A recent report showed that less than half of arbitration agreements in the consumer financial arena include delegation clauses in their arbitration agreements. Two recent decisions from state high courts suggest that is a wise decision because courts do not like to enforce delegation clauses. (Reminder: a delegation clause gives the arbitrator explicit authority to decide issues of substantive arbitrability that would otherwise be decided by a court, like the enforceability and scope of the arbitration clause.)

In Schumacher Homes of Circleville v. Spencer, __ S.E.2d.___, 2015 WL 1880234 (W.Va. 2015), the highest court in West Virginia refused to enforce the parties’ delegation clause. The construction contract contained an arbitration agreement, which stated that “The arbitrator(s) shall determine all issues regarding the arbitrability of the dispute.” When the homeowners sued over construction defects, the builder moved to compel arbitration. The trial court denied the motion, finding the arbitration clause unconscionable. On appeal, the builder focused on the delegation clause, arguing that the trial court erred in not sending the unconscionability issue to the arbitrator.

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The Supreme Court of Kentucky did something similar in Dixon v. Daymar Colleges Group, LLC, __S.W.3d__, 2015 WL 1544450 (Ky. 2015). The single-page student enrollment agreement at issue in that case had an arbitration agreement on its back side, with a clause saying “all determinations as to the scope or enforceability of this arbitration provision shall be determined by the arbitrator, and not by the court.” After the students brought suit, the college moved to compel arbitration. The trial court denied the motion, finding the arbitration agreement was unconscionable. The Court of Appeals reversed, finding no unconscionability.

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