California Court Holds that Arbitration “Delegation Clause” Is Not Unconscionable
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In Tiri v. Lucky Chances, Inc. (5/15/14) — Cal.App.4th —, the Court held that an arbitration agreement may delegate to an arbitrator the authority to decide whether the agreement is enforceable, and such a “delegation clause” is not procedurally unconscionable.
The agreement at issue in Tiri provided:
The 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.
Slip op. at 2-3. The trial court found the arbitration agreement procedurally unconscionable, and the Court of Appeal reversed, holding as follows:
Applicability of the Federal Arbitration Act (FAA) was immaterial because federal and state law incorporate the same policies regarding enforcement of arbitration agreements. Slip op. at 5-6.
Under Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 72 (Rent-A-Center), which applies equally to cases arising under the FAA and the California Arbitration Act (CAA), “while courts may consider enforceability challenges specific to delegation clauses, the arbitrator is to consider challenges to the arbitration agreement as a whole.” Slip op. at 6-7.
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