Commercial Litigation and Arbitration

Enforceability of Entire Agreement Containing Arbitration Clause Is for Arbitrator to Decide — Court May Consider Only Enforceability of Agreement to Arbitrate Specific Issue — U.S. Supreme Court

An attack on the enforceability of a contract containing an arbitration clause is for the arbitrator to resolve, under the Supreme Court’s decision in Rent-A-Center, West, Inc. v. Jackson, 2010 U.S. LEXIS 4981 (U.S. June 21, 2010). Only an attack on the enforceability of the arbitration clause itself is subject to judicial determination. The Court considered that this followed from (1) the mandate of Section 2 of the Federal Arbitration Act that a “written provision ... to settle by arbitration a controversy ... shall be valid, irrevocable, and enforceable,” because Section 2 so provides “without mention of the validity of the contract in which it is contained” (Court’s emphasis), and (2) its prior holdings that “‘[a]s a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract.’”

Rent-A-Center was an employment discrimination action, and the arbitration agreement was a stand-alone contract In addition to requiring arbitration of all disputes arising out of the plaintiff’s employment, it included a provision (unusual in commercial contracts) that “[t]he Arbitrator, and not any federal, State, or local court or agency, shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement, including, but not limited to any claim that all or any part of this Agreement is void or voidable.” The Court held that this proviso (the “delegation clause”) was itself separable from the contractual agreement to arbitrate all claims arising out of the plaintiff’s employment — i.e., the rest of the contract —and must be separately attacked to permit judicial intervention.

While the doctrine applied by the Court is easy enough to summarize, its implications are fuzzy. If the arbitration agreement signed by the employee in Rent-A-Center were not a stand-alone agreement but a provision in a larger agreement, one would have thought it sufficient to attack that provision as unenforceable to obtain judicial review. Now, however, there is an argument that every dependent, “including” clause in an arbitration provision in a contract must be considered a separate agreement to arbitration and must be specifically attacked if a judge is to decide the issue of the enforceability of the agreement to arbitrate.

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