Arbitrating novel legal questions: A recommendation for reform

Yale Law Journal

Volumn 105, Issue 7, 1996, Pages 1927-1961

  Scodro, Michael A ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0040660803     PISSN: 00440094     EISSN: None     Source Type: Journal    
DOI: 10.2307/797237     Document Type: Article

References (187)

1. First Options of Chicago, Inc. v. Kaplan, 115 S. Ct. 1920 (1995); Mastrobuono v. Shearson Lehman Hutton, Inc., 115 S. Ct. 1212 (1995); Allied-Bruce Terminix Cos. v. Dobson, 115 S. Ct. 834 (1995).
2. Other federal statutes, such as the Labor Management Relations Act and the Railway Labor Act, govern labor-management disputes brought under collective bargaining agreements.
3. 9 U.S.C. § 3 (1994) provides: If any suit . . . be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing . . . the court in which such suit is pending . . . shall on application of one of the parties stay the trial . . . until such arbitration has been had . . . .
4. Id. § 4 provides: A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court [that would otherwise have civil or admiralty jurisdiction over the matter] . . . for an order directing that such arbitration proceed in the manner provided for in such agreement.
5. Id. § 2. This statutory language refers to what are typically termed "predispute" arbitration agreements. As their name suggests, these are contractual provisions mandating the arbitration of future disputes between the contracting parties. Unless otherwise stated, references to arbitration agreements in this Note should be assumed to mean "predispute" agreements, as opposed to arbitration arrangements entered into to resolve already existing disputes. The latter are also covered by the FAA, however. See id. Exempt from the broad range of contracts to which the Act applies are "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." Id. § 1. This limiting language remains ill-defined. See Stuart H. Bompey & Andrea H. Stempel, Four Years Later: A Look at Compulsory Arbitration of Employment Discrimination Claims after Gilmer v. Interstate/Johnson Lane Corp., EMPLOYEE REL. L.J., Autumn 1995, at 21, 28-29.
6. Although most lower courts have interpreted the exception narrowly, some opinions have endorsed a broader reading, see Jay W. Waks et al., Gilmer: Where We Are and Where We Are Going, C976 A.L.I.-A.B.A. 423, 443-44 (1994), and the Supreme Court has so far declined to determine its bounds, see Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 n.2 (1991) ("[I]t would be inappropriate to address the scope of the § 1 exclusion because the arbitration being enforced here is not contained in a contract of employment.").
7. See 9 U.S.C. § 9 (1994) (giving parties opportunity to receive judicial confirmation of award); id. § 10 (providing grounds on which courts can vacate award); id. § 11 (providing grounds on which courts can modify or correct award). Sections 10 and 11 are discussed in greater detail infra text accompanying notes 57-58.
8. 346 U.S. 427 (1953); see also John R. Allison, Arbitration Agreements and Antitrust Claims: The Need For Enhanced Accommodation of Conflicting Public Policies, 64 N.C. L. REV. 219, 233-34 (1986);
9. Jenifer A. Magyar, Comment, Statutory Civil Rights Claims in Arbitration: Analysis of Gilmer v. Interstate/Johnson Lane Corp., 72 B.U. L. REV. 641, 643 (1992).
10. Wilko, 346 U.S. at 434.
11. Id. at 435-37.
12. Id. at 436-37 (footnotes omitted). The Court footnoted its reference to English law with § 21 of the English Arbitration Act of 1950. Id. at 437 n.25. This statutory provision allowed for procedures whereby arbitrators could certify questions of law to the English courts in the course of an arbitration or, alternatively, could render awards in the form of multiple outcomes, allowing the courts to choose among them depending on a judgment about a specified legal issue. See Arbitration Act of 1950, 14 Geo. 6, ch. 27, § 21 (Eng.). These procedures, and their American analogues, are discussed in more detail below. See infra Part II.
13. Michael A. Lindsay, "Public" Rights and Private Forums: Predispute Arbitration Agreements and Securities Litigation, 20 LOY. L.A. L. REV. 643, 681 (1987) (citing Allison, supra note 7, at 233-34). The public policy exception for antitrust claims warrants special mention, as the Supreme Court's decision in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), discussed in detail infra text accompanying notes 18-35, was in part a direct response to the Second Circuit's opinion in American Safety Equipment Corp. v. P.J. Maguire & Co., 391 F.2d 821 (2d Cir. 1968), the central case establishing this exception.
14. 417 U.S. 506 (1974); see also Magyar, supra note 7, at 643-44.
15. Scherk, 417 U.S. at 515.
16. Id. at 515-19. The Scherk dissent, however, continued the line of argument regarding arbitral competence to interpret federal statutes reflected in the majority opinion in Wilko. Writing for the four dissenters. Justice Douglas cited Wilko for the failings it identified in arbitration, including the fact that "[h]ere, as in Wilko, the allegations . . . will involve 'subjective findings on the purpose and knowledge' of the defendant, questions ill-determined by arbitrators without judicial instruction on the law." Id. at 532 (Douglas, J., dissenting) (quoting Wilko, 346 U.S. at 435).
17. See Michael F. Hoellering, Arbitrability, in COMMERCIAL ARBITRATION FOR THE 1990s, at 1, 5-6 (Richard J. Medalie ed., 1991). A series of statutes enacted in the early 1980s allowed parties to subject patent issues to private arbitration. Id. at 5. With respect to copyright claims, the Seventh Circuit held that a dispute over a copyright's validity is arbitrable in Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191, 1198-99 (7th Cir. 1987).
18. See, e.g., Bird v. Shearson Lehman/Am. Express, Inc., 926 F.2d 116 (2d Cir.), cert. denied, 501 U.S. 1251 (1991); Fabian Fin. Servs. v. Kurt H. Volk, Inc. Profit Sharing Plan, 768 F. Supp. 728 (C.D. Cal. 1991).
19. As one author remarked in 1991, "During the last five years, there have been a number of developments and landmark decisions from the United States Supreme Court that have expanded significantly the domain of arbitration." Hoellering, supra note 15, at 1.
