This Article uses recent developments in the enforcement of arbitration agreements to illustrate one way in which strategic dynamics can drive doctrinal change. In a fairly short period of time, arbitration has grown from a method of resolving disputes between sophisticated business entities into a phenomenon that pervades the contemporary economy. The United States Supreme Court has encouraged this transformation through expansive interpretations of the Federal Arbitration Act. But not all courts have embraced arbitration so fervently, and therefore case law in this area is marked by tension and conflict. The thesis of this Article is that we can better understand developments in arbitration doctrine by viewing the case law as the product of an ongoing strategic interaction between courts with differing preferences regarding the spread of arbitration. As the Supreme Court has shut off most other means of resisting arbitration, the state law doctrine of unconscionability has in the last several years become a surprisingly attractive and successful tool for striking down arbitration agreements. The nature of unconscionability analysis is that it is flexible, which provides opportunities for courts skeptical of arbitration to use the doctrine to evade the Supreme Court’s pro-arbitration directives while simultaneously insulating their rulings from Supreme Court review. Sophisticated resistance to arbitration is just one side of the story, however. The approach employed in this Article examines the judicial system as a whole, including the ways pro-arbitration courts respond, sometimes indirectly, to what they perceive as manipulation of unconscionability. The suspicion that some courts are disfavoring arbitration drives pro-arbitration courts to change their strategies, such as by establishing new doctrine that facilitates monitoring and shifts decisionmaking authority. This strategic framework can help us make sense of otherwise puzzling trends in arbitration doctrine and can help us predict what moves will be next. Although the specific subject matter is arbitration, this analysis is also aimed at those interested in more general problems of judicial federalism.
Private resolution and public adjudication of disputes are commonly seen as discrete, antipodal processes. The essence of private dispute resolution is that the parties can arrange the disputed rights and entitlements per agreement and without judicial intervention. In public adjudication, however, the sovereign mandates the substantive and procedural laws to be applied, many of which cannot be changed by either a party’s unilateral decision or both parties’ mutual consent. Neither approach allows a party an option to unilaterally alter important aspects of the process, such as the attorney fee rules and standards of proof. This understanding is commonly accepted and rarely challenged, but it is curious nonetheless.
This Article proposes that we move toward procedural optionality, the idea that each party should have options to choose certain procedural laws in public adjudication. To show the potential efficacy of this concept, this Article proposes a scheme in which parties can unilaterally shift fees as long as they contractually bond their good faith by assuming a higher standard of proof. Allowing private choice to alter these rules can better address the problems of frivolous suits and nonprosecution of low value claims—two problematic bookends in the spectrum of litigation. By properly structuring party options, the law can create greater convergence of private incentives and social interest. More efficient dispute resolution results, as measured by increased enforcement of and compliance with the substantive laws, at lower cost. Lastly, this Article concludes by examining more broadly some policy implications of procedural optionality for substantive and procedural laws.
This Article considers a trend toward what I have termed the “new multiculturalism,”
in which conflicts between law and religion are less about recognition
and symbolism and more about conflicting legal orders. Nothing typifies this trend
more than the increased visibility of religious arbitration, whereby religious groups
use current arbitration doctrine to adjudicate their disputes not in U.S. courts and
under U.S. law, but before religious courts and under religious law. This dynamic
has pushed the following question to the forefront of the multicultural agenda:
Under what circumstances should U.S. courts enforce arbitration awards issued by
religious courts in accordance with religious law? Indeed, with growing skepticism
regarding the oppressive potential of religious majorities, critics have questioned
whether religious arbitration has any place in a regime dedicated to individual liberties.
By contrast, this Article contends that current arbitration doctrine can meet
the challenges of the new multiculturalism. To do so, this Article makes two concrete
policy recommendations: (1) courts should redefine the scope of enforceability
of religious arbitration awards by limiting the application of public policy to vacate religious arbitration awards; and (2) courts should expand the application of
the unconscionability doctrine to void religious arbitration agreements.
Accident compensation, and particularly auto accident compensation, is typically
thought to take one of two dichotomous forms: either no-fault or traditional tort.
Further, conventional wisdom holds that while pure no-fault may be an option in
theory, it is not one in practice. No pure no-fault auto regime has ever been enacted
in the United States, and states these days are repealing, rather than enacting, modified
no-fault legislation. Yet something peculiar is happening on the ground. Far
out of the light of day, high-volume personal injury firms that I call “settlement
mills” are quietly achieving many of no-fault’s objectives—speeding recoveries,
lowering systemic costs, and delivering relatively standardized sums to an apparently
expanded set of clients—while ostensibly operating within traditional tort.
