Congress-Supreme Court arbitration showdown

Marcia Coyle, in her Law.com article this morning, predicts "Congress and the U.S. Supreme Court appearing to be headed for a collision over mandatory arbitration in consumer and employment contracts, with two actions over the last month moving the branches closer to impact: The justices agreed to decide next term whether a class action ban in a cell phone arbitration agreement is unconscionable -- being AT&T v. Concepcion -- and major financial reform legislation, which would give government agencies the power to ban or limit mandatory arbitration agreements, moved into a House-Senate conference committee."
[AT&T v. Concepcion's Petition for certiorari Brief in opposition 9th. Circuit opinion ]

"In late April the Court heard arguments in Rent-A-Center v. Jackson, the second of the term's most important arbitration challenges and now awaiting decision," according to Coyle. "Antonio Jackson sued his employer for race discrimination and retaliation. The trial court granted the employer's motion to dismiss and to compel arbitration according to an agreement in Jackson's employment contract. Jackson appealed, arguing the arbitration agreement was procedurally and substantively unconscionable and that the issue of unconscionability must be decided by a court, not the arbitrator. The 9th U.S. Circuit Court of Appeals agreed that the threshold issue of unconscionability is for a court to decide even if the agreement assigns that issue to the arbitrator…. If Rent-A-Center wins, the role of courts in deciding whether an agreement is unconscionable before ruling on motions to compel arbitration will be reduced, if not eliminated, according to arbitration experts. And if Jackson prevails, it will be easier to avoid arbitration and consumers and employees will be encouraged to challenge it on unconscionability grounds."[Petition for certiorari Brief in opposition 9th. Circuit opinion ]

Also in April, the Court decided the term's other arbitration challenge: Stolt-Nielsen S.A. v. AnimalFeeds International. There, the majority held that arbitrators cannot impose class arbitration on a party when the arbitration agreement is silent on that issue, creating what Ms. Coyle phrased "the classic conservative-liberal split that marks many of the Court's arbitration decisions. Justice Ruth Bader Ginsburg, joined by Justices John Paul Stevens and Stephen Breyer, dissented (Justice Sonia Sotomayor did not participate)."


Congress’ input…Tucked away in the 2010 defense department spending bill President Obama signed last December was the so-called Franken amendment, named after Minnesota Sen. Al Franken. "The amendment,"this morning's article says, "prohibits the award of Department of Defense funds to any federal contractor that forces its employees or independent contractors to submit to pre-dispute binding arbitration of Title VII and sexual-assault tort claims. Franken's amendment was a response to Halliburton Co.'s efforts to require a former employee, Jamie Leigh Jones, to arbitrate rather than litigate claims related to her rape on company property by Halliburton employees."

"The Arbitration Fairness Act of 2009," Coyle continues, "would ban pre-dispute arbitration agreements in employment, consumer and franchise contracts… ( Senate version )( House version )

"And, the House and Senate financial reform bills, now in a joint conference committee, would give the U.S. Securities and Exchange Commission authority to limit or ban mandatory arbitration in brokerage and investment advisory contracts. Both bills also create a consumer financial protection agency that could restrict or prohibit its use in credit cards, mortgages and other financial products."


Stay tuned.