20. 473 U.S. 614 (1985).
21. Id. at 616-19.
22. Id. at 619-21.
23. Id. at 624.
24. Id. at 625 ("[W]e find no warrant in the Arbitration Act for implying in every contract within its ken a presumption against arbitration of statutory claims."). The Court proceeded to explain in an accompanying footnote that the FAA was intended "to overcome an anachronistic judicial hostility to agreements to arbitrate, which American courts had borrowed from English common law." Id. at 625 n.14.
25. Id. at 628.
26. Id. at 627-28.
27. Id. at 628.
28. Id. at 629.
29. 391 F.2d 821 (2d Cir. 1968).
30. Mitsubishi, 473 U.S. at 632.
31. Id. at 633.
32. Id. at 634 (footnote omitted).
33. Id. at 634-37.
34. Id. at 636-37 (citation and footnote omitted).
35. Id. at 638.
36. Id.
37. See id. at 636 n.19 (noting that Court "would have little hesitation in condemning the agreement as against public policy" if arbitration agreement precluded arbitral recognition of statutory claims). 36. While the Supreme Court's holding in Mitsubishi was in the context of an international contract, lower courts have held that the prohibition on the arbitration of domestic antitrust claims is no longer good law. See, e.g., Syscomm Int'l Corp. v. Synoptics Communications, Inc., 856 F. Supp. 135, 139 (E.D.N.Y. 1994) ("While American Safety has not been explicitly overruled, this Court believes that in light of the federal policy favoring arbitration agreements that has fueled the expansion of the types of federal statutory claims that may be arbitrated, . . . domestic antitrust claims are arbitrable.").
38. 482 U.S. 220 (1987).
39. Wilko v. Swan, 346 U.S. 427 (1953); see supra text accompanying notes 7-10.
40. Shearson, 482 U.S. at 233-34.
41. Id. at 232 (emphasis added) (citations to Mitsubishi omitted).
42. Id. at 239. The Court also rejected the argument that private RICO plaintiffs' roles as "private attorneys general" rendered their claims nonarbitrable. The Court reasoned that the private antitrust claims ordered to arbitration in Mitsubishi were, if anything, more important to society generally; private RICO claims, as an empirical matter, only rarely target the organized criminal behavior that Congress had hoped the statute's treble damages provisions would create an incentive to challenge. Id. at 240-42.
43. 490 U.S. 477 (1989).
44. Id. at 481.
45. Id.
46. 415 U.S. 36 (1974).
47. Id. at 57. The Court further explained that arbitrators are, in fact, selected for their understanding of "the demands and norms of industrial relations," id., citing the fact that "a substantial proportion of labor arbitrators are not lawyers, " id. at 57 n.18. The opinion does provide that a court may admit the arbitral award into evidence, however, "accord[ing it] such weight as the court deems appropriate." Id. at 60.
48. A series of Supreme Court collective bargaining cases followed in Gardner-Denver's wake, extending its rule allowing for de novo judicial review to cover other statutory claims. See Atchison, T. & S.F. Ry. Co. v. Buell, 480 U.S. 557 (1987) (extending rule to Federal Employers' Liability Act claim); McDonald v. City of W. Branch, 466 U.S. 284 (1984) (extending rule to § 1983 action); Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728 (1981) (extending rule to Fair Labor Standards Act (FLSA) claim). In Barrentine, the majority further elaborated on the courts' unique competence to interpret statutory rights. As one of the factors rendering arbitration inferior to formal adjudication for the purpose of resolving the plaintiff's FLSA claim, the Court noted that "many arbitrators may not be conversant with the public law considerations underlying the FLSA," id. at 743, citing Gardner-Denver for the fact that many arbitrators are not lawyers, id. at 743 n.21. Moreover, the opinion continued: FLSA claims typically involve complex mixed questions of fact and law - e.g., what constitutes the "regular rate," the "workweek," or "principal" rather than "preliminary or postliminary" activities. These statutory questions must be resolved in light of volumes of legislative history and over four decades of legal interpretation and administrative rulings. Id. at 743. The Court thus expressed concern over the ability of arbitrators to interpret statutory language in a manner consistent with the public policies that Congress intended to advance. 48. R. Gaull Silberman et al., Alternative Dispute Resolution of Employment Discrimination Claims, 54 LA. L. REV. 1533, 1541 (1994) ("The Court's broad pronouncements in Gardner-Denver led most courts and commentators to believe the holding applied to any employer-employee agreement to arbitrate discrimination claims, not just those in collective bargaining agreements.").
49. See, e.g., Utley v. Goldman Sachs & Co., 883 F.2d 184. 186 (1st Cir. 1989) (upholding district court's refusal to stay in favor of arbitration in-court proceedings on plaintiff's Title VII sex discrimination claims, noting that "[n]otwithstanding [the Court's expansion of arbitrability since Alexander v. Gardner-Denver] . . . the Court has done nothing to disturb its prior ruling in Alexander that arbitration agreements do not preclude an independent right of access to a judicial forum for resolution of Title VII claims"), cert. denied, 493 U.S. 1045 (1990); Swenson v. Management Recruiters Int'l, Inc., 858 F.2d 1304, 1307 (8th Cir. 1988) ("We conclude that in the passage of Title VII it was the congressional intent that arbitration is unable to pay sufficient attention to the transcendent public interest in the enforcement of Title VII."), cert. denied, 493 U.S. 848 (1989).
50. 500 U.S. 20 (1991).
51. Id. at 35.
52. See id. at 34 n.5. Earlier in the opinion, relying in part on its decisions in Mitsubishi, Shearson, and Rodriguez de Quijas, the Court refuted a barrage of additional arguments, several of them regarding arbitral procedure, that Gilmer had levied as challenges to the propriety of allowing arbitrators to decide his ADEA claim. See id. at 26-33.
