Commentary on Rent-A-Center v. Jackson and Arbitration Unconscionability


Today, April 26, 2010, the U.S. Supreme Court will hear an arbitration case. Chicago, has its own with overlapping issues. On February 15, 2010, I FILED 10cv1013 in the United States District Court for Northern, Illinois. See Falconer v. Gibsons Restaurant Group et. al. My opponent (Gibsons) has argued that the federal court lacks subject matter jurisdiction to decide if the arbitration clause is unconscionable (see its Pacer documents 12 & 13). Gibsons position is that the filed suit is not in Diversity and it that involves because the parties signed the contract in Illinois, federal law does not apply. This 42 U.S.C. 1981 based lawsuit has two parts. The first part represents counts against individuals for 42 USC 1981 violations. The second part asks the court to provide Declaratory Relief. The issues in the instant case for which the plaintiff seeks declaratory relief are: First, whether or not the Gibsons arbitration agreement is unconscionable—if, the plaintiff is required to pay half of the arbitration costs; and second, whether or not the arbitration agreement is unconscionable when the employer can seek injunctive relief in the federal court but that the agreement prohibits the plaintiff/employee from seeking injunctive relief in any court.

In response to Gibsons motion to dismiss, I have argued that the Defendant’ shows (in its documents 12 and 13) a gross misunderstanding of the purpose of 28 U.S.C. § 2201; and that Defendant Gibsonsmisunderstands that plaintiff uses the statute as a basis to ask (within his Complaint, esp., pp.10-17 of the Complaint) the court to make a declaratory judgment as to validity and enforceability of the Gibsons employer group arbitration agreement.

It is my position that the federal Court does not lack subject matter jurisdiction for reasons which include that the Plaintiff is alleging a violation of a FEDERAL statute. That statute is 42 U.S.C. 1981. Second, the arbitration agreement in issue commits adhere to the Federal Arbitration Act (FAA). Section 4 Para. a of the ACT reads: “The Federal Arbitration Act shall govern this Agreement, including any actions to compel, enforce, vacate or confirm proceedings, awards, orders or arbitrator, or settlements under this Agreement.” This statement represents to me that the employer (Defendant Gibsons) accepts that its arbitration agreement is governed by 9 U.S.C. §§ 1-14. This means that federal court has jurisdiction to declare whether terms of the Gibsons arbitration agreement (or the agreement in its entirety) are enforceable. Furthermore, the United States Supreme Court has ruled that challenges to the validity of a contract containing an arbitration clauseare to be decided by the arbitrator. Conversely, a claim that only the arbitration clause itself is void—as in Falconer v. Gibsons, et. al. is to be determined by a court. Buckeye Check Cashing, Inc. v. Cardegna make the former and latter absolute and clear.

The Gibsons Arbitration Agreement (PF. Exh. 1) in Section 4, Para. ““a)”” reads: ““The Federal Arbitration Act shall govern this Agreement including any actions to compel, enforce, vacate or confirm proceedings, awards, orders of the arbitrator, or settlements under this agreement.”” This requirement should be read in conjunction with ““Rule 1”” of the American Arbitration Rules which reads in part: ““Applicable Rules of Arbitration: The parties shall be deemed to have made these rules a part of their arbitration agreement whenever they have provided for arbitration by the American Arbitration Association (hereinafter “AAA”) or under its Employment Arbitration Rules and Mediation Procedures or for arbitration by the AAA of an employment dispute without specifying particular rules.*”” AAA Rules at http://www.adr.org/sp.asp?id=32904.

Since the AAA rules require of Defendant Gibsons that it accept that an employee’s arbitration costs are capped at $175.00 and that Gibsons has agreed (in its own Arbitration Agreement) that it is bound by AAArules and FAA, then there should be no conclusion other than one that holds that Mr. Falconer is not responsible for half of the arbitration costs (and that he can ask the court to help him stop the defendants immediately from calling him Nigger, Gigaboo and Blackie).

A tangential point, I am convinced those alleging civil rights violations in an employee-employer relationship should not be precluded by arbitration agreements from filing in court. It would be helpful if there is more recognition in the legislative community that many employee-employer arbitration agreements in the U.S. have been drafted in such a way that it becomes impossible for a aggrieved employee to have hisher disputes addressed because the costs of the arbitration process make arbitration inaccessible to the employee (or former employee).

The decision by the New York Court of Appeals in Brady v. The Williams Capital Group, L.P., 2010 WL 1068163 (N.Y. Mar. 25, 2010, NY’s Highest Court Requires Ability-to-Pay Hearing Before Enforcing Fee-Splitting Provision in Arbitration Agreement) should cause us to note that some employer mandated arbitration agreements not only take away an employee’s right to sue the employer in court, but as well, impose arbitration costsexpenses on the employee. The employee who lacks funds is unable to make use of the arbitration process.

There is something very wrong with any arbitration provision that makes it almost impossible for a consumer or former employer to challenge an arbitration clause due to financial reasons.

Christopher C. Cooper, ESQ., JD, Ph.D.

Law Office of Christopher Cooper, INC.
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