some floodgates or that this will in any way -- to the contrary--
Justice Antonin Scalia: The amici certainly claim the contrary.
The Chamber of Commerce claims that this is what's happening and that it has been a snowballing effect.
Mr. Silverberg: --We disagree with them and Your Honor, and I would cite that we have some of the most prestigious arbitrators in this country that have joined our position and recognized the courts' vital role in maintaining the fairness of the arbitration process so the public can trust it and so the weaker parties to these agreements can be protected, because should that disappear, there will be nothing to stop stronger parties from again sending Mr. Jackson, who lives in Reno, to Minnesota to arbitrate his claim.
Justice Ruth Bader Ginsburg: Well, this--
Justice Antonin Scalia: There--
Justice Ruth Bader Ginsburg: --This clause is not of that kind, and you've singled out three things that made it unconscionable.
One, the fee provision, the splitting fees, that the court rejected.
So the only two left is the one-sided aspect of it and the limited discovery.
It seemed to me that the limited discovery clause, that that was quite common to say we're not -- we don't want to get involved in the massive discovery you can get in a -- in a civil proceeding.
Is there something unusual about limiting discovery to documents?
Mr. Silverberg: There -- there is something unusual.
They've gone well beyond the AAA and limited discovery to one deposition and one expert, which in an employment case is very difficult.
Thank you, Your Honor.
Chief Justice John G. Roberts: Thank you, counsel.
Mr. Friedman, you have 4 minutes remaining.
REBUTTAL ARGUMENT OF ROBERT T. FRIEDMAN ON BEHALF OF THE PETITIONER
Mr. Friedman: Thank you, Mr. Chief Justice.
I'm hearing terms like "safe thing to do".
And in response to -- I think it was a question from Justice Scalia, I'm hearing my colleague state that there is concern that the arbitrator is not going to apply State law.
This is merely distrust of arbitrators.
This Court has rejected this bias that arbitrators cannot make these decisions.
And, in fact, this Court and many others have sent very, very complicated issues to the arbitrator to decide.
There is no reason to believe that an arbitrator, as well as a judge, cannot decide State law issues of unconscionability, and the arbitrator will have the discretion and the ability to either strike the entire arbitration agreement or strike certain clauses as he or she sees fit.
Furthermore, this type of speculation, this fear as to what the arbitrator may do, that was rejected in this Court's decisions in Vimar and PacifiCare, where the Court stated we are going to enforce this, and the arbitrator may do something wrong, may do something right, but at the tail end there will be an ability under section 10 to address it.
There is no difference there.
Additionally, this -- this analysis of unconscionability -- I want to reiterate unconscionability is based on a policy decision that -- that attacks an agreement that unquestionably has already been made.
Justice Stephen G. Breyer: All right.
What is the one-sentence answer, one sentence, to the thing, this is a very interesting case, lots of stuff in it that we needn't reach because irrespective of everything else, they in their reply, the district court, and the court of appeals all said these whole four pages, the whole four pages were unconscionable, so none of it's enforceable, and all we have to decide is whether that's an issue for the court.
And the answer to that being not an issue for the court is what, in a sentence or two?
Mr. Friedman: Justice Breyer, I'm sorry.
I'm going to ask you to--
Justice Stephen G. Breyer: They said, look, there's a four-page document.
They said this four-page document is unconscionable, the product of unconscionability, and, therefore, don't enforce it.
That's their claim.
That issue is at least is for the court, because there is no valid agreement here at all, if that's right.
Mr. Friedman: --No, Justice Breyer, the determination of unconscionability is for the arbitrator.
The -- the limited role of the court goes only to the making, not to the issue of unconscionability.
So the court--
Justice Sonia Sotomayor: The problem -- I -- I keep going back to my initial question to you, is you want to parse out what making is from unconscionability, and you want us to say, well, if it's too onerous a fee for arbitration, that goes to the making, because you're depriving the party of -- of an arbitration forum.
If it's discovery, that doesn't go to depriving them of anything because the arbitrator could give them more discovery if he or she chose.
Am I correct, this is your argument?
Mr. Friedman: --No, Justice Sotomayor, our argument about the onerous fee -- and it would have to be evidence put in by the party opposing counsel -- by the party opposing arbitration, that there was an actual barrier, an impossibly burdensome barrier.
So it does not come under making; it would be under a -- a Randolph standard or under a First Options standard.
There's two areas that we agree are for the court.
One is to determine whether or not there's an issue with the making of the agreement.
The other one, if it's challenged, is to determine whether or not there is indeed access to arbitration.
The First Circuit in Awuah applied this test very neatly in a very reasonable manner and applied both First Options and Randolph, harmonized those cases, and made a determination that unconscionability is for the arbitrator based on a clear and unmistakable delegation.
But issues as to whether or not--
Justice Antonin Scalia: If there's no access to arbitration, there's no way that you can leave that issue to the arbitrator, is there?
Mr. Friedman: --Exactly, Justice Scalia.
Justice Antonin Scalia: Because you never get to the arbitrator.
Mr. Friedman: Exactly, Justice Scalia.
It fails the First Options test.
