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The Mandatory Core of Section 4 of the Federal Arbitration Act

IN April 2010, the U.S. Supreme Court will hear oral arguments in Rent-a-Center v. Jackson, a case that has profound implications for the future of American dispute resolution. The issue before the Court is not the merits of Antonio Jackson’s civil rights lawsuit against his former employer, nor even the validity of the mandatory arbitration contract that he was required to sign before he could begin work. Instead, the Court must decide whether Jackson—and the hundreds of millions of other employees, consumers, and franchisees who are subject to mandatory arbitration clauses—have a non-waivable right to challenge the fairness of such provisions in federal court. Because the Federal Arbitration Act (“FAA”) allows courts to nullify one-sided arbitration clauses under the unconscionability doctrine, the judiciary has traditionally served as a bulwark against harsh dispute resolution terms. Yet the contract at issue in Rent-a-Center expressly gives the arbitrator, not courts, the sole authority to decide whether “any part of this Agreement is void.” If the Court enforces this clause, it will quickly become boilerplate in many standard form contracts, giving arbitrators the exclusive right to determine whether an arbitration clause is unconscionable, and limiting the judiciary’s role to little more than rubber-stamping motions to compel arbitration.

Every court that has grappled with a similar clause, including the Ninth Circuit in Rent-a-Center, has assumed that parties can delegate the issue of an arbitration clause’s validity to the arbitrator as long as there is “clear and unmistakable” evidence that they wanted to do so. The source of the “clear and unmistakable” criterion is based on dicta in several Supreme Court decisions. These cases begin by noting that because arbitration is, first and foremost, a matter of contract, parties enjoy the freedom to customize the process. Thus parties can agree to arbitrate arbitrability: that is, they can make a contract that entrusts the arbitrator with defining the scope or rules of arbitration. Finally, even though there is a presumption that parties want courts, not arbitrators, to resolve these issues, this presumption will yield to a strong indication to the contrary.

Rent-to-Own Unionism?

In Information and the Market for Union Representation, Professor Matthew Bodie provides an instructive framework for addressing information deficiencies in union elections. His consumer or “purchase of services” paradigm is apt and well illustrates the shortcomings of the more dominant approaches to elections. The extent to which this paradigm should drive the National Labor Relations Board’s (NLRB) regulation of union elections is less obvious. The best fit with Bodie’s consumer paradigm appears to be a system in which employees can easily designate a union as their representative, yet can just as easily get rid of the union. In other words, employees, like many other consumers, could purchase union services with the knowledge that they can easily change their mind later. It is not clear, however, whether the benefits associated with that model are worth its costs.

Bodie rightly decries the NLRB’s failure to ensure that employees have access to the information needed to make a fully informed decision whether to unionize. In particular, his criticism of the NLRB’s “laboratory conditions” and “political elections” models provides valuable insights into the nature of the union election process and raises important questions about the governance of elections. Yet his consumer paradigm is no panacea. For example, employees’ collective decision whether to unionize differs from a typical consumer decision, which generally does not face concerns from a group of dissenting members. Moreover, even if employees are acting as consumers when voting on union representation, there is a real danger of taking that model too far. The informational concerns that Bodie emphasizes may lead to changes with significant costs of their own. Thus, I am not convinced that the gains from a consumer approach to union elections are large enough to warrant the regulatory response it demands.

The Scope of Trademark Law In the Age of The Brand Persona

A description of a typical trademark infringement suit begins with the assumption that acquiring a desired product in the marketplace involves a search process, which incurs costs in terms of time spent, cognitive attention, and other resources. Consumers use trademarks as heuristics to reduce the amount of these costs. The trademark Levi’s, for example, allows a consumer to quickly find the jeans she knows fit her well without having to try on multiple pairs each time she goes to the department store. (This, of course, assumes that Levi Strauss & Company maintains the same design for its jeans over time, which trademark law does not obligate it to do.) Trademark law uses the concept of “consumer confusion” to describe a scenario in which the ability of a trademark to function as a shorthand is called into question because more than one producer is using the mark to brand its product. Thus, the theory goes, if we eliminate uses of trademarks that lead to “confusion” among consumers—the unauthorized Levi’s jeans, for example—we will stave off “search costs.”

Professor Mark McKenna’s article “A Consumer Decision-Making Theory of Trademark Law” brings welcome attention to what has become an increasingly unhelpful vocabulary. As he notes, the terms “confusion” and “search costs” are not always useful ways of characterizing the harms that result from trademark infringement. Consider, for example, the typical trademark infringement case, in which the defendant’s use of the plaintiff’s trademark misled the consumer into buying the impersonator’s product in lieu of the trademark holder’s product. Characterizing the defendant’s actions in this scenario as unfair competition is uncontroversial because the defendant took business away from the trademark owner through duplicity rather than through persuasion. But trademark law doesn’t actually tell a nuanced story about the nature of the consumer’s harm. Perhaps the consumer was ultimately pleased with her purchase, despite the fact that it was not what she initially intended to buy. Perhaps it is enough that she was provided with false information, regardless of her ultimate assessment of the product. Perhaps she will henceforth distrust the Levi’s trademark and instead try on several pairs of jeans to find the fit she likes or give up and turn to a different type of clothing altogether. Trademark law typically doesn’t delve too deeply into these questions, using “confusion” and “search costs” to characterize the various possibilities instead. A better sense of the harm that trademark law is supposed to remedy (and why it constitutes a harm) may not be crucial in a fake Levi’s scenario, but it becomes increasingly important the more the fact pattern moves away from the prototypical to more expansive theories of infringement.

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