53. See, e.g., Alford v. Dean Witter Reynolds, Inc., 939 F.2d 229, 230 (5th Cir. 1991) ("Because both the ADEA [held arbitrable in Gilmer] and Title VII are similar civil rights statutes, and both are enforced by the EEOC, we have little trouble concluding that Title VII claims can be subjected to compulsory arbitration." (citation omitted)); Maye v. Smith Barney Inc., 897 F. Supp. 100, 109 (S.D.N.Y. 1995) ("[I]t is well established by courts in the Second Circuit that Title VII claims are arbitrable. Courts in other Circuits have reached the same conclusion." (citations omitted)); see also Waks et al., supra note 5, at 431-32, 437. Other employment statutes, including the Americans with Disabilities Act and the Employee Polygraph Protection Act, have also been subject to court-compelled arbitration. See Richard A. Bales, Compulsory Arbitration of Employment Claims: A Practical Guide to Designing and Implementing Enforceable Agreements, 47 BAYLOR L. REV. 591, 605 (1995) (listing employment statutes that have been subject to court-compelled arbitration in Gilmer's wake). Even if the Supreme Court ultimately upholds the compelled arbitration of Title VII claims, however, its impact will be subject to certain limitations. First, Gardner-Denver still commands that Title VII claims resolved through labor arbitration in the collective bargaining context be subject to de novo judicial review; it is only commercial contracts that, when they contain covenants to arbitrate future disputes, are subject to the FAA and, therefore, to the Gilmer holding. Second, § 1 of the FAA excludes from the Act's coverage "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1 (1994). As noted above, the boundaries set by this exception are still unclear. See supra note 5. Finally, as the Gilmer Court itself noted, employees who must bring discrimination claims to binding arbitration pursuant to the FAA can still file charges with the EEOC. Gilmer, 500 U.S. at 28.
54. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985).
55. Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 232 (1987).
56. Id.
57. 9 U.S.C. § 10 (1994).
58. Id. § 11.
59. For a discussion of some of these court-made exceptions, see Bret F. Randall, Comment, The History, Application, and Policy of the Judicially Created Standards of Review for Arbitration Awards, 1992 B.Y.U. L. REV. 759. Thus, for example, some courts have vacated arbitral awards upon a finding that "the underlying contract or the award violates the law" or that "enforcing the award would somehow violate the public's interests." Id. at 769. While the former category includes cases in which courts appear to have performed a substantive review of the arbitrator's legal reasoning, Randall questions the validity of these decisions: "Although the Supreme Court has stated that federal courts are not allowed to reverse an arbitrator's award based on legal errors, a few circuit courts seem to hold that some egregious legal errors actually violate the law." Id. at 770 (footnote omitted). The "manifest disregard of the law" doctrine, in contrast, requires a finding not merely of legal error but of an arbitral decision not to follow established law.
60. The "manifest disregard" doctrine represents the primary means of substantive judicial review of arbitral awards. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 656 (1985) (Stevens, J., dissenting) ("Arbitration awards are only reviewable for manifest disregard of the law . . . ."); Martin H. Malin & Robert F. Ladenson, Privatizing Justice: A Jurisprudential Perspective on Labor and Employment Arbitration from the Steelworkers Trilogy to Gilmer, 44 HASTINGS L.J. 1187, 1226 (1993) ("Arbitral errors of law are not grounds for judicial vacation of an arbitration award, unless the award displays a manifest disregard for the law."); see also Nicholson v. CPC Int'l Inc., 877 F.2d 221, 234 n.5 (3d Cir. 1989) (Becker, J., dissenting) (following list of statutory grounds for review and reference to manifest disregard doctrine, noting that Shearson Court found these bases "'sufficient to ensure that arbitrators comply with the requirements of the statute'" (quoting Shearson, 482 U.S. at 232));
61. cf. C. Evan Stewart, Securities Arbitration Appeal: An Oxymoron No Longer?, 79 KY. L.J. 347, 352-54 (1990-91) (identifying manifest disregard doctrine as nonstatutory source of judicial review that is under pressure to expand in light of recent Supreme Court opinions "stressing that arbitrators must look to and follow the law").
62. 346 U.S. 427, 436-37 (1953); see also Brad A. Galbraith, Vacatur of Commercial Arbitration Awards in Federal Court: Contemplating the Use and Utility of the "Manifest Disregard" of the Law Standard, 27 IND. L. REV. 241, 249-50 (1993) (noting that this language in Wilko initiated manifest disregard doctrine).
63. 808 F.2d 930 (2d Cir. 1986); see also Randall, supra note 59, at 766 (referring to Bobker holding as "the most often cited formulation of the manifest disregard standard").
64. Bobker, 808 F.2d at 933-34 (emphasis added) (citations omitted).
65. See Edward Brunet, Questioning the Quality of Alternate Dispute Resolution, 62 TUL. L. REV. 1, 13 (1987);
66. cf. Christine Godsil Cooper, Where Are We Going with Gilmer? - Some Ruminations on the Arbitration of Discrimination Claims, 11 ST. LOUIS U. PUB. L. REV. 203, 215 (1992) (noting that arbitrators are discouraged from providing written opinions).
67. Randall, supra note 59, at 767.
68. Id.
69. Bobker, 808 F.2d at 933 (quoting chair of arbitration panel).
70. Id. at 938 (Meskill, J., concurring).
71. Id. at 936-37; see also Galbraith, supra note 61, at 252 ("[T]he court of appeals determined that the disputed SEC rule was unclear, and thus, the actions of the arbitrators did not meet the test for 'manifest disregard' of the law.").
72. See Nicoletti v. E.F. Hutton & Co., 761 F. Supp. 312, 314 (S.D.N.Y. 1991) (finding that, because "[t]he New York State Court of Appeals ha[d] not decided either question" at issue and "[t]he lower New York State courts ha[d] reached conflicting conclusions," legal standard was not sufficiently clear to meet Bobker requirement for manifest disregard); Mutual Redevelopment Houses, Inc. v. Local 32B-32J, Serv. Employees Int'l Union, 700 F. Supp. 774, 778 (S.D.N.Y. 1988) (rejecting manifest disregard claim because "[p]laintiff's contention that complete mitigation is required in the present case, which it supports by citation to allegedly analogous . . . cases, does not rise to the level of defined and settled law that is necessary to establish manifest disregard" (citation omitted)).
