63 Pages Posted: 25 Aug 2010 Last revised: 2 May 2011
Date Written: August 25, 2010
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.
Keywords: arbitration, Federal Arbitration Act, FAA, class arbitration waiver, nondelegation doctrine, delegation clause
Suggested Citation: Suggested Citation
Horton, David, Arbitration as Delegation (August 25, 2010). New York University Law Review, Vol. 86, 2011; Loyola-LA Legal Studies Paper No. 2010-34. Available at SSRN: https://ssrn.com/abstract=1665565