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Abstract:
The Supreme Court has so significantly rewritten the Federal Arbitration Act (FAA) over the last twenty-five years that today it bears little resemblance to the statute enacted by Congress in 1925. Adopted as a simple procedural Act to enforce arbitration agreements, the FAA was intended to be applicable only in federal court. Today, the statute is a substantive statute applicable in both state and federal courts, which broadly pre-empts state law. The statute's pre-emption of state law has recently been confirmed and expanded in the Court's decision in Buckeye Check Cashing v. Cardegna (Feb. 2006).

Although the thrust of the original legislation was to enforce arbitration agreements between merchants regarding fact-heavy commercial disputes, the Court has held that the FAA applies to statutory rights under antitrust, securities and employment laws. Moreover, although all workers' contracts were excluded from the Act in 1925, the Court has held that only transportation workers are excluded. Finally, despite concerns of Members of Congress that this legislation should not apply in "take-it-or-leave-it" situations, the increasing use of mandatory arbitration clauses in adhesion situations has closed access to the courts for a substantial segment of consumers, insureds, small businesses, and investors.

How does a statute acquire a totally different scope and application without any legislative intervention? This article begins with the story of the Federal Arbitration Act's origins, and then discusses the interpretive methods used by the Supreme Court in the major cases that have defined the FAA. It concludes that none of the different interpretive methods used by the Court has served to cabin judicial discretion to legislate, resulting in a complete rewriting of the statute.

The article also considers the impact of the Court's policy choices on our legal system. The FAA is a statute that reduces protections legislated in the fields of federal antitrust, securities and employment law, and intrudes upon state police powers to control core state functions involving contract law and legal process. The new architecture of the FAA appears to reflect judicial policy preferences for the economically powerful, favoring corporations over consumers, and employers over employees.

FAA, arbitration, preemption, contract, statutory construction, textualism, consumer, employment

Abstract:
Because payment under a letter of credit depends upon presentation by the seller-beneficiary of documents that comply strictly with the documents required by the letter of credit, the slightest discrepancy in the documents relieves the bank of its obligation to pay. Indeed, most presentations are discrepant. Yet buyers typically waive the discrepancies in the documents, thereby permitting the seller to be paid by the bank under the letter of credit. This article shows how the seller, by controlling the goods through use of a negotiable bill of lading, consigned to the bank, can protect itself from the potential opportunism of the buyer.

Recently published scholarship has attempted to explain why buyers waive discrepancies since they have no obligation to do so and since seller's presentation of discrepant documents provides buyer an opportunity to avoid payment under the letter of credit. This article will add to the discussion by showing how the seller, by controlling the goods through the use of a negotiable bill of lading, consigned to the bank, can protect itself from the potential opportunism of the buyer. When the seller maintains control of the goods, the buyer has an incentive to waive the discrepancies in the documents, and therefore permit the bank to pay the seller under the letter of credit.

This article first describes how letters of credit are thought to work. It will then show the reality of how the system works. It next focuses on explanations proposed in recent scholarship as to why buyers tend to waive discrepancies, even though they have no duty to do so. Finally, it explains the role of the bill of lading as a control mechanism.

international letters of credit, lading

Abstract:
In interpreting the Federal Arbitration Act ('FAA"), the Supreme Court has not carried out the will of Congress, but instead, has created over the last twenty-five years a new law based upon its own policy preferences. The Court's interpretation in a recent case, Hall Street v. Mattel, in conjunction with its earlier decision in Mitsubishi v. Soler, demonstrates how it has undervalued or ignored both the text of the statute and its legislative history. In disregard of Congress's statutory commands, the Court has created a law which undercuts the protections Congress has adopted in the areas of civil rights, securities, consumer protection, antitrust and employment.