73. For a chronology of the British statutes governing arbitration, see SIR MICHAEL J. MUSTILL & STEWART C. BOYD, THE LAW AND PRACTICE OF COMMERCIAL ARBITRATION IN ENGLAND 436-58 (2d ed. 1989).
74. Id. at 439-40.
75. Id. at 448. The most recent English arbitration statute, passed in 1979, has reduced the role of the bench in arbitration. In place of the special case procedure, parties can "appeal" arbitral awards to the courts, id. at 456-57, with the courts retaining the right to refuse to hear the appeal, id. at 457. Parties can contract out of the right to appeal in certain classes of cases in advance of the dispute, and after the dispute has arisen in all cases. Id. at 456. A procedure whereby parties can certify legal questions to the courts during the pendency of an arbitration still remains, see Arbitration Act of 1979, ch. 42, § 2 (Eng.), subject to the same possibility of contractual limitations on its use, see id. § 3.
76. IAN R. MACNEIL, AMERICAN ARBITRATION LAW 25-28 (1992).
77. Id. at 35.
78. Id. at 37.
79. Id.
80. As ultimately enacted, § 1 provided: "Two or more parties may agree in writing to submit to arbitration, in conformity with the provisions of this act, any controversy existing between them at the time of the agreement to submit." An Act Concerning Arbitration, to Make Uniform the Law with Reference Thereto, in Report of the Committee on Uniform State Laws, 50 REP. A.B.A. 560 app. A at 591 (1925) (emphasis added).
81. Section 13 allowed for submission of legal questions to the courts through one of two methods: Either (1) an arbitrator or a party could "[a]t any stage of the proceedings submit any question of law . . . for the opinion of the court, stating the facts upon which the question arises," or (2) the arbitrator could render the "award in the form of a conclusion of fact for the opinion of the court on the questions of law arising on the hearing." Id. at 592-93. These same two methods had been developed earlier in England. See supra text accompanying notes 71-73.
82. Nevada enacted the UAA in 1925, MACNEIL, supra note 74, at 54, including its provision for submitting legal questions to the courts, see NEV. REV. STAT. § 38.140 (1957). North Carolina enacted it in 1927. See N.C. GEN. STAT. § 1-556 (1969) (providing for certification of legal questions to courts); see also Wesley A. Sturges, Arbitration Under the New North Carolina Arbitration Statute - The Uniform Arbitration Act, 6 N.C. L. REV. 363, 406-08 (1928) (fleshing out provisions of act, noting incorrectly that North Carolina was only state aside from Illinois with procedures to submit legal questions to courts, and criticizing these provisions as ambiguous and therefore as sources of future litigation). Utah and Wyoming also adopted the UAA in 1927. See UTAH CODE ANN. § 104-36-13 (1943) (providing for certification of legal questions to courts); WYO. STAT. § 1-1038 (1957) (same).
83. As Joseph F. O'Connell, a member of the Massachusetts delegation to the 1925 gathering of the National Conference of Commissioners on Uniform State Laws, explained, his state enacted a statute similar to that in England: "[T]he court[s] shall have some jurisdiction in [arbitrated disputes] and . . . the matter may be referred to the court if any of the parties want it or if all the parties want it, or if the arbitrators think it necessary." 35 HANDBOOK OF THE NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS AND PROCEEDINGS OF THE THIRTY-FIFTH ANNUAL MEETING 76 (1925). As for Connecticut, it remains the only state with a certification procedure between arbitrators and the courts. The state code currently provides: At any time during an arbitration, upon request of all the parties to the arbitration, the arbitrators or an umpire shall make application to any designated court, or to any designated judge, for a decision on any question arising in the course of the hearing, provided such parties shall agree in writing that the decision of such court or judge shall be final as to the question determined and that it shall bind the arbitrators in rendering their award. An application under this section may be heard in the manner provided by law for the hearing of written motions at a short calendar session, or otherwise as the court or judge may direct. CONN. GEN. STAT. § 52-415 (1995).
84. The statute provided: Any question of law may, and upon the request of all parties shall, be referred by the arbitrator or arbitrators to the court to which the report is to be made. Upon application by a party at any time before the award becomes final under section nineteen, the superior court may in its discretion instruct the arbitrator or arbitrators upon a question of substantive law. MASS. GEN. L. ch. 251, § 20 (1932).
85. See Richard C. Curtis, A Comparison of the Recent Arbitration Statutes, 13 A.B.A. J. 567, 570 (1927).
86. Richard C. Curtis, A Comparison of the Recent Arbitration Statutes, 13 A.B.A. J. 567 (1927). Id.
87. In fact, Francis B. James, former member of the ABA's committee on commerce, trade, and commercial law, testified before the Senate and House Judiciary Committees that it was on Julius Henry Cohen, a leading member of the New York arbitration movement, that "the burden fell of drafting the [federal] bill." Joint Hearings Before the Subcomms. of the Comms. on the Judiciary, 68th Cong., 1st Sess. 19 (1924) [hereinafter 1924 Joint Hearings].
88. See 9 U.S.C. § 2 (1994).
89. See supra text accompanying notes 57-58.
90. The FAA was in fact heralded as an attempt to overcome traditional judicial hostility to arbitration. Lindsay, supra note 11, at 647 (quoting H.R. REP. No. 96, 68th Cong., 1st Sess. 1-2 (1924), quoted in Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 220 n.6 (1985)).
91. MACNEIL, supra note 74, at 55. All of the first UAA states, see supra note 80, have since adopted this second UAA, as have Illinois and Massachusetts. See ILL. ANN. STAT. introduction to ch. 710, act 5 (Smith-Hurd 1993 & Supp. 1995) (listing states that have adopted second UAA).
