Disappearing Claims and the Erosion of Substantive Law
42 Pages Posted: 7 Dec 2014 Last revised: 9 Jun 2015
Date Written: 2015
The Supreme Court’s arbitration jurisprudence from the last five years represents the culmination of a three-decade-long expansion of the use of private arbitration as an alternative to court adjudication in the resolution of disputes of virtually every type of justiciable claim. Because privatizing disputes that would otherwise be public may well erode public confidence in public institutions and the judicial process, many observers have linked this decades-long privatization of dispute resolution to an erosion of the public realm. Here, I argue that the Court’s recent arbitration jurisprudence undermines the substantive law itself.
While this shift from dispute resolution in courts — the public realm — to dispute resolution in arbitration — the private realm — initially undermined values and mechanisms of adjudication, the shift from public lawsuits to private arbitration now also threatens values and mechanisms of lawmaking. This new threat to the lawmaking function stems from a fundamental theoretical shift in the Court’s arbitration jurisprudence, cemented in its 2013 decision in American Express v. Italian Colors. As this piece explains, in Italian Colors, the Supreme Court subtly, but definitively, abandoned its descriptive and normative premise that freedom of contract was justified in the arbitration context because it would result in more cost-effective procedures for resolving disputes, and, accordingly, enforcement of federal statutory regimes. In its place, the Court adopted a reductionist vision of arbitration as any set of private dispute resolution procedures chosen by the parties, no matter how onerous or inefficient, and it held that the Federal Arbitration Act required courts to enforce whatever terms the parties chose. Particularly given a pronounced reliance in the United States upon private litigants to enforce statutory directives, the Court’s recent arbitration jurisprudence now threatens the substantive law itself. Through private arbitration contracts, private parties can effectively rewrite substantive law by rendering a host of legal claims mere nullities. What’s more, private parties can exercise this quasi-lawmaking power almost entirely outside of public view, through rarely read and little-understood provisions in contracts of adhesion subject to scant public scrutiny or regulatory oversight. The largely unchecked power of private entities to recalibrate their legal obligations, now recognized by the Court, leaves little to stop an erosion of substantive law.
Keywords: arbitration jurisprudence, Supreme Court, privatizing dispute resolution
JEL Classification: K00, K30, K39, J52
Suggested Citation: Suggested Citation