On April 26, 2010, the U.S. Supreme Court heard oral arguments in Rent-A-Center v. Jackson, a case addressing whether a court is required to determine the validity of an arbitration agreement, if challenged, even if the parties agreed to leave that question to the arbitrator. A Rent-A-Center employee claimed that the arbitration clause in his employment agreement was invalid. The arbitration clause expressly provided that the question of validity of the clause was left exclusively to the arbitrator.
The district court followed the language of the agreement and left the question to the arbitrator. The Ninth Circuit reversed the decision, holding, "[W]hen a party specifically challenges the validity of arbitration provisions within a larger contract, apart from the validity of the contract as a whole, a court decides the threshold question of the enforceability of the arbitration provisions." Jackson v. Rent-A-Center, 581 F.3d 912, 915 (9th Cir. 2009). The Ninth Circuit reasoned that, because arbitration arises from a contract, "a compulsory submission to arbitration cannot precede judicial determination that the agreement does in fact create such a duty" to arbitrate. Id.
The U.S. Supreme Court's decision will impact the nature and scope of court involvement in arbitration agreements.