92. As Leo Kanowitz notes, "Starting with the New York Arbitration Act of 1920, and followed by the United States Arbitration Act of 1925 (also known as the Federal Arbitration Act) and extensive state enactments of the Uniform Arbitration Act, Congress and most state legislatures have essentially repudiated the traditional judicial hostility toward arbitration." Leo Kanowitz, Alternative Dispute Resolution and the Public Interest: The Arbitration Experience, 38 HASTINGS L.J. 239, 256 (1987).
93. Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 232 (1987). As one commentator puts it somewhat differently, "As the arbitration process has become more widely utilized over the past decade, the U.S. Supreme Court has taken the lead in stressing that arbitrators must look to and follow the law." Stewart, supra note 60, at 352.
94. The Third Circuit noted in Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., a decision overturning the district court's denial of a motion to compel arbitration of the plaintiffs' ERISA claims: [I]n arguing that arbitration is inconsistent with ERISA's statutory purpose, the Trustees contend that since there is no assurance that arbitrators will follow court precedents, compulsory arbitration of ERISA claims frustrates the legislative goal of developing a consistent body of law. This argument has a familiar ring; it is a reiteration of the traditional distrust of arbitration on the ground that arbitrators cannot be relied upon to follow the law. The Court has uniformly rejected this position in its recent arbitration cases, however, and we will only briefly address the Trustees' contentions in this regard. 7 F.3d 1110, 1121 (3d Cir. 1993). Similarly, in Fabian Financial Services v. Kurt H. Volk, Inc. Profit Sharing Plan, 768 F. Supp. 728 (C.D. Cal. 1991) (enforcing arbitration of ERISA claims), the court noted that "[t]he body of [judicial] case law interpreting ERISA will continue to grow and provide the framework within which arbitrators may base their decisions." Id. at 733.
95. 1924 Joint Hearings, supra note 85, at 27.
96. See Mark R. Lee, Antitrust and Commercial Arbitration: An Economic Analysis, 62 ST. JOHN'S L. REV. 1, 25-26 (1987). Lee explains that: In terms of personal labor, [following the law] might be less costly than developing an alternative set of principles and acceptable modes of reasoning and then applying that set to the claim at hand. And in terms of income from serving as an arbitrator in subsequent proceedings, it might be less costly than any other method of ruling on antitrust claims because applying antitrust law might be most consistent with the well-counseled expectations of parties to agreements containing broad scope arbitration clauses. Id. at 26.
97. Allison, supra note 7, at 242-43. Allison further notes, however, that, if more perfect adherence to the antitrust laws is desired on particular occasions, "a court can identify and outline these laws and require the arbitrator to apply them." Id. at 242.
98. FRANK ELKOURI & EDNA ASPER ELKOURI, How ARBITRATION WORKS 368 (4th ed. 1985).
99. Id. at 369. Intuitively, it makes sense that parties will cite any law that may be helpful to their claim. See Brunet, supra note 64, at 27 ("Law is a regular tool of mediation and arbitration . . . . In any ADR process, a participant possessing a clear advantage in substantive law will explain that advantage." (footnote omitted)).
100. See Report of the Special Committee Appointed in February, 1924, to Consider the Subject of Arbitration with Particular Reference to its Operation in New York, in YEARBOOK OF THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK 267, 273 (1925).
101. Id. at 276.
102. Id. at 272; see also id. at 275-78.
103. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985); see Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991); Rodriquez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 481 (1989); Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 229-30 (1987).
104. Thus, while Chief Judge Harry Edwards recommends that all arbitrated public law issues should be subject to de novo judicial review, he advocates the initial arbitration only of those claims for which the governing legal principle is well defined. To allow the arbitration of unsettled or novel questions, he warns, would lead to "public law issues [being] resolved by nongovernmental bodies." Harry T. Edwards, Alternative Dispute Resolution: Panacea or Anathema?, 99 HARV. L. REV. 668, 672 n. 13 (1986).
105. In another piece, Edwards notes that "arbitrators may be able to resolve expeditiously many routine employment discrimination claims that involve the application of settled law to particular facts." Harry T. Edwards, The Rising Work Load and Perceived "Bureaucracy" of the Federal Courts: A Causation-Based Approach to the Search for Appropriate Remedies, 68 IOWA L. REV. 871, 931 (1983).
106. Along similar lines. Professors Malin and Ladenson, while arguing ultimately for de novo judicial review of arbitrated employment discrimination claims, suggest that arbitrators take a "judically cautions approach" to the resolution of legal issues. See Malin & Ladenson, supra note 60, at 1233. As a means of both upholding the determination of publicly accountable bodies and maximizing uniformity in the law's application, they recommend that arbitrators follow established law and, "[w]hen extending current law, . . . [that they] do so in relatively familiar and unsurprising ways." Id.; see also Lamont E. Stallworth & Martin H. Malin, Workforce Diversity, DISP. RESOL. J., June 1994, at 27, 38 ("In gray areas where judges have yet to tread, arbitrators should avoid novel interpretations and instead extend the law in relatively unsurprising ways.").
107. In a recent piece in Estate Planning, the authors, both trusts and estates attorneys, suggest that trusts and estates arbitration may be inappropriate when there is no precedent shaping the legal issue. They note that "[a]rbitration is beneficial for both parties if the amounts at issue are not great or the case hinges solely on factual determinations which, when made, will decide the outcome under clearly established legal theories." Stanard T. Klinefelter & Sandra P. Gohn, Alternative Dispute Resolution: Its Value To Estate Planners, 22 EST. PLAN. 147, 154 (1995).
108. The authors continue, "Arbitration appears less desirable for a party whose case rests on the application of a technical theory or where the matter is a case of first impression in the jurisdiction." Id. Along similar lines, noting the minimal opportunity to appeal an arbitral award, family law practitioner James E. Mahood recommends that "arbitration of the entire matter may not be the best option for a case that presents a novel or undecided issue of law." James E. Mahood, A Negotiated Settlement, FAM. ADVOC., Fall 1994, at 46, 48.
