Court Says Arbitrators Can Decide If Arbitration Is Fair

Think the arbitration clause in a contract is unfair? Go ahead and contest it! Of course, you shouldn’t expect to win, since the Supreme Court has just ruled that it’s just fine for the arbitrator to decide whether the clause is fair.

In a 5-4 ruling, the Court found that a lower court erred in granting the courts the right to determine the fairness of an arbitration clause which included a statement that enforceability could only be determined by an arbitrator. As adjudicated by Consumer Reports:

The decision involved an employment discrimination case brought by a Nevada worker against his former employer, Rent-a-Center. The employee challenged the arbitration clause as being unconscionable under Nevada law. Because the clause had a provision empowering the arbitrator to settle questions about the enforceability of the clause itself, the decision belonged to the arbitrator and not to the courts, said the majority opinion, written by Justice Antonin Scalia.

The dissent, written by Justice John Stevens, questioned the court’s logic of enforcing a provision of an agreement whose very enforceability is being questioned.

The ruling may eventually be overturned by Congress, which may pass legislation that would give courts the power to determine whether an arbitration clause is valid or enforceable.

Is that arbitration clause unfair? Ask the arbitrator. [Consumer Reports]