In Gilmer v. Interstate/Johnson Lane Corp., the Supreme Court
discussed unequal bargaining power between employers and employees, and how the
existence of such unequal bargaining was not a sufficient reason to hold
arbitration agreements unenforceable in an employment context. The Court cited
two prior decisions, Rodriguez de Quijas and
McMahon to back up their reasoning.
While I agree with the Court’s decision overall, because it would have been
entirely impractical to hold that employment disputes can never be arbitrated,
I was intrigued as to what unequal bargaining arrangements were validated by
the Court in the prior two decisions.
This is especially because, like several of my classmates, I have
serious issues with people being forced into arbitration because they had to
sign contracts of adhesion. As Justice Stevens pointed out in his dissent, you
don’t really have a choice to reject the arbitration clause in your employment
agreement unless you’d also like to reject the job you’re being offered. I got
the impression from the reading that the Court is really looking to Congress to
fix the unequal bargaining issue (and protect consumers and employees), and
that’s the reason why they continue to make decisions in favor of employers.
Rodriguez
de Quijas v. Shearson/American Express, Inc. (490 U.S. 477) was a case
involving a customer agreement signed by the plaintiff (and others), who were
securities investors. The plaintiffs alleged that the brokerage firm
respondents had lost their money and had conducted fraudulent transactions in
violation of the Securities Act of 1933. The lower courts had held that some
language in the Securities Act precluded those claims from being sent to
arbitration. Much like the decision in Gilmer,
the Supreme Court held that the Securities Act did not, in fact, stop claims
from being sent to arbitration. Interestingly, Justice Stevens also dissented
on this case.
Shearson/American
Express, Inc. v. McMahon (482 US 220) is, unsurprisingly, more of the same issue
as the Rodriguez case. Here, the
claims were under the Securities Exchange Act of 1934 and the RICO Act. And,
once again, the Supreme Court found that claims under both acts were, in fact,
arbitrable.
I was surprised to find that these
cases were less about unequal bargaining power and more about statutory
interpretation, considering the context in which they were discussed in Gilmer. It’s true that, as in Gilmer, the claimants in these cases
argued that statutory language is what stopped a certain kind of case from
going to arbitration, but the unequal bargaining power wasn’t really an issue
that was heavily discussed in either. Maybe the Supreme Court didn’t have a
wide body of arbitration cases to pick from? Either way, their point is clear: claims under
any statute can be sent to arbitration, because of the judicial system’s
pro-arbitration stance. I don’t know how fair that is to consumers, but again,
maybe the Court is looking to Congress to fix that issue.
We can hope the courts would listen to Congress if it made amendments to the FAA and other relevant statutes. But it seems the court may just ignore, in some sense, anything except explicit language, and narrow that language as much as possible to retain the status quo, pro-arbitration stance. As far as the policy arguments go, it may just be a better practice to use them when case law and statutory interpretation is unclear. If the court can resolve an issue just through statutory interpretation, I would think that would drive the opinion... though they're seemingly away of the policy issues.
ReplyDeleteI certainly agree with you that something must be done about the Court's treatment of the FAA and it's absurdly stubborn pro-arbitration policy. The problem is with each step forward, it becomes increasingly difficult for the court to step backwards. As such, I agree that the legislature is likely the only entity capable of combating the contagion that is arbitration. At the same time, however, there is a big difference between forcing a party into arbitration and allowing parties to elect arbitration as opposed to litigation. Essentially forcing parties to arbitrate and desert their constitutional rights seems downright wrong.
ReplyDeleteThis pro-arbitration stance is pretty staunch. the textbook mentions that courts and legislatures, as well as the AAA are trying to even the playing field a little bit between consumers and companies, yet my question is... are they? We haven't seen many success stories. We keep talking about the benefits of arbitration, but this chapter really makes me re-examine those benefits and exactly who they are benefitting.
ReplyDeleteI think you're absolutely correct that the Supreme Court is deferring to Congress on this issue. I tend to think these issues are for Congress to decide, especially to the extent that any rights asserted by claimants derive from federal statutes. Where Congress created the right, Congress can supply the judicial forum (or not supply it). Congress is well-situated to assess the complex policy choices at work here.
ReplyDeleteThis gets more problematic when we start talking about state-created rights and causes of action. If a state wants to provide increased protection for employees, and give employees within its borders a cause of action enforceable in state court, should federal arbitration law preempt that action? This situation puts liberals in the awkward position of arguing in favor of states rights.
Buttttttt, I'm not sure the fervor for arbitration has set on in all courts. For instance, aren't Texas courts especially arbitration-UNfriendly?
ReplyDeleteI agree that employee contracts with adhesive arbitration clauses are a pretty bum deal, and I think that the decisions in Gilmer et al. demonstrate the courts' reluctance to talk about this power disparity by simply circumventing the real issue via statutory excuses.
The Arbitration Fairness Act of 2009 that was a proposed amendment of the FAA that died in the committee was something that might be an answer to protect parties from positions where they face unequal bargaining power:
ReplyDelete"No pre-dispute arbitration agreement shall be valid or enforceable if it requires arbitration of: (1) an employment, consumer, or franchise dispute, or (2) a dispute arising under any statute intended to protect civil rights."
There are additional measures, such as allowing a court to decide arbitrability.
I think part of the reason that US courts are currently so pro-arbitration (even in domestic cases) is to support the view that the US is a safe place to do international business. They (and congress) want to project to the rest of the world that we put arbitration in the realm of 'capable to decide any issue' regardless of whether or not we have certain statues that say we shouldn't arbitrate. The consequences of the world seeing you the other way are evident when you look at Jordan. In Jordan that NO party can do ANYTHING that would remove jurisdiction from Jordanian courts over disputes relating to bills of lading. (Jordanian law no. 35 of 1983) Therefore as an international business why would you ever even want goods relating to bills of lading near Jordan? By allowing even out domestic arbitrations to decide issues which should go to Court (per statute) we portray a pro-arbitration stance which strengthens the business communities faith the we are a safe country to arbitrate in.
ReplyDelete