There can't be an ability under First Options for the arbitrator to make a decision if there's no access to the arbitrator.
So those are the two tests.
In -- in this case, what I think I'm hearing is my colleague is saying that the arbitrator can decide nothing; the arbitrator should decide nothing, notwithstanding this Court's regular holdings sending very, very complicated matters to the arbitrator.
In this case, the arbitrator can absolutely decide these issues of unconscionability as well as a judge can.
Chief Justice John G. Roberts: Thank you, Mr. Friedman, Mr. Silverberg.
The case is submitted.
Chief Justice John G. Roberts Jr.: Justice Scalia has our opinion this morning in case 09-497, the Rent-A-Center West versus Jackson.
Justice Antonin Scalia: This case is here on writ of certiorari to United States Court of Appeals for the Ninth Circuit.
In 2007, respondent Antonio Jackson filed an employment discrimination suit in federal court against his former employer, petitioner, Rent-A-Center West Incorporated.
Rent-A-Center filed a motion under the Federal Arbitration Act to dismiss or stay the proceedings and to compel arbitration, based on the mutual agreement to arbitrate which Jackson had signed as a condition of his employment.
That agreement provided for arbitration of all past, present or future disputes arising out of Jackson's employment with Rent-A-Center.
The agreement also provided in a separate provision that the arbitrator shall have exclusive authority to resolve disputes about the enforceability of the agreement.
Jackson resisted arbitration.
He claimed that the agreement was unenforceable because it was unconscionable under Nevada law.
Rent-A-center replied that the agreement assigned resolution of the question of unconscionability which is a question of enforceability to the arbitrator.
The district court granted Rent-A-Center's motion and the Ninth Circuit reversed in relevant part.
We granted certiorari and now reverse the Ninth Circuit.
The FAA, Federal Arbitration Act reflects the fundamental principle that arbitration is a matter of contract.
Section 2 of the Act provides that “a written provision in a contract evidencing a transaction involving commerce to settled by arbitration.
A controversy thereafter arising out of such contract shall be valid, irrevocable and unenforceable save upon such grounds as exists at law or in equity for the revocation of any contract.”
Courts must enforce arbitration agreements according to their terms, in another words, except that arbitration agreements like other contracts may be invalidated by generally applicable contract defenses such as fraud, duress or unconscionability.
As I mentioned earlier the arbitration agreement at issue here includes two relevant written provisions to in the words of Section 2 settled by arbitration, a controversy.
The first is the provision stating that disputes relating to Jackson's employment are subject to arbitration and the second is the provision stating that disputes regarding the enforceability of the arbitration agreement itself are subject to arbitration.
The current controversy between the parties whether the agreement is unenforceable because it is unconscionable, is governed by the second provision and it is that provision which Rent-A-Center asks us to enforce.
I will call it the delegation provision because it delegates resolution of the enforceability controversy to the arbitrator.
Enforceability is a so-called gateway question, like the question of whether the agreement was ever in fact entered into, it has to be answered before applying the arbitration agreement.
Our cases have imposed a special requirement upon agreements to arbitrate gateway issues.
Before those gateway issues can be taken away from the courts, there must be “clear and unmistakable evidence” that the parties agreed to arbitrate.
The delegation provision here satisfies that heighten requirement because as both the district court and the Ninth Circuit found, its text clearly and unmistakably provides that the arbitrator will decide questions of enforceability and once that heightened requirement is satisfied, the FAA operates on that additional arbitration agreement just as it does on any other.
It is important for purposes of this case to distinguish between two types of validity challenges under Section 2.
One type challenge is specifically the validity of the agreement to arbitrate.
The other challenge is the whole contract of which the agreement to arbitrate is merely a part.
In the line of cases beginning with the case called Prima Paint Corporation versus Flood & Conklin Manufacturing Company, we held that only the first type of challenge, namely a challenge specifically to the validity of the agreement to arbitrate, can invalidate an agreement to arbitrate.
That is to say an arbitration provision is severable from the remainder of the contract and stands on its own feet.
This case differs from the Prima Paint line of cases because the arbitration provisions sought to be enforced in those cases were contained in contracts unrelated to arbitration, employment contracts for example that had an arbitration provision.
Whereas in this case, the delegation clause is part of an agreement that is itself entirely an arbitration agreement, but that makes no difference.
Application of the severability rule does not depend on the substance of the remainder of the contract.
Section 2 operates on the written provision to “settle by arbitration a controversy" that the party seeks to enforce.
Thus unless Jackson challenged the delegation provision specifically, we must treat it as valid under Section 2 and enforce --sending the question of enforceability to the arbitrator.
The district court correctly concluded that Jackson challenged only the validity of the contract as a whole.
His filings before the district court and the Ninth Circuit confirmed this.
He argued that the entire agreement and the arbitration agreement as a whole were unconscionable.
He repeated those arguments in this court.
In addition, for first time in his brief to this Court, he claimed that the delegation provision specifically was unconscionable.
He raised that challenge too late and we will not consider it.
The judgment of the Court of Appeals is reversed.
Justice Stevens has filed a dissenting opinion in which Justices Ginsburg, Breyer and Sotomayor have joined.