Volume 14 / Number 3 / Fall 2010

 

SYMPOSIUM:

THE SUPREME COURT AND ARBITRATION

An Introduction to the Symposium

Edward Brunet

The Pretext of Textualism: Disregarding
Stare Decisis in 14 Penn Plaza v. Pyett

Margaret L. Moses

In 14 Penn Plaza LLC v. Pyett, the Supreme Court ignored the principles of stare decisis and justified its disregard of precedent established thirty-five years earlier in Alexander v. Gardner-Denver Co. on the basis of changed judicial methods of interpretation. This article will examine how the Supreme Court, in Pyett, as well as in other decisions, has used the judicial method of interpretation known as textualism, including a version I call “no-text textualism,” to reinvent statutes, abandon precedent, and create its own norms in the field of arbitration. The Pyett decision demonstrates how the Supreme Court has freely disregarded a statute’s text, its legislative history, and even the Court’s own judicial precedent when fashioning a law of arbitration to suit its policy preferences. In the field of arbitration, the Court’s use of textualism has frequently served as a pretext for creating national law and policy that differ substantially from statutory text and purpose as evidenced by legislative history. Pyett serves as a strong invitation to Congress to adopt new legislation that will overturn inconsistent “legislation” created by the Court.

Let the Grand Experiment Begin: Pyett Authorizes Arbitration of Unionized Employees’ Statutory Discrimination Claims

Sarah Rudolph Cole

In 14 Penn Plaza LLC v. Pyett, the Supreme Court affirmed the ability of unions and employers to negotiate arbitration clauses that require unionized employees to arbitrate statutory claims. The academic response to this case will likely be that it is wrongly decided because arbitration, especially labor arbitration, is a poor substitute for litigation and unions’ willingness to bargain away minority members’ rights to the judicial forum is but one more sign of union bias against women and minorities. This paper contends that this response may be wrong on both counts. It is likely that litigants will achieve better results in labor arbitration than in traditional litigation because unionized arbitration involves repeat players on both sides of the arbitration and offers parties substantial opportunity to negotiate an arbitral process that best suits them. In addition, the presence of repeat players on both sides of the dispute offers protection against arbitrary decision-making. The process should also be cheaper for the employee than traditional litigation because the employee does not have to pay for a representative.

The presumption that unions are biased against women and minorities may also be in error. Although this was true in the past, unions, to ensure their survival, have become staunch advocates of traditionally underrepresented groups as they recognize that it is members of those groups who form a large percentage of their newest and most supportive members.

Pyett creates an opportunity for unionized employees and their advocates to take advantage of the arbitration process to resolve their discrimination claims more quickly and cheaply with results similar to or better than litigation. As unions search for a role in the twenty-first century workplace and employees face increasingly poor odds of success in litigating statutory discrimination claims, labor arbitration may be the best response to an increasingly dire landscape for unionized employees’ statutory discrimination claims in federal courts.

Contracting Around Hall Street

Christopher R. Drahozal

This Article examines the extent to which expanded court review of arbitration awards remains available after the Supreme Court’s decision in Hall Street Associates, L.L.C. v. Mattel, Inc.—that is, whether parties can contract around Hall Street. It finds only a limited likelihood that expanded-review provisions are enforceable after Hall Street in federal court, but a greater likelihood in state court (assuming the state arbitration law permits parties to contract for expanded review). First, contract provisions limiting the arbitrators’ authority to make legal errors should permit expanded review under the FAA (in both federal court and state court), but courts since Hall Street have not been receptive to the argument. Second, under a narrow interpretation of the Supreme Court’s decision in Volt, parties are unlikely to be able to contract out of the FAA altogether. As a result, confirmation of an award in federal court under the FAA likely would preclude a court from relying on an expanded-review provision authorized by state law to vacate the award. Third, whether expanded review is available in state court depends on (1) whether state arbitration law authorizes expanded review; and (2) the scope of FAA preemption. Under at least some theories of FAA preemption, state laws authorizing expanded review would not be preempted by the FAA in state court.

