Judicial review of arbitration awards is highly deferential- but when does it become rubber stamping? Using original data, I find that federal courts vacated only 4.3 percent of 162 disputed awards. Nearly the same result was observed for a sub-sample of 44 employment discrimination awards under Title VII. By comparison, federal appeals courts in 2006 reversed 12.9 percent of 5,917 rulings made by civil court judges on the merits of legal claims. Why are the rulings of Article III judges scrutinized more than the awards of citizen-arbitrators? What does this mean when companies can avoid Article III court rulings by requiring employees to arbitrate their claims? Judicial review of awards based on statutory claims is inadequate, and undermines the constitutional role of federal courts. I explore these empirical findings from a historical perspective. English kings and merchants helped to fashion modern arbitration. Nearly 700 years ago, small merchants traded goods at fairs that operated under a royal franchise. Arbitrators improved the efficiency of these markets by adjudicating transactional disputes. This role was codified by the Statute of the Staple of 1353, where the king delegated his sovereign power to ensure the success of the fair. I point to two prominent junctures - in 1698, and again in 1925 - when lawmakers in England and the U.S. believed that court litigation hampered commerce. They enacted similar statutes to authorize courts to confirm disputed awards, unless these private rulings resulted from corruption or misconduct. This deference grew out of practical considerations. The parties had chosen the arbitrator, agreed to the private process, and bound themselves to an industry norm. Courts deferred so heavily to awards because William III wanted these merchant tribunals to be autonomous. His law, the 1698 Arbitration Act, did not allow courts to vacate awards for fact finding or legal errors. Great deference in its reviewing standards reflected the king's infallibility. My textual research shows that the FAA's reviewing standards descended from William III. I suggest that our law crowns today's statutory arbitrator with the king's mantle of infallibility. But this deference is too extreme for awards that rule on statutory claims. In Gilmer v. Johnson/Interstate Lane Corp., the Supreme Court ignored the commercial history of arbitration when it broadly approved a theory of forum substitution. Gilmer said that arbitrators may decide statutory claims, even if one disputant objects to the forum and wishes, instead, to be heard by a court. The result is that the ruling of the arbitrator is subject to a narrower standard for review than an Article III judge's order. Epitomizing this regal deference, a contemporary court said: "The arbiter was chosen to be the Judge. That Judge has spoken. There it ends." In textual and empirical analysis, I show that statutory arbitrations enjoy a presumption of royal infallibility. I conclude with two solutions for aligning the review of rulings by statutory arbitrators and Article III judges.
[Recommended for its historical analysis of the 1698 English Arbitration Act and the American Federal Arbitration Act]
Claire H. Hill, Bargaining in the Shadow of the Lawsuit: A Social Norms Theory of Incomplete Contracts
Complex business contracts are notoriously difficult to write and read. Certainly, when litigation arises, courts scarcely have an easy time interpreting them. Indeed, contracts don't look at all as though they are written to tell a court what the parties want. Why can't smart, well-motivated lawyers do a better job? My article argues that they rationally don't try. I argue for a view of contracting in which parties aren't principally trying to set forth an agreement for a court to enforce. Rather, by leaving inartful language and ambiguity in the agreement, parties are bonding themselves not to seek precipitous recourse to litigation. The agreement entered into provides each party with grounds to bring a lawsuit if it so desires. Thus, if one party sues, the other party will virtually always have grounds to countersue. The complex transacting community has a norm against litigation in any event; bonding encourages and bolsters this norm, as well as norms of appropriate conduct throughout the contracting relationship. The contracting process, and the contract that results, thus serves importantly to create the parties' relationship and to set the stage for dispute-resolution consistent with preserving the relationship, as well as to keep available the backstop of enforcement if needed.