Clause Construction: A Glimpse into Judicial and Arbitral Decision-Making

56 Pages Posted: 28 Feb 2018  

David Horton

University of California, Davis - School of Law

Date Written: February 18, 2018

Abstract

For decades, the U.S. Supreme Court has insisted that forcing a plaintiff to arbitrate — rather than allowing her to litigate — does not affect the outcome of a dispute. Recently, the Court has invoked this “parity principle” to expand arbitral jurisdiction. Reasoning that it does not matter whether an arbitrator or a judge resolves a particular issue, the Justices have allowed arbitrators to decide important questions about the arbitral proceeding itself.

The parity principle has proven impossible to test. First, cases that are arbitrated differ from those that end up in the judicial system, complicating efforts to compare outcomes from each sphere. Second, arbitral awards are rarely published, and thus remain shrouded in mystery.

However, one important topic defies these limitations. Jurisdictions are divided over whether courts or arbitrators should perform a task known as “clause construction”: determining whether an arbitration clause that does not mention class actions permits such procedures. As a result, both judges and arbitrators have been weighing in on the same question. Moreover, because class members are entitled to notice of rulings that impact their rights, the American Arbitration Association requires arbitral clause construction awards to be available to the public. For once, then, it is possible to assess how the two decision-makers resolve the identical issue.

The Article capitalizes on this opportunity by analyzing a dataset of 134 recent judicial and arbitral clause construction decisions. Its logit regression analysis concludes that the odds of class actions being allowed increase nearly 27 times when an arbitrator, rather than a judge, resolves the issue. The Article then uses its findings to propose a solution to the circuit split over clause construction and inform the broader debate over the boundaries between judicial and arbitral power.

Keywords: Clause Construction, Arbitration, Class Action, Class Arbitration, FAA, Delegation Clause, Rent-a-Center West, Inc. v. Jackson, Stolt-Nielsen, S.A.. V. AnimalFeeds, Inc., Oxford Health Plans, Inc. v. Sutter, Wholly Groundless

Suggested Citation

Horton, David, Clause Construction: A Glimpse into Judicial and Arbitral Decision-Making (February 18, 2018). Duke Law Journal, Vol. 68, Forthcoming . Available at SSRN: https://ssrn.com/abstract=3125841

David Horton (Contact Author)

University of California, Davis - School of Law ( email )

Martin Luther King, Jr. Hall
Davis, CA CA 95616-5201
United States

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