Volume 96

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.

Schrödinger’s Cross: The Quantum Mechanics of the Establishment Clause

Perhaps the most famous character in modern physics is Schrödinger’s cat, an unfortunate feline trapped in a box alongside a flask containing deadly poison that may or may not have been released. Thanks to the wonders of quantum mechanics, the cat is both alive and dead—”mixed or smeared out in equal parts”—until the box is opened, at which point the act of observation causes its state to collapse into either life or death.

Far away in the Mojave Desert, the “life” of a six-foot-tall cross is disputed: it is either a religious symbol or it is not. Like the cat, it has spent much of its life (or non-life) in a box that makes direct observation impossible. Is the cross, like the cat, both alive and dead? And does opening the box—either metaphorically or otherwise—cause it to become one or the other? This Essay argues that recent forays into “constitutional physics” may have over-emphasized the role of box-opening judges, and thereby elided the cat’s predicament and the relationship between legal and social reality.

Does the Structure of the Franchise Tax Matter?

In Delaware’s Compensation, I analyzed the relationship between the structure of Delaware’s franchise tax and Delaware’s incentives for producing corporate law.

Conventional wisdom, supported by theory and evidence, has it that the franchise tax plays an important role in shaping Delaware corporate law. Under the widely held account, Delaware offers a product and charges a price, the franchise tax, which creates incentives for the state to attract incorporations. Some argue that this system results in a race to the bottom, while others argue that it results in a race to the top. But no one argues that the tax is unimportant to Delaware, and evidence demonstrates the tax’s significance. The literature, however, fails to address Delaware tax structure, and how such structure affects Delaware’s incentives. Delaware’s Compensation first submitted the view that if the tax matters, then the tax’s structure matters too.

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