I have had a few days to digest the Supreme Court’s most recent opinions interpreting the Federal Arbitration Act (Oxford Health Plans LLC v. Sutter, see blog post here; and American Express Co. v. Italian Colors Restaurant, see blog posts here and here) and offer the following reflections:
Sutter affirmed the broad power of the arbitrators to decide issues properly submitted to them even if the resulting decision seems implausible. Italian Colors affirmed the power of parties entering into a valid arbitration agreement to eliminate procedural devices in the forum (such as class arbitration) even if they are the only devices through which a party can effectively vindicate federal statutory rights. Both of these decisions continue along the same path the Court has been on for 35 years: converting arbitration agreements from disfavored status to super-status – and creating what I picture to be a bubble-like model of arbitration.
What do I mean by bubble-like? For years I have envisioned the ironclad arbitration agreement (i.e. an agreement that thwarts all attacks to contractual validity) as creating an impenetrable and opaque bubble – once disputing parties are inside the bubble and have submitted their disputes to an arbitration panel, nothing – no court, no doctrine, no judge — can question what happened inside. The arbitration process is safe from scrutiny; arbitrators’ decision-making is immune from challenge.
That image is all the more clear to me now, as Italian Colors drew what could be seen as a puzzling distinction between affording access to a forum and affording the ability to prove a claim. Thus, Justice Scalia, in the majority opinion, wrote:
The “effective vindication” exception to which respondents allude originated as dictum in Mitsubishi Motors, where we expressed a willingness to invalidate, on “public policy” grounds, arbitration agreements that