109. The Court's opinion in Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728 (1981), referred to this difference between courts and arbitrators. See quotation supra note 47.
110. William L. Reynolds & William M. Richman, The Non-Precedential Precedent - Limited Publication and No-Citation Rules in the United States Courts of Appeals, 78 COLUM. L. REV. 1167, 1175 (1978).
111. While the federal courts are not required to issue written opinions to accompany all decisions, courts are encouraged to do so if a decision breaks new ground, either by questioning or overturning existing law or by recognizing a novel legal claim. For discussions of the criteria governing opinion publication in the federal courts, see Philip Nichols, Jr., Selective Publication of Opinions: One Judge's View, 35 AM. U. L. REV. 909 (1986); Reynolds & Richman, supra.
112. See, e.g., Owen M. Fiss, Against Settlement, 93 YALE L.J. 1073, 1085 (1984) ("[A judge's] job is not to maximize the ends of private parties, nor simply to secure the peace, but to explicate and give force to the values embodied in authoritative texts such as the Constitution and statutes: to interpret those values and to bring reality into accord with them.");
113. Geoffrey C. Hazard, Jr. & Paul D. Scott, The Public Nature of Private Adjudication, 6 YALE L. & POL'Y REV. 42, 59 (1988) ("Ordering by public justice produces decisions resting on considerations that transcend the immediate dispute and the immediate parties [whereas] [o]rdering by private disposition can involve a normative frame of reference that includes only the immediate parties."); Malin & Ladenson, supra note 60, at 1229 ("Under a system in which employment arbitrators make final and binding decisions in cases involving charges of discrimination based on Title VII, there will be serious concern about whether those decisions adequately reflect the public justice values at the heart of the statute.").
114. See, e.g., Magyar, supra note 7, at 654-55 (advocating nonarbitrability of civil rights claims).
115. See Edwards, supra note 102, at 679 ("A potential danger of ADR is that disputants who seek only understanding and reconciliation may treat as irrelevant the choices made by our lawmakers and may, as a result, ignore public values reflected in rules of law."); id. at 682 n.48 ("In order to ensure that public law issues are not resolved in private fora, we must permit litigants who raise issues of public or constitutional law to use courts even if private ADR systems have already settled the dispute."). Malin and Ladenson make this point in the specific context of employment disputes arbitrated pursuant to private contracts. See Malin & Ladenson, supra note 60, at 1237 ("To ensure that public law continues to develop in accordance with public justice values as articulated by publicly accountable judges constrained by the principle of integrity, arbitral legal conclusions must be subject to de novo judicial or administrative review."); see also Cooper, supra note 64, at 241. Cooper writes: There must be a mechanism for the rediversion of issues of public policy and statutory construction back into the courts. This can be handled at the front end by removing such issues from arbitration, or at the back end by providing for judicial review of arbitration awards on such matters. Public policy issues need public resolution. Id. (footnote omitted).
116. Professor Cooper, herself an arbitrator, asks, "If arbitrators display weaknesses in applying the law . . . they are completely inadequate to develop the law. Could an arbitrator have come up with the disparate impact theory of discrimination? With an understanding that environmental sexual harassment is sex discrimination?" Cooper, supra note 64, at 218. But see Susan A. Fitzgibbon, The Judicial Itch, 34 ST. LOUIS U. L.J. 485, 503 (1990) (suggesting that labor arbitrators "have demonstrated the ability to decide cases involving external law, and even novel issues, as well as courts").
117. The district court felt that the 50% award itself constituted a manifest disregard of the law. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 636 F. Supp. 444, 447 (S.D.N.Y. 1986) ("The arbitrators' disregard of the law is underscored by the fact that although Bobker claimed he lost profits totalling $23,000, the arbitrators, without explanation, reduced the request by exactly fifty percent (after allowing for costs and expenses)." (footnote omitted)). The appeals court, however, countered that the 50% award may have indicated the arbitrators' true estimate of the damages, and noted that "the arbitrators were not required to explain their computation." 808 F.2d 930, 937 (2d Cir. 1986). In any case, it seems likely that the splitting of the award must have had some connection to the ambiguity of the governing legal principle. For a case in which arbitration served even more clearly to avoid the resolution of a novel legal issue in favor of a compromise, see John V. O'Hara, Comment, The New Jersey Alternative Procedure for Dispute Resolution Act: Vanguard of a "Better Way"?, 136 U. PA. L. REV. 1723, 1747-51 (1988) (describing IBM-Fujitsu arbitration, in which unnavigated legal terrain in copyright law was avoided in favor of arbitral compromise).
118. Richard E. Speidel, Arbitration of Statutory Rights Under the Federal Arbitration Act: The Case for Reform, 4 OHIO ST. J. ON DISP. RESOL. 157, 161 (1989) ("[I]n arbitration, a compromise decision is possible while judicial decisions tend to be either win all or lose all.").
119. O'Hara, supra note 110, at 1746.
120. Henry M. Hart, Jr., and Albert M. Sacks, for example, provide a substantial list of reasons in favor of following precedent that translates easily into an enumeration of the positive effects of the creation of precedent. Among these is the "desirability of enabling people to plan their affairs at the stage of primary private activity with the maximum attainable confidence." HENRY M. HART, JR. & ALBERT M. SACKS, THE LEGAL PROCESS: BASIC PROBLEMS IN THE MAKING AND APPLICATION OF LAW 587 (tentative ed. 1958).
121. See O'Hara, supra note 110, at 1750.
122. See, e.g., Brunet, supra note 64, at 19-20 (noting, in comparing private and public dispute resolution mechanisms, that "society gains more from litigation than would be produced if litigation were left to the private market. . . . [and l]itigation guides third parties" by "applying] . . . vague positive law to concrete fact situations" (footnote omitted)); O'Hara, supra note 110, at 1745-51 (explaining benefits of creation of formal precedent and identifying arbitration's capacity to undermine this process).
