|
Article Excerpt
Introduction
I. How We Got Here A. The Gardner-Denver, Barrentine, and McDonald Trilogy B. Gilmer and the End of the Non-Waivability Principle 1. Employment Cases 2. Consumer Cases II. The Empirical Defense A. Fundamentally Flawed Data B. Neglected Societal Costs III. Contracting (Out) Statutory Rights Conclusion
INTRODUCTION
On April 1, 2009, the Supreme Court ruled in 14 Penn Plaza LLC v. Pyett (1) that a union can bargain away a member's right to seek judicial relief for employment discrimination. The Court had already resolved that an employee could bargain away that right for herself, (2) and the recent decision only expanded the notion that statutory rights may be overwritten by contract. In the Supreme Court's current view, private dispute resolution through arbitration is preferable to litigation. The Court seems undeterred by the Congressional mandate that claims arising under, for example, Title VII of the Civil Rights Act of 1964, (3) the Fair Labor Standards Act of 1938, (4) the Americans with Disabilities Act, (5) the Age Discrimination in Employment Act, (6) and the Civil Rights Act of 1991, (7) are to be enforced by the federal judiciary. With the Court's approval, pre-dispute, mandatory arbitration provisions have become ubiquitous in contracts for employment and consumer goods, forcing employees and consumers to arbitrate, rather than litigate, their statutory claims.
What is the significance of this trend for the enforcement of federal laws and the vindication of the rights conferred by those laws? (8) A number of scholars have devoted empirical research to this question, many arguing that arbitration is not as bad as it seems if one looks at real outcomes. (9) There are at least two significant problems with these analyses. First, putting aside any methodological flaws in the individual studies, everyone agrees that the data available is extraordinarily limited, and even the degree of the limitation is unknown. This is because arbitration is a private, often confidential process, the initiation, outcome, and reasoning of which are generally invisible to the public and unavailable to social scientists. As others have suggested, drawing conclusions from the small fraction of available data is meaningless and misleading. (10)
A second curious aspect of the empirical literature, which has received less criticism, is its narrow focus on a single question: courts are expensive, so does arbitration provide the litigants with more bang for their buck? Even those who question the wisdom of mandatory arbitration generally adopt this analytic approach. Conceding that arbitration costs less overall, they raise concerns about the hurdle of arbitration fees, whether grievants win as often and as much as they would in court, and whether the arbitration process disproportionately rewards repeat players. (11) Even the theorists who direct their inquiries towards fairness evaluate it by comparing the interests of plaintiffs and defendants, ignoring the benefits of statutory enforcement beyond those accrued by individual parties. The trouble with this approach is that what is at issue is not simply private interests, but public rights. (12)
Measuring the economic utility of arbitration for isolated individuals might make sense if contract law were independent of, or superior to, statutory law, as the Court seemed to believe in Lochner. (13) Applying a contract-based approach to the adjudication of statutory rights, however, leaves out a key player: the legislature. Congress passed anti-discrimination laws because it wanted to end discrimination in the workplace, and Congress saw public adjudication of these claims as an important part of the fight against discrimination. (14) In a similar vein, Congress passed consumer-protection statutes because it recognized the wide disparity in bargaining position between corporate sellers and consumer purchasers and wanted to protect consumers from corporate overreaching. Empowering consumers to bring suit in federal court, where their claims could be aggregated into class actions, was seen as vital to leveling the playing field between consumers and corporations. (15) Congress added cost-shifting provisions in both the anti-discrimination and consumer protection statutes so that individuals could serve as private attorneys general and enforce those laws in court, where transparency and adherence to the law are matters of first principle.
Arbitration, on the other hand, is conducted out of public view and is less constrained by the letter of the law. (16) Governing statutes appear to play a minimal role in arbitrators' decisions. (17) Arbitration does not develop precedent, nor does it allow for appellate review of conflicting decisions. (18) Even when arbitrators do produce written opinions, the decisions by and large remain unpublished and unavailable; some arbitration services require written decisions, which they make publicly available, but even those decisions are often significantly redacted. (19) For the most part, arbitration decisions constitute a species of "secret law," known only to repeat players and a few others. (20) To the extent that we are considering wholesale acceptance of arbitration as a mandatory substitute for litigation, we must come to terms with the fact that we are sacrificing the public interpretation of public laws.