In Hall v. Mattell, the Court resolved a split in the circuit courts by determining that the FAA did not permit parties to determine by agreement that an award by an arbitrator could be reviewed on the merits by a court. Ignoring legislative history, which supports the enforcement of the parties' agreement according to its terms, the Court misapplied the canon ejusdem generis to find that the silence of the statute amounted to a prohibition. The court further determined that "manifest disregard of the law," a judicially created ground for reviewing an arbitrator error of law, did not constitute a separate ground for review, and that the narrow grounds set forth in the statute, which do not permit review for errors of fact or law, were exclusive.

In Mitsubishi, in 1985, the Court relied on the silence of the FAA to find that antitrust claims were arbitrable under the FAA. This is so despite the fact that it is clear from the text of the statute, its legislative history and at least 300 years of prior arbitration practice that the FAA was enacted to enforce contract claims arising out of business relationships. Thus, Mitusbishi created a paradigm shift in arbitration law. For the first time, the Court delegated to citizen-arbitrators the power to determine rights under statutes passed by Congress. In so doing, the Court has weakened rights under statutes adopted by Congress to protect investors, employees, consumers, investors and small businesses. Arbitrations take away the right to a jury trial, limit discovery, may eliminate a class action right, and permit no judicial review on the merits. Private-citizen arbitrators have an obligation to the parties before them, but unlike a judge, have no obligation to the public interest.

Thus, with respect to the arbitration of claims under mandatory law, many have called for heightened scrutiny of arbitrator awards. The Supreme Court, on the other hand, has shown in Hall v. Mattel that it wants no review whatsoever of an award based on a regulatory statute that may rest upon an erroneous conclusion of law. Congress needs to take back control of arbitration law and policy, consider overturning Hall v. Mattel through corrective legislation, and consider a complete overhaul of arbitration law to provide either for no arbitration of claims under mandatory law, or, at the least, for heightened scrutiny of arbitral awards based on such claims.

Arbitration, Federal Arbitration Act, FAA, Legislation, Judicial Review, Arbitration Award, Statutory Claims, Manifest Disregard of the Law, Hall v. Mattel

Abstract:
This Article will focus on the letter of credit's failure to protect against buyer insolvency, and it will show how the letter of credit system provides an issuing bank with substantial discretion to deny payment under a letter of credit when it believes its customer, the buyer, is unable to reimburse it. The Article will also consider whether the bank's obligation to act in good faith should limit its discretion to deny payment to the seller under a letter of credit when the buyer is insolvent. This Article will focus on those cases where the bank dishonors the letter of credit when the buyer/applicant insolvent. Part II of this Article will focus on the causes and consequences of letter of credit failure. Part III will consider certain conduct of the issuing bank which could be considered opportunistic, the incentives for such conduct, and the impact it has on the letter of credit process. Part IV will discuss the obligation of good faith imposed on issuing banks; the impact on this obligation of two important aspects of letter of credit law, strict compliance and the independence principle; and the different approaches to the good faith obligation taken in the Untied States and in civil law countries. Finally, Part V will consider the application of the good faith standard when a bank denies payment under a letter of credit because the applicant is insolvent. The Article concludes that in cases of applicant insolvency, when a bank is likely to dishonor a letter of credit because it fears non-reimbursement, the bank's claim that it is dishonoring for other reasons should be carefully scrutinized. Holding a bank to a good faith standard of conduct in cases of applicant insolvency would strengthen the letter of credit process and provide an incentive to all banks to follow standard practices when dealing with letters of credit.

letters of credit, buyer insolvency, good faith, credit failure

Abstract:
Revised Article 1 of the Uniform Commercial Code (UCC) changes the definition of good faith from the narrow, "honesty in fact" standard, to the broader standard which includes both honesty in fact and reasonable commercial standards of fair dealing. The changed definition essentially means that the new standard for determining good faith under Article 1 is no longer only subjective, but rather requires decision-makers to use both a subjective and an objective standard, incorporating fairness. This article will consider the effect of this change on UCC provisions and on the application of the doctrine of good faith.