123. Even Julius Henry Cohen, the primary author of the New York Arbitration Act and the ABA's version of the federal act - adopted by Congress with few modifications to become the FAA - acknowledged the trade-off between the use of arbitration and the development of judge-made law. In his well-known 1918 book, Commercial Arbitration and the Law, he attempted to defuse this concern, noting that: From the point of view of society, in some instances it might sometimes be better to secure a determination of the particular question of constitutional or other law involved; yet this consideration has never prevailed with the Court, nor resulted in the rejection of an adjustment or a settlement of the controversy, with the consequent waiver and elimination of an interesting and perhaps important question of law. JULIUS HENRY COHEN, COMMERCIAL ARBITRATION AND THE LAW 12 (1918). While Cohen ultimately decided that the value of unimpeded arbitral authority outweighed its possible costs in terms of forgone precedent, he was at least aware of these costs.
124. Carl F. Taeusch, Extrajudicial Settlement of Controversies: The Business Man's Opinion: Trial at Law v. Nonjudicial Settlement, 83 U. PA. L. REV. 147, 156 (1934).
125. Carl F. Taeusch, Extrajudicial Settlement of Controversies: The Business Man's Opinion: Trial at Law v. Nonjudicial Settlement, 83 U. PA. L. REV. 147, 1934). Id.
126. See Philip G. Phillips, A Practical Method for the Determination of Business Fact, 82 U. PA. L. REV. 230, 251 n.88 (1934).
127. Id. at 250-51. For another commentator supporting this proposition, see Harry S. Wollheim, Commercial Arbitration and the Law, 13 MARQ. L. REV. 225, 228 (1929).
128. 500 U.S. 20 (1991); see supra text accompanying notes 50-52.
129. See id. at 31 (emphasis added).
130. Id. at 31-32.
131. Id. at 32.
132. Bompey & Stempel, supra note 5, at 22 ("Since the Supreme Court's ruling [in Gilmer], numerous companies . . . have implemented policies requiring their employees to submit to binding arbitration all disputes arising from their employment . . . that cannot be resolved through internal dispute resolution mechanisms.").
133. See Allison, supra note 7, at 241-42; Lee, supra note 94, at 14-18.
134. See Allison, supra note 7, at 241.
135. See id. at 242.
136. See Lee, supra note 94, at 18.
137. See supra note 105.
138. See Malin & Ladenson, supra note 60, at 1237 ("Judicial mistakes are . . . more likely to be corrected legislatively because of their sweeping precedential value than are arbitral mistakes which have no stare decisis value. Indeed, the history of employment discrimination laws is replete with legislative correction of judicial mistakes.").
139. See Wendy W. Wolfe, Case Note, Holmes v. Securities Investor Protection Corporation: A Warning to Legitimate Business, 65 U. COLO. L. REV. 659, 680 n.164 (1994) (listing congressional hearings and reports concerning civil RICO reform, dating from 1985 to 1990).
140. Oversight on Civil RICO Suits: Hearings Before the Senate Comm. on the Judiciary, 99th Cong., 1st Sess. 94 (1985) (statement of Stephen S. Trott, Assistant Attorney General, Criminal Division, U.S. Dep't of Justice). Later in his testimony, Trott indicated explicitly that the controversy surrounding private RICO suits "has led to growing pressure for statutory changes." Id. at 102 (statement of Stephen S. Trott).
141. Wolfe, supra note 132, at 680.
142. See Infra Part IV.
143. See William F. Baxter, Separation of Powers, Prosecutorial Discretion, and the "Common Law" Nature of Antitrust Law, 60 TEX. L. REV. 661 (1982). Baxter was serving as Assistant Attorney General for Antitrust when he published this article.
144. Id. at 663.
145. Id.
146. Id. at 669. Baxter describes "the conceptual quagmire faced by those who sought to regulate competitive business behavior at the turn of the century and the need for a common-law approach to antitrust law." Id. at 668-69. He adds, "[t]his need remains apparent today as the law continues to evolve." Id. at 669.
147. David Klingsberg, Balancing the Benefits and Detriments of Private Antitrust Enforcement: Detrebling, Antitrust Injury, Standing, and Other Proposed Solutions, in 3 ANTITRUST IN TRANSITION 1155, 1181 (Milton Handler ed., 1991).
148. 391 F.2d 821 (2d Cir. 1968).
149. See Robert Pitofsky, Arbitration and Antitrust Enforcement, 44 N.Y.U. L. REV. 1072 (1969).
150. See id. at 1076-77 (noting that, because arbitral awards are unwritten and immune from substantive judicial review, "other businessmen in a particular industry . . . will not be put on notice as to the boundaries of permissible behavior").
151. See John J. Finn, Comment, Private Arbitration and Antitrust Enforcement: A Conflict of Policies, 10 B.C. INDUS. & COM. L. REV. 406 (1969).
152. Id. at 412.
153. Id. at 417.
154. Id.
155. Pub. L. No. 101-552, 104 Stat. 2736 (1990) (codified in scattered sections of U.S.C.).
156. 5 U.S.C. § 579(c)(5) (1994).
157. Id. § 572(b).
158. 9 U.S.C. §§ 10, 11 (1994). These factors concern the rights of the parties involved in the dispute. See supra text accompanying notes 57-58.
159. 5 U.S.C. § 572(b)(1)-(2) (1994). Chief Judge Edwards, in a 1978 article, recommended a procedure by which the EEOC could select from its caseload discrimination claims appropriate for arbitration. Edwards's suggested procedure similarly distinguished between settled and unsettled areas of law. See Harry T. Edwards, Arbitration as an Alternative in Equal Employment Disputes, ARB. J., Dec. 1978, at 23. As one of the six categories of claims that he suggested should be proper subjects of adjudication, rather than arbitration, Edwards included "grievances ... involving unsettled areas of the law." Id. at 24. More recently, a similar recommendation was made, this time in the form of an amendment to Title VII that would allow the EEOC to determine which employment discrimination claims should go to arbitration.