The sphere of privacy surrounding arbitration not only frustrates any attempt to study its social effects; it contravenes the public scrutiny and public education functions Congress intended for courts to serve. Privatizing the enforcement of statutory rights erodes those rights, as rights that are not enforced publicly vanish from the public's eye, making the public less educated about the laws governing society and probably less likely to recognize and correct the laws' violations. The opaqueness of the arbitration process also makes it easy for the protections that Congress carefully built into legislation to fall victim to unequal contractual bargains. Purchasing a cell phone routinely requires forfeiting the right to band together in a class action to challenge fraud. (21) As a condition of employment, individuals often unknowingly surrender their right to a jury trial. (22) We suggest that these sacrifices and their aggregate social costs deserve attention. In our view, the Supreme Court's embrace of mandatory arbitration reflects a return to a Lochner-like veneration for the freedom to contract unrestrained by public laws, and the studies measuring individual interests fail to grapple with this reality.
I. HOW WE GOT HERE
Before turning to our critique of mandatory arbitration, we situate our observations in the context of a far broader assault on the civil justice system. As other commentators have discussed, for approximately the past twenty years, the Supreme Court has engaged in a procedural and substantive revolution of erecting previously nonexistent barriers between ordinary individuals and the adjudication of their rights. (23) The Court's ringing endorsement of mandatory arbitration, as it pushes rights claims out of courts of law and into a contract-based dispute resolution system, is just one manifestation of this revolution, but there are many others. Newly-fashioned standing jurisprudence obstructs environmental and consumer cases. (24) District court judges suddenly enjoy license to dismiss any complaint whose bare allegations (25) strike the judge as insufficient to make out a "plausible" case. (26) Emerging preemption jurisprudence has foreclosed state-law claims in areas ranging from products liability to pensions. (27) At the same time as the Court has wiped away longstanding, state-law rights of action, it has flatly refused to recognize new implied rights in the most compelling cases and has stripped away remedies, rendering some rights "rights" in name only. (28) Finally, the Court's restrictive reading of fee-shifting provisions has left many lawyers who win substantial relief for fights-beating clients without compensation to sustain themselves and their work. (29) We focus on cases shunted out of public courts and into private arbitration.
A. The Gardner-Denver, Barrentine, and McDonald Trilogy
To trace the emergence of the Court's arbitration-favoring jurisprudence, we begin with a trilogy of cases--starting with the Court's 1974 decision in Alexander v. Gardner-Denver Co. (30) and its 1981 ruling in Barrentine v. Arkansas-Best Freight Systems, Inc., (31) and ending a decade later in McDonald v. City of West Branch (32)--that took the diametrically opposed view that arbitration was not well-suited to protect statutory rights Congress conferred on individuals. Each of the cases rejected the argument that union members had forfeited statutory claims because their employment claims were submitted to an arbitrator pursuant to their union's collective bargaining agreement with the employer and the arbitrator had ruled against the employee. These cases all turned, in part, on the idea that resolving statutory claims should be the province of courts, not arbitrators, because arbitration was inherently an inferior process for safeguarding rights guaranteed by statute. (33)
In Gardner-Denver, a unanimous Court rejected the employer's submission that the plaintiff was barred from filing a Title VII complaint because an arbitrator had decided a parallel claim, brought under a collective bargaining agreement, adversely to the employee. (34) The Court emphasized that "[a]rbitral procedures, while well suited to the resolution of contractual disputes, make arbitration a comparatively inappropriate forum for the final resolution of fights created by Title VII." (35) The Court rested its conclusion on several factors. One was that statutory claims were better entrusted to generalist federal judges rather than to arbitrators. As the Court saw it, "the special role of the arbitrator ... is to effectuate the intent of the parties rather than the requirements of enacted legislation." (36) This is problematic, the Court said, because when there is conflict between the contract and Title VII, "the arbitrator must follow the agreement." (37) Arbitrators are generally chosen by the parties "because they trust his knowledge and judgment concerning the demands and norms of industrial relations." (38) But "the resolution of statutory or constitutional issues is a primary responsibility of courts, and judicial construction has proved especially necessary with respect to Title VII, whose broad language frequently can be given meaning only by reference to public law concepts." (39)
The Court also expressed serious reservations about the adequacy of the arbitration procedures to protect statutory rights. (40) The Court noted that Congress had decided that private litigation was essential to the enforcement of Title VII. When an action is brought, "the private litigant not only redresses his own injury but also vindicates the important congressional policy against discriminatory employment practices." (41) The Court did not find the procedures available in arbitration sufficient. One particular concern was that "the factfinding process in arbitration usually is not equivalent to judicial factfinding. The record ... is not as complete; the usual rules of evidence do not apply; and rights and procedures common to civil trials, such as discovery, compulsory process, cross-examination, and testimony under oath, are often severely limited or unavailable." (42) Further, unlike courts, "[a]rbitrators have no obligation to the court to give their reasons for an award." (43) In sum, "it is the informality of arbitral procedure that enables it to function as an efficient, inexpensive, and expeditious means for dispute resolution," but these characteristics "make[] arbitration a less appropriate forum for final resolution of Title VII issues than the federal courts." (44)
The Court's 1981 decision in Barrentine echoed many of these concerns, but took Gardner-Denver one step further, emphasizing the nonwaivability of individual rights conferred by statute. Barrentine involved the Fair Labor Standards Act ("FLSA"). (45) The employer argued that the submission of an employee's wage claim to arbitration waived the employee's right to bring a separate action for the payment of wages under FLSA. In rejecting the employer's argument, the Court noted "[w]e have held that FLSA rights cannot be abridged by contract or otherwise waived because this would 'nullify the purposes' of the statute and thwart the legislative policies it was designed to effectuate." (46) Permitting a union to bargain away an individual employee's FLSA rights would subvert the goals underlying the statute. The Court justified its ruling by repeating many of the concerns raised earlier in Gardner-Denver, including that "many arbitrators may not be conversant with the public law considerations underlying the FLSA." (47) This question about the competence of arbitrators to decide public law claims was important because "FLSA claims typically involve complex mixed questions of fact and law," and "[t]hese statutory questions must be resolved in light of volumes of legislative history and over four decades of legal interpretation and administrative rulings." (48) The Court recognized that "arbitrator[s] may be competent to resolve many preliminary factual questions," but they "may lack the competence to decide the ultimate legal issue whether an employee's right to a minimum wage or to overtime pay under the statute has been violated." (49) The Court also repeated Gardner-Denver's reservations about the adequacy of arbitral procedures to protect statutory rights: "not only are arbitral procedures less protective of individual statutory rights ... but arbitrators very often are powerless to grant the aggrieved employee as broad a range of relief," including, for example, "liquidated damages, costs, or attorney's fees." (50)
The third case in this trilogy, the Court's 1984 decision in McDonald, held that submission of a civil rights claim to an arbitrator under a collective bargaining agreement did not waive a municipal employee's right to bring in court a claim under Section 1983. (51) Like Gardner-Denver and Barrentine, McDonald involved an employee who sought to assert a statutory claim after an arbitrator had rejected his contract claim. Summarizing its prior decisions in Gardner-Denver and Barrentine, the Court said that its rejection of a waiver-of-rights rule in those cases was "based in large part on our conclusion that Congress intended the statutes at issue in those cases to be judicially enforceable and that arbitration could not provide an adequate substitute for judicial proceedings in adjudicating claims under those statutes." (52) This concern applied with special force to Section 1983 actions because the statute's "very purpose" was "to interpose the federal courts between the States and the people, as guardians of the people's federal rights--to protect the people from unconstitutional action under color of state law." (53) The Court also repeated its prior conclusion that arbitration is a less desirable forum for resolving statutory claims, noting that (a) a specialist arbitrator may not have the "expertise required to resolve the complex legal questions that arise" in statutory cases; (b) the arbitrator "has no general authority to invoke public laws that conflict with the bargain between the parties"; and (c) "arbitral factfinding is generally not equivalent to judicial factfinding" because the record "is not as complete; the usual rules of evidence do not apply; and the rights and procedures common to civil trials, such as discovery, compulsory process, cross-examination, and testimony under oath, are often severely limited or unavailable." (54)
Taken together, this trilogy of cases signaled the Court's hostility to the suggestion that arbitration was a suitable replacement for litigation of statutory claims. Each decision underscored the Court's strongly held belief in the need for judicial vindication of statutory rights and the inadequacy of arbitral procedures to safeguard the fulfillment of the objectives embodied in these statutes. McDonald, however, proved to be the high-water mark for this view.
B. Gilmer and the End of the Non-Waivability Principle
Just seven years later, in Gilmer v. Interstate/Johnson Lane Co., (55) the Court reconceptualized arbitration of employment disputes altogether, so much so that it found the earlier trio of cases "far out of step with our current strong endorsement of the federal statutes favoring this method [arbitration] of resolving disputes." (56) So what had happened? How could a Court united in the belief that arbitration was inadequate to protect statutory rights repudiate that view only a few years later?
We suggest a number of reasons for this sea change. For one, the period between 1984 and 1991 brought about a seismic shift in the Court's composition. Chief Justice Burger and Justices Powell, Marshall, and Brennan all left the Court between...
|