The change in the definition of good faith revised in Article 1 is bound to bring about some change in the way courts interpret the obligation of good faith. Since the broad standard has already been adopted in most UCC articles, however, the change will not in all likelihood be a major one. Nonetheless, assuming the states adopt revised Article 1 as drafted, these enactments of the broad definition of good faith should generally reaffirm and strengthen the view that under the UCC, a party's conduct should not be contrary to the reasonable expectations of the other party, and should be in accordance with commercial standards reasonably structured to result in fair dealing.

good faith, Uniform commerical code, honesty in fact

Abstract:
Arbitration agreements remove disputes from our court system to a private system of justice, paid for by the participants. Although arbitration can have certain advantages over litigation, such as confidentiality, speed, flexibility, and ability of the parties to choose the arbitrators, such a forum also has disadvantages. At particular risk of being disadvantaged is the consumer, who may be unaware that by agreeing to an arbitration clause she has given up her right to a jury trial, and she will pay higher fees for the arbitral process than she would have to pay as court fees in litigation. Moreover, she will have no right to an appeal on the merits of the case, and may be prohibited from bringing her action as a class action. Although a party's consent is supposed to be required in order for the dispute to be resolved in a private forum, in many consumer transactions, there is no willing and knowing consent to arbitration. Adhesion contracts that are imposed on consumers by banks, telephone companies, credit card companies, pest control companies, and a myriad of other vendors and service providers are neither read nor signed by most consumers. Nonetheless, the arbitration provisions in such contracts - referred to as pre-dispute arbitration clauses - are regularly upheld by the courts. This article will focus on how the Supreme Court has interpreted the Federal Arbitration Act in a way that undermines consumer protection, in particular by holding that states' attempts to limit arbitration abuses will in most instances be preempted by the Federal Arbitration Act.

arbitration agreements, Federal Arbitration Act, adhesion contracts

Abstract:
Arbitration is a private system of justice, made possible by the parties' consent. In the United States, a court's ability to interfere with this private adjudicatory process or to set aside an arbitral award has been severely limited by the United States Federal Arbitration Act. Recently, parties to arbitrations held in the United States have sometimes asked for judicial review of an award for errors of law or fact. The question raised by this is whether the parties have the right to expand the grounds on which a court can review an arbitral award. The answer depends on the proper interpretation of the FAA.

This Article will focus on the various policies behind the two different interpretations of the FAA's grounds for review. It concludes that while both positions raise important questions, the better interpretation of the FAA permits expanded judicial review. However, there are a number of pitfalls that parties need to consider before they seek expanded judicial review of arbitral awards.

Part II will consider the conflicting circuit court positions regarding the proper scope of judicial review under the FAA, with an analysis of the rationales supporting each position. Part III will then examine domestic enforcement issues which arise when parties have agreed to expanded judicial review, including different approaches which may be taken by state and federal courts. Part IV will consider the complexities of international enforcement of arbitral awards, particularly the tendency of some courts to enforce awards even though they have been vacated in the place where made, and will focus on problems of enforcement internationally when expanded review has been sought. The Article concludes that even though the better legal arguments support expanded judicial review, the practical problems with enforcement of awards subjected to expanded judicial review remain significant.

arbitration, FAA, party's consent

Abstract:
This Article examines the Supreme Court's evolving Seventh Amendment jurisprudence by focusing on the four strands that have emerged primarily in the twentieth century: first, the historical test of the right to a jury trial, based upon whether the action could have been brought in a court of law in 1791, the time of the Seventh Amendment's ratification; second, the preservation of the "substance" of the jury trial right, as opposed to mere matters of pleading and practice; third, the preservation of the jury right after law and equity courts were merged in 1938; and fourth, the creation of an exception to the Seventh Amendment guarantee for matters which Congress has delegated for decision to non-Article III courts and administrative agencies.