What settlement mills are accomplishing, then, is in some respects astonishing—and
certainly commendable. Yet, the fact settlement mills’ distinctive operations are out
of the light of day and rarely revealed to clients is problematic, raising profound
issues of informed consent and highlighting severe information deficiencies in the
market for legal services. A well-designed disclosure regime can preserve settlement
mills’ substantial benefits, ameliorate their unique costs, and, more broadly,
improve the tort system’s operation and address the vexing problem of attorney
Over the last fifty years, nonunion employers have increasingly adopted formal
grievance procedures, which allow employees to challenge a company decision or
policy and appeal manager adjudications of the challenge. Employers have
adopted these procedures to minimize liability and ensure employee productivity.
But while these procedures signal that employees are treated fairly, the psychological
theory of escalation of commitment suggests that complaint-and-appeals procedures
exacerbate workplace conflict. This Note presents this unintended
consequence of formal grievance procedures and discusses its implications for
workplace dispute resolution. Part I explains the adoption of formal grievance procedures
as employer efforts to signal that employees are treated fairly. Part II
applies the psychological theory of escalation to grievance procedures, and Part III
argues that escalation undermines the purpose of formal grievance procedures and
proposes mediation as an escalation-reducing alternative.
Hundreds of millions of consumer and employment contracts include arbitration clauses, class arbitration waivers, and other terms that modify the rules of litigation. These provisions ride the wake of the Supreme Court’s expansive interpretation of the Federal Arbitration Act (FAA). For decades, scholars have criticized the Court’s arbitration jurisprudence for distorting Congress’s intent and tilting the scales of justice in favor of powerful corporations. This Article claims that the Court’s reading of the FAA suffers from a deeper, more fundamental flaw: It has transformed the statute into a private delegation of legislative power. The nondelegation doctrine forbids Congress from allowing private actors to make law unless they do so through a process that internalizes the wishes of affected parties or that is subject to meaningful state oversight. The FAA as construed by the Court violates this rule. First, companies have invoked the statute to create a parallel system of civil procedure for consumer and employment cases. This river of privately made law not only washes away Congress’s procedural rulemaking efforts but dilutes the potency of substantive rights. Second, although businesses ostensibly impose these rules through the mechanism of contracting—a process normally rooted in mutual consent—the Court’s arbitration case law deviates from traditional contract principles. It funnels consumers and employees into arbitration even when they truthfully claim that they did not agree to arbitrate. Third, despite the fact that the FAA as enacted mandates robust judicial review of privately made procedural rules, the Court has all but abolished this safeguard. This Article concludes that the Court should recognize that the FAA as interpreted raises grave private delegation issues and should thus limit the statute.
The Annulment Committee’s Role in Multiplying Inconsistency in ICSID Arbitration: The Need to Move away from an Annulment-Based System
This Note critiques the current structure and practice of the ICSID annulment mechanism by shifting away from the traditional focus on the ICSID arbitration system as a dispute settlement body and instead analyzing the annulment mechanism’s role in a progressively “judicializing” investor-state arbitration system. Recent developments in ICSID arbitration indicate that, over time, ICSID arbitral tribunals have undergone “judicialization”—that is, they have acquired domestic court–like characteristics enabling them to impact state and individual behavior prospectively, rather than merely to resolve the specific dispute at bar. These developments raise the question of whether the current annulment mechanism, which provides for cancellation of tribunal awards on a strictly limited set of grounds, is capable of accommodating this shift. Although the drafters of the ICSID Convention did not intend to allow an annulment committee, convened after the tribunal’s issuance of an award, to review the substantive merits of that tribunal’s award, annulment committees have previously based their decisions on more expansive substantive review than that permitted under the Convention. This Note argues that in a recent series of decisions, annulment committees appear to be engaging in greater substantive review of tribunals’ awards once again, a fact that triggers a renewed sense that annulment committees are still confused over the proper role of annulment in the ICSID arbitration system. Such confusion has serious implications in that it leads to the production of inconsistent decisions at the annulment level of the ICSID arbitration system, thus adding to the layer of inconsistent decisions produced at the tribunal level. These incoherent decisions may ultimately imperil the legitimacy of the ICSID arbitration system as a judicialized body for shaping prospective state and individual behavior. To strengthen the legitimacy of ICSID arbitral decisions and promote further development of coherent international investment law, I argue that it is critical for ICSID to establish a mechanism with official powers of substantive review.
Convenient Facts: Nken v. Holder, the Solicitor General, and the Presentation of Internal Government Facts
In April 2012, facing a court order to disclose internal Justice Department e-mails, the Office of the Solicitor General (OSG) wrote to the United States Supreme Court to admit that it had made a factual statement to the Court three years earlier in Nken v. Holder about agency policy and practice that was not accurate. The statement had been based on e-mail communications between Justice Department and agency lawyers. In fact, the statement neither reflected the content of the e-mails nor the actual policy and practice of the relevant government agencies. The letter promised remedial measures and concluded by assuring the Court that the OSG took its responsibility of candor seriously. The underlying factual representation by the OSG in the Nken case was unusual because it attracted attention and lengthy Freedom of Information Act (FOIA) litigation that led to the disclosure of the communications that served as the basis of the statement. But it is not at all unusual as an example of unsupported factual statements by government lawyers that are used to support legal arguments. Indeed, unsupported statements appear in OSG briefs on a wide range of issues. These statements benefit from the unusual position of the government: It has access to information not available to other litigants, and it benefits from a presumption of candor that endows its statements with a claim of self-evident authority that no private litigant could match.