The Other Avenues of Hall Street and Prospects
for Judicial Review of Arbitral Awards

Maureen A. Weston

In Hall Street Associates, L.L.C. v. Mattel, Inc., the U.S. Supreme Court held that the Federal Arbitration Act (FAA) provided the exclusive grounds for judicial vacatur and modification of arbitral awards covered under the Act. In so ruling, the Court rejected the contention that the FAA’s requirement to enforce arbitration contracts as written includes private contracts that seek to expand the scope of judicial review beyond the grounds enumerated in the FAA. Despite holding that parties cannot expand a court’s power to review an arbitration award under the FAA, the Court alluded to the possibility of “other possible avenues” for judicial review of arbitration awards. This decision arguably raised more questions than it answered. For example, did Hall Street limit a court’s power to review an arbitral award for a judicially recognized standard of manifest disregard of the law or violation of public policy? Can parties achieve essentially the same result through creative drafting, such as provisions that limit the scope of an arbitrator’s powers to render only factually or legally correct decisions? Are state courts bound by the FAA’s narrow modification and review standards, and Hall Street’s interpretation thereof? This Article analyzes these questions and considers Hall Street’s impact on arbitration practice and judicial willingness and ability to review arbitral awards.

SYMPOSIUM COMMENT

Nonsignatories in Arbitration: A Good-Faith Analysis

Aubrey L. Thomas

As businesses conduct more and more transactions in the world market, the ability to settle disputes between international parties in a neutral forum has become a paramount concern. For this reason, the arbitration clause is an integral part of the international commercial contract. Still, due to the complex nature of most international commercial transactions, a nonsignatory, often times a subsidiary or parent corporation of one of the signatories, becomes materially involved in the performance of the contract. All of the benefits of the arbitration clause relied on by the contracting parties—such as a neutral forum, dispute finality, party autonomy, and reliance on enforceability—can be lost if the nonsignatory is not required to arbitrate disputes arising out of the contract.

Acknowledging this problem, U.S. courts have applied a variety of legal theories to require arbitration with a nonsignatory. Still, application of these different theories is inconsistent from jurisdiction to jurisdiction and is incongruent with the delocalization movement inherent in international transactions. This Comment proposes that U.S. courts should apply the principle of good faith to determine whether arbitration including a nonsignatory is appropriate. Essentially, courts should utilize the equitable principle of good faith to analyze both the contractual language as well as the conduct of the parties during negotiation and performance of the contract to determine whether the nonsignatory may compel or be compelled to arbitrate. This Comment focuses on past cases dealing with the nonsignatory issue to exemplify how the principle of good faith would create a uniform test and to demonstrate how this principle is consistent with the public policy underpinnings of arbitration. Last, this Comment concludes with arbitration clause drafting tips. Parties must engage in “conscious drafting” so that when the principle of good faith is used to interpret the parties’ contract, it will be clear when a nonsignatory should or should not arbitrate.

 

ARTICLES

The Ethics of Contract Drafting

Gregory M. Duhl

This Article provides the first comprehensive discussion of the ethical obligations and duties to non-clients of lawyers drafting contracts. It discusses fraudulent representations and warranties, errors, fraud, and “conscious ambiguity” in transcription, as well as “iffy” and invalid clauses, and argues that the standard for lawyer misconduct under the disciplinary rules should be consistent with the purposes of contract law, one of which is to promote trust between contracting parties. Additionally, this Article discusses lawyer liability for negligence to non- parties in contract drafting and contends that lawyers should be liable to non-parties only when they are third-party beneficiaries to the contract between the lawyer and client for the lawyer’s services. This Article concludes by arguing for a functional set of ethical rules for lawyers drafting contracts that reflects the increasing emphasis on cooperation, rather than competition, in the contracting process.

