Crowning the New King: The Statutory Arbitrator and the Demise of Judicial Review

Source: Michael H. LeRoy, Journal of Dispute Resolution, Vol. 29, No. 3, Spring 2009

From the abstract:
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 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.

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