Tell it to the Arbitrator: Unconscionability Challenge to Arbitration Agreement for Arbitrator to Decide

Last week, another federal court compelled arbitration in a TCPA case finding that pursuant to the arbitration agreement’s delegation clause, any claims that the arbitration agreement is unconscionable must be resolved by the arbitrator.  See Zeevi v. Citibank, N.A., Case No. 19-cv-02206-GMN-BNW (D. Nev. Feb. 16, 2021).

In 2019, plaintiff opened a bank account with defendant, and in doing so, plaintiff alleges that he restricted any potential text notifications to those greater than $100.  However, plaintiff alleges that defendant texted him about transactions less than $100 and also mistakenly sent him texts unrelated to his account.  Defendant responded by seeking to compel arbitration, noting that plaintiff agreed in writing to the terms of defendant’s client manual, which contains an arbitration agreement with a delegation clause that provides, among things, disputes regarding the enforceability or interpretation of the arbitration agreement are to be resolved in arbitration.  Plaintiff argued that the arbitration agreement was unconscionable and therefore unenforceable.

The issue before the Court was whether the unconscionability challenge is to be resolved by the Court or the arbitrator.  Pursuant to the Supreme Court’s holding in Rent-A-Center v. Jackson, 561 U.S. 63 (2010), the Court found that because the parties had clearly and unmistakably assigned the arbitrability of the arbitration agreement to the arbitrator, the authority to decide whether the arbitration agreement is unconscionable lies with the arbitrator unless plaintiff is specifically arguing that the delegation clause itself is unconscionable.

While plaintiff made the conclusory challenge the delegation clause was unconscionable, he offered nothing to substantiate his claim.  First, he claimed that the limitation on time to sue or arbitrate in the Client Manual circumscribed the TCPA’s four-year statute of limitations, but as the Court found, such an attack has nothing to do with the delegation clause and whether it is unconscionable.  Second, plaintiff claimed that the delegation clause was a contract of adhesion, but again the Court found that plaintiff “fails to explain the significance  of an alleged contract of adhesion with particular respect to the delegation clause.”  Rather, the Court found that both of these challenges were “more appropriately aimed at the unconscionability of the arbitration agreement as a whole.”  Likewise, the Court rejected plaintiff’s argument that the delegation clause was unconscionable because of the restrictions in arbitration on the scope of discovery, noting that such an argument was addressed and rejected by the Supreme Court in Rent-A-Center because it did not specifically apply to the delegation clause.

This is just another reminder for those here in TCPAWorld of the importance of including and utilizing delegation clauses in arbitration agreements.



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