Judicial Review and the Limits of Arbitral Authority: Lessons from the Law of Contract

Abstract

Arbitration may be conceptualized either as a species of adjudication or as a species of contract. In the former model, the arbitrator is a private judge, hired by the parties but tasked with performing the same sorts of functions that public judges normally perform: finding facts and applying predetermined rules (normally legal rules) to those facts in order to assign rights and obligations. In the latter model, the arbitrator is a "contract reader," serving as the parties' agent designated by them in advance to supply the terms of their agreement that they did not foresee and that are necessary to resolve a conflict between them.

Scholars concerned with the expansion of binding contractual arbitration into public law areas such as employment discrimination have argued that arbitration should be subject to the requirements of due process. Application of due process to arbitration would almost certainly require some degree of judicial oversight beyond the minimal judicial review currently allowed. Courts have resisted those calls, in part by invoking the contractarian model of arbitration. Courts insist that arbitration is a purely private matter and that no state action is involved because court enforcement of arbitral awards is equivalent to court enforcement of private contracts generally.

In this article, I argue that rigorous application of the contractarian model would require significantly greater judicial review of arbitral awards than courts have acknowledged. Under the contractarian model, the award is the equivalent of a contract term agreed upon by the parties ex ante. When an arbitrator issues an award that denies a claimant rights the claimant could have enforced in court, the claimant can be understood to have waived its rights with respect to that claim. That waiver functions, in effect, like an exculpatory contract. Basic principles of contract law hold exculpatory contracts unenforceable in many areas, including intentional torts and the provision of medical services, in which arbitration is most controversial. I contend that these principles compel heightened judicial review of arbitral awards in those areas.