The Supreme Court tangles with mandatory arbitration clauses.

Oral argument from the court.
April 26 2010 6:43 PM

Justice by the Hour

The Supreme Court tangles with mandatory arbitration clauses.

(Continued from Page 1)

I think we can also agree at this point that whatever else is happening in this case, it's probably time to start calling it a "bailout."

Ian Silverberg represents Antonio Jackson, and at no point does he allege that Joe Bananas brandished a gun in Alaska to force his client to sign a contract. Yet somehow he is still probably going to lose. Silverberg wants to make a simple point: Rent-A-Center is trying to create a rule that agreements to arbitrate are "presumed enforceable even before their validity has been determined by a court." But Silverberg can't quite tell Justice Sonia Sotomayor whether the arbitration agreement is unconscionable in its entirety or whether the problem is just certain clauses. Then Scalia starts to hound him about whether he is truly claiming that the arbitrator can ignore state law and just impose his own views on the parties: "Let's assume," grins Scalia "that the contract is a contract to maim. It's a Shylock contract, OK? He's going to be able to exact a pound of flesh." Scalia wonders if Silverberg really thinks the arbitrator can ignore the fact that state law forbids that, and say, "Well, you know, I don't really think it's so bad. A pound of flesh sounds reasonable to me?"

Silverberg replies, "I don't think we have that guarantee." To which Scalia retorts, "I think you have a misunderstanding of the law, then!" Roberts steps in to say of arbitration that if you are "in for a penny, you're in for a pound. If you agree to arbitrate, then it's at least for the arbitrator to decide particular provisions, whether they are unconscionable." Scalia chimes in, "You can be a stupid person who voluntarily signs an unconscionable contract. Now, the courts may protect you because you are stupid, but you haven't been coerced."

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Silverberg concludes his presentation with the attempt to caution those assembled that "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—"

But Ruth Bader Ginsburg cuts him short. "Underlying your whole case, I think, is the notion that this is 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," she says. "Are all those contracts subject to the unconscionability argument that you are making?" Uh, oh. When Silverberg says that, yes, all these contracts are subject to this argument, Scalia says, "Well, kiss goodbye to arbitration." Or, more likely, kiss it hello.

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