Part I of this Article describes the background of the Seventh Amendment, including the emergence of the historical test for the right to a jury trial. This historical background sets the stage for the discussion in Part II of the four strands of twentieth-century Seventh Amendment jurisprudence. Part III then outlines the Markman v. Westview Instruments, Inc. decision and compares it with the four strands of Seventh Amendment jurisprudence. Part IV concludes that Markman should have little impact upon the Seventh Amendment right to a jury trial outside the area of patent law. Part V discusses the continuing evolution of Seventh Amendment jurisprudence in three post-Markman decisions: Warner-Jenkinson Co. v. Hilton Davis Chemical Co., Feltner v. Columbia Pictures Television, Inc. and City of Monterey v. Del Monte Dunes.

seventh amendment, right to jury trial

Abstract:
Revised Article 5 of the Uniform Commercial Code is the product of years of effort to modernize the statute and harmonize it with international letter of credit rules. Since Article 5 has been sent to the states for review and enactment, the impact of certain provisions on small and mid-sized companies should be considered. These smaller companies as a group contribute substantially to the growth of the U.S. economy through exports. Individually, however, they have little leverage to use with a bank in a dispute over a letter of credit.

There are two provisions that impact negatively on these companies. The first provision, Section 5-108(e), potentially impacts adversely on all parties, since it abridges the constitutional right to a jury trial. The second, Section 5-111(e), which mandates that attorney's fees and expenses of litigation be awarded to the prevailing party, may effectively prevent smaller companies from bringing a lawsuit against a bank, because of the risk of having to pay the bank's attorney's fees if they lose. Both of these provisions need modification.

uniform commercial code, revised article 5

Abstract:
Uniform Commercial Code (UCC) drafters have attempted to reduce the role of juries in commercial cases by drafting provisions in the UCC that assign the court to decide as a question of law certain matters which have traditionally been decided by the jury. This article addresses the questions of whether the gradual erosion of the right to a jury trial in UCC cases should be continued or reversed, and whether or to what extent Article 1 should have a role in the process.

This article will first consider federal and state constitutional requirements of the right to a jury trial and their applicability to cases brought under the UCC. It will then examine specific UCC provisions where the drafters allocated to the court determination of matters that are typically decided by the jury. A brief examination will then be made of the reaction of some state bar committees, law revision commissions, and legislatures to the question of the constitutionality of such reallocation under state law. Next, the article will consider the constitutionality of the specific UCC provisions in light of traditional Seventh Amendment of jurisprudence, as well as recent Supreme Court decisions regarding the scope of the Seventh Amendment guarantee. It will then examine the policies favoring or opposing jury trials and will compare results of empirical studies of jury performance with beliefs and attitudes upon which various policy views are based. Finally, the question of whether Article 1 has a role with respect to this issue will be considered. The article concludes that reallocation by the drafters of factual matters to the court is both constitutionally troubling and not justified on policy grounds

jury trial, Uniform commercial code, commercial cases, seventh amendment

Abstract:
This Article will examine the right to a jury trial in a letter of credit case, and whether revised section 5-108(e) of the Uniform Commercial Code violates that right. It will consider the historical use of jury trials in letter of credit cases, and will examine the constitutional implication of revised section 5-108(e), both with respect to the Seventh Amendment and state constitutional law.

The policies and goals underlying revised section 5-108(e) will be considered, as well as the drafters' proffered justifications for assigning to the court in this subsection questions of fact normally decided by juries. The Article concludes that revised section 5-108(e) unconstitutionally abridges the jury's role both in deciding disputed factual issues and in drawing inferences from the evidence. It also concludes that even assuming no constitutional defect, the proposed revision will not promote the stated goals of efficiency, predictability, speed, and uniformity.

uniform commercial code, seventh amendment

Abstract:
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 on the basis of changed judicial methods of interpretation. This article will examine how the Supreme Court, in Penn Plaza, 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. Penn Plaza serves as a strong invitation to Congress to adopt new legislation that will overturn inconsistent “legislation” created by the Court. The Penn Plaza 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 from purpose as evidenced by legislative history. Instead, the current law of arbitration represents judicial policies independently crafted by the Court and unrelated to statutes enacted by Congress.

Statutory Interpretation, Textualism, Arbitration, Legislative History