160. See Laura R. Hillock, Comment, Arbitration of Title VII and Parallel State Discrimination Claims: A Proposal, 27 CAL. W. L. REV. 179, 206-07 (1990). Among other criteria, Hillock recommended that the EEOC should prevent the arbitration of claims raising "novel statutory construction[s] of Title VII" or "case[s] of first impression which require[] resolution by a court." Id. at 207.
161. H.R. REP. No. 513, 101st Cong., 2d Sess. 11 (1990).
162. Alternative Dispute Resolution Use by Federal Agencies: Hearing Before the Subcomm. on Administrative Law and Governmental Relations of the House Comm. on the Judiciary, 100th Cong., 2d Sess. 52 (1988) (written submission of Stuart E. Schiffer, Deputy Assistant Attorney General, Civil Division, U.S. Dep't of Justice).
163. Id. at 75, 77 (written submission of Marshall J. Breger, chair of the Administrative Conference of United States) (emphasis added).
164. 136 CONG. REC. S18,090 (daily ed. Oct. 24, 1990).
165. See supra text accompanying notes 98-100.
166. See Judicial Improvements and Access to Justice Act, Pub. L. No. 100-702, § 901(a), 102 Stat. 4642, 4659-62 (1988) (codified at 28 U.S.C. §§ 651-658 (1994)).
167. 28 U.S.C. § 652(c) (1994). This requirement, among others that the Act imposes, led one commentator to note that "[s]uch standards would ensure that the law continues to grow and that judicial pronouncements will not be foreclosed on important issues of public policy." Irving R. Kaufman, Reform for a System in Crisis: Alternative Dispute Resolution in the Federal Courts, 59 FORDHAM L. REV. 1, 31 (1990).
168. The federal courts have repeatedly recognized the importance of this "finality interest" in arbitration. See, e.g., DelCostello v. International Bhd. of Teamsters, 462 U.S. 151, 167 (1983) ("[T]he short limitations period for vacating the arbitral award would protect the interest in finality of the opposing party to the arbitration . . . ."); Christianson v. Pioneer Sand & Gravel Co., 681 F.2d 577, 580 (9th Cir. 1982) ("When an arbitration decision has been rendered, the interest in finality of that decision is sufficiently strong to warrant clear evidence of a breach of a union's duty of fair representation before the courts should overturn the arbitration award.").
169. See Speidel, supra note 111, at 191-92 ("Finality is part of the package that supposedly gives arbitration an advantage over litigation. It is a core ingredient in the concept of arbitration."); Stewart, supra note 60, at 347-48 n.4 (listing among "virtues trumpeted" about arbitration fact that "the process provides finality, since there is virtually no right of appeal").
170. Galbraith, for example, writes, "[t]he federal courts of the United States are immensely overcrowded. Each year, more cases are filed than in the previous year, making the administration of justice progressively more difficult. The search for solutions to this problem has continually focused upon alternative dispute resolution, and, in particular, arbitration." Galbraith, supra note 61, at 241 (footnotes omitted); see also Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191, 1197 (7th Cir. 1987) (noting "the warm judicial regard for arbitration evident in the modern cases - a warmth that in part reflects modem caseload pressures").
171. Speidel, supra note 111, at 161 ("Arbitration is touted as a private process where confidence is normally maintained while the opposite is true in court.").
172. 304 U.S. 64 (1938).
173. PETER W. LOW & JOHN C. JEFFRIES, JR., FEDERAL COURTS AND THE LAW OF FEDERAL-STATE RELATIONS 304-05 (3d ed. 1994) (explaining that, while Erie itself was a diversity case, its requirement that federal courts apply substantive state law applies to other classes of cases in which federal courts hear state-law claims).
174. Geri J. Yonover, Ascertaining State Law: The Continuing Erie Dilemma, 38 DEPAUL L. REV. 1, 3 (1989).
175. See Note, The Uniform Certification of Questions of Law Act, 55 IOWA L. REV. 465, 465 (1969).
176. Ira P. Robbins, The Uniform Certification of Questions of Law Act: A Proposal for Reform, 18 J. LEGIS. 127, 135 (1992).
177. John B. Corr & Ira P. Robbins, Interjurisdictional Certification and Choice of Law, 41 VAND. L. REV. 411, 416 (1988).
178. See, e.g., id. at 415 n.11 (listing examples of cases in which state courts rejected federal interpretations of state law).
179. CHARLES A. WRIGHT, THE LAW OF FEDERAL COURTS § 52, at 334 n.57 (5th ed. 1994).
180. Yonover, supra note 166, at 16.
181. UNIF. CERTIFICATION OF QUESTIONS OF LAW ACT § 1, 12 U.L.A. 21 (Supp. 1995) (alterations in original).
182. See, e.g., WRIGHT, supra note 171, § 52, at 334 ("The certification procedure has been regarded with quite an extraordinary enthusiasm by the commentators . . . ."); Yonover, supra note 166, at 16-17 ("[T]he notion of certification is alive and well in many jurisdictions and has been frequently approved of by commentators and the Supreme Court alike." (footnotes omitted)).
183. Corr & Robbins, supra note 169, at 430; see also Robbins, supra note 168, at 137 (noting that resolution of cases of first impression through certification procedures can decrease future litigation).
184. Yonover, supra note 166, at 20 (describing Seventh Circuit refusals to certify questions, despite party's request, because "there was sufficient precedent" on the issue or the "state law was not so unsettled as to justify the use of certification").
185. See, e.g., Western Helicopter Servs. v. Rogerson Aircraft Corp., 811 P.2d 627 (Or. 1991) (refusing to answer certified question because it represented settled point of law).
186. This is essential to satisfy Article III's case or controversy requirement. See U.S. CONST. art III, § 2.
187. In 1994, members of both houses of Congress introduced legislation to prevent the arbitration of various employment discrimination claims, including causes of action arising under Title VII. Waks et al., supra note 5, at 446. As of yet, there has been no significant action on these proposals.