Reforming the Law of Adhesion Contracts:
A Judicial Response to the Subprime Mortgage Crisis

Shelley Smith

This Article examines the role of contracts of adhesion1 in the form of home mortgages and installment sale contracts, as well as in causing the Great Depression and the subprime mortgage crisis. By shifting the focus to these “financial adhesion contracts,” this Article suggests that the harm caused by the lack of mutual assent in adhesion contracts consists not simply of one-sided terms, but of terms that impose highly unsuitable economic risks on consumers. When millions of consumers sign such contracts, their collective risk-taking threatens the stability of the entire financial system. The most common cures for the nation’s economic ills— market forces, monetary policies, and regulatory controls—are found inadequate to resolve this challenge based on a review of the Great Depression, the savings and loan crisis of the 1980s, and the subprime mortgage crisis. The Article explains why current law and scholarship fail to adequately address the threat posed by financial adhesion contracts and proposes a rule of informed assent for the good of consumers and the economy.

Passive Observers, Passive Displays, and the Establishment Clause

Mark Strasser

This Article examines jurisprudence surrounding state action, and when that action does and does not violate the Establishment Clause. Division within the Court regarding what constitutes a “passive” state practice has complicated Establishment Clause analyses for lower courts, as evidenced by the chaotic case law on the issue. Because the Court has advanced very little clear guidance on Establishment Clause standards, lower courts issue widely varying opinions and reasoning on the matter, as explored by this Article.

 

NOTES AND COMMENTS

Terror Firma:
The Unyielding Terrorism Bar in the Immigration and Nationality Act

Scott Aldworth

The terrorism bar casts a long shadow in the Immigration and Nationality Act (INA). If it applies to a non-citizen, that person is ineligible for essentially any form of immigration relief. The bar casts an equally broad net, sweeping in any person who was a member of⎯or has provided support to⎯a group that engaged in any kind of armed resistance deemed unlawful by its government. The terrorism bar does not allow an adjudicator to take into account the goals of the group, any alliance it has with the United States, or the level of involvement of the individual. As a result, thousands of non-citizens have been denied immigration benefits and the protection of the United States asylum laws because they participated in or supported a group that resisted some of the most corrupt and repressive regimes in the world. As the terrorism bar is currently written, the United States troops in Iraq and Afghanistan are considered members of a terrorist organization. In spite of this, the immigration agencies and the judiciary have followed a literal application of the statute.

This Comment argues that the terrorism bar operates in violation of international law and the United States’s obligation to provide a safe harbor for refugees. Because of this and other canons of statutory construction, courts should interpret the statute narrowly to require a showing that there are reasonable grounds for regarding the non-citizen as a danger to national security. However, because courts have refused to interpret the statute appropriately, this Comment argues that the most practical solution to the problem is for the Attorney General to issue a regulation requiring a narrow interpretation.

A., B. & C. v. Ireland: “Europe’s Roe v. Wade”?

Shannon K. Calt

In Ireland, abortion is effectively illegal. In 2005, three Irish women who had previously traveled to England for abortions brought suit in the European Court of Human Rights asserting that restrictive and unclear Irish laws violate several provisions of the European Convention on Human Rights. The case was heard before the Grand Chamber of the Court on December 9, 2009 and a decision will be published in 2010.

The European Court of Human Rights has never determined whether the Convention protects the right to life of the unborn or conversely the right to an abortion. The case at hand squarely presents an opportunity for the Court to take a position.

This Note focuses on the Irish and European Court of Human Rights’s abortion law and the impending decision in A., B. & C. v. Ireland. I conclude that—based upon the Court’s own jurisprudence— the European Court of Human Rights is very likely to declare that Ireland’s nearly absolute abortion ban and the resultant effects of Irish law have and continue to violate rights the Court has already deemed protected by the European Convention on Human Rights. The Court will likely embrace one of two possible holdings. First, the Court could find that Ireland’s abortion ban causes undesirable secondary effects such as inadequate post-abortion care, that these effects implicate rights under the Convention, and that Ireland has an unfulfilled positive obligation to mitigate these effects. Alternatively, I suggest that the Court may hold that Ireland’s abortion ban itself violates the personal and family rights of applicants A., B., and C. and women like them. Commentators have referred to this case as “Europe’s Roe v. Wade,” and I believe this to be an accurate if oversimplified statement.