Contracting (Out) Rights

Abstract

With the blessing of the Supreme Court, pre-dispute, mandatory arbitration provisions have become ubiquitous in contracts for em-ployment and consumer goods. What is the significance of this trend for the enforcement of federal laws and the vindication of the rights conferred by those laws? A number of scholars have devoted empirical research to this question, with many arguing that arbitration is not as bad as it seems if one looks at outcomes. This Article highlights two significant problems with these analyses. First, putting aside any methodological flaws in the individual studies, everyone agrees that the data available is extraordinarily limited, and even the degree of the limitation is unknown. This is because arbitration is a private, often confidential process, the initiation, outcome, and rea-soning of which are generally invisible to the public and unavailable to social scientists. Drawing conclusions from the small fraction of available data is meaningless and misleading. A second curious as-pect of the empirical literature, which has received less criticism, is its narrow focus on a single question: courts are expensive, so does arbitration provide the litigants with more bang for their buck? Even among those who question the wisdom of mandatory arbitration, many concede that arbitration costs less overall. Theorists who direct their inquiries towards fairness also evaluate it by comparing the interests of plaintiffs and defendants, but they neglect the benefits of statutory enforcement beyond those accrued by individual parties. The trouble with this approach is that what is at issue is not simply private interests, but public rights. To the extent that we consider acceptance of arbitration as substitute for litigation, we must come to terms with the fact that we are sacrificing the public interpretation of public laws. The aggregate social costs of that sacrifice deserve at-tention. In our view, the Supreme Court’s embrace of mandatory arbitration reflects a return to a Lochner-like veneration for the free-dom to contract unrestrained by public laws, and the studies measuring individual interests fail to grapple with this reality.