The Nken case provides a unique opportunity to explore the consequences of judicial acceptance of fact statements provided by the OSG. Because of FOIA litigation, we have an opportunity to examine how the OSG gathered information as well as the role played by government counsel at the Justice Department and the interested agencies. This examination shows multiple dangers with unsupported statements about internal government facts. It also demonstrates the difficulty of relying on lawyers representing the government to seek out and offer information that will undermine the government’s litigation position. Finally, it shows that it is dangerous to rely on the party that has misled the Court to develop an appropriate remedy.
Prevention of misleading statements could be pursued through greater self-regulation, prohibition of extra-record factual statements, or through a model of disclosure and rebuttal. This Article argues that the experience in Nken reflects the grave danger in presuming that self-regulation is an adequate safeguard against erroneous statements. It further argues that despite the appeal of a rigid rule that prohibits such statements, such an approach ignores the Court’s interest in information about real world facts that are relevant to its decisions. The Article concludes by arguing that the best proactive approach is to adopt a formal system of advance notice combined with access to the basis of government representations of fact. It further argues that courts should refuse to honor statements in court decisions that are based on untested and erroneous statements of fact by the government.
Clearing the Road to Havana: Settling Legally Questionable Terrorism Judgments to Ensure Normalization of Relations Between the United States and Cuba
The Obama Administration has acted decisively to cure a long-standing wound the United States has inherited from the Cold War by seeking to normalize relations with Cuba. However, prospects for full normalization are currently impeded by over four billion dollars in judgments levied against Cuba by politically motivated state courts in Florida under the state sponsor of terrorism (SST) exception to the Foreign Sovereign Immunities Act. These judgments create a serious obstacle and impede Cuba and its companies from transferring any assets into the United States. Because these judgments purport to punish Cuba for acts occurring during and immediately after the Cuban Revolution and Cuba was only placed on the SST list in 1982 for supporting insurgent movements elsewhere in Latin America, the courts manifestly exceeded their subject matter jurisdiction in issuing them. Nevertheless, several federal courts have afforded them full faith and credit and begun to enforce them against Cuba’s existing assets in the United States.
This Note therefore argues that the President can and should exercise his power to espouse and settle international claims to resolve these judgments pursuant to a sole executive agreement, whether or not he is able to secure congressional acquiescence for his actions. In doing so, the President can lean on a long record of historical practice affirmed repeatedly by the Supreme Court and buttressed by recent settlements of terrorism claims with Iraq and Libya. Finally, the U.S. government should be able to avoid a takings claim by SST judgment holders after the judgments’ resolution by funneling their claims into the Foreign Claims Settlement Commission and providing for some fractional compensation.
A settlement is an agreement between parties to a dispute. In everyday parlance and in academic scholarship, settlement is juxtaposed with trial or some other method of dispute resolution in which a third-party factfinder ultimately picks a winner and announces a score. The “trial versus settlement” trope, however, represents a false choice; viewing settlement solely as a dispute-ending alternative to a costly trial leads to a narrow understanding of how dispute resolution should and often does work. In this Article, we describe and defend a much richer concept of settlement, amounting in effect to a continuum of possible agreements between litigants along many dimensions. “Fully” settling a case, of course, appears to completely resolve a dispute, and if parties to a dispute rely entirely on background default rules, a “naked” trial occurs. But in reality virtually every dispute is “partially” settled. The same forces that often lead parties to fully settle—joint value maximization, cost minimization, and risk reduction—will under certain conditions lead them to enter into many other forms of Pareto-improving agreements while continuing to actively litigate against one another. We identify three primary categories of these partial settlements: award-modification agreements, issue-modification agreements, and procedure-modification agreements. We provide real-world examples of each and rigorously link them to the underlying incentives facing litigants. Along the way, we use our analysis to characterize unknown or rarely observed partial settlement agreements that nevertheless seem theoretically attractive, and we allude to potential reasons for their scarcity within the context of our framework. Finally, we study partial settlements and how they interact with each other in real-world adjudication using new and unique data from New York’s Summary Jury Trial Program. Patterns in the data are consistent with parties using partial settlement terms both as substitutes and as complements for other terms, depending on the context, and suggest that entering into a partial settlement can reduce the attractiveness of full settlement. We conclude by briefly discussing the distinctive welfare implications of partial settlements.