As Diana Ross once sang, “You keep me hangin’ on.” And now the other Supremes are picking up the tune. As we reported last time, consumer arbitration caught the eye of the Supreme Court. This summer alone, the Court issued two important opinions on arbitration. In Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (U.S. June 21, 2010), the Court settled a circuit split over whether the district court is in all cases required to determine whether an arbitration agreement is unconscionable even where the parties have contractually agreed that this is an issue to be resolved by the arbitrator. In a 5-4 decision, written by Justice Scalia, the Court held that the answer depends on what kind of challenge to the agreement is made: If a party challenges specifically the enforceability of the provision that the arbitrator will determine the enforceability of the agreement, 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.
In Granite Rock Co. v. Int’l Broth. of Teamsters, 130 S. Ct. 2847 (U.S. June 24, 2010), the Court held, in a 7-2 decision authored by Justice Thomas, that the question of when parties formed an agreement containing an arbitration clause is generally an “issue for judicial determination,” not an arbitrator. The underlying dispute involved the formation date of a collective bargaining agreement and who should decide that question. To determine whether the parties’ dispute over the agreement’s ratification date is arbitrable, the Court held that it is necessary to apply the rule that a court may order arbitration of a particular dispute only when the parties agreed to arbitrate that dispute. The Court explained that under the agreement, arbitration is required only when a dispute “arise[s] under” the agreement– which a dispute over when the agreement was formed does not.