In Nanberg v. 21st Century Flooring, LLC, No. 21 C 6623, 2022 WL 4482761 (N.D. Ill. Sept. 27, 2022), the court enforced an arbitration agreement’s delegation clause and stayed litigation pending arbitration, ruling that plaintiffs’ unconscionability challenges went to enforceability, not formation, and thus must be decided in the first instance by the arbitrator.
Plaintiffs, a salesperson and the company he had formed, filed suit against defendants, the salesperson’s employers. The suit, which had been removed to federal court, asserted various federal and state causes of action arising from alleged “wrongful conduct, fraud and discrimination.” After removal, defendants moved to dismiss/stay pending arbitration. Plaintiffs opposed the motion, arguing that the parties’ arbitration agreement was “unenforceable” because it was both procedurally and substantively unconscionable.
Plaintiffs asserted the agreement was procedurally unconscionable because the salesperson received no notice prior to being asked to sign, he was not allowed to consult with an attorney prior to signing it, it was offered under a threat of the salesperson losing his job, it was offered on a take-it-or-leave it basis, and the salesperson had impaired vision and cognitive limitations. Plaintiffs argued the agreement was substantively unconscionable because it unreasonably shortened the statute of limitations period, recited “one-sided” consideration, provided for “abridged” discovery, and failed to advise plaintiffs that both sides would have to pay the arbitrator’s fees. Id. at *5.
The court granted the motion to compel arbitration, holding that an arbitrator—not the court—was required to decide these issues in the first instance. The court acknowledged that “[b]y default, the [gateway] determination of whether the parties had agreed to arbitrate” was decided by courts. Id. at 3. But, it noted, as had long been recognized, the default rule could be changed when there was a “clear and unmistakeable” intent of the parties to do so. Id. (citing Henry Schein, Inc. v. Archer White Sales, Inc., 139 S. Ct. 524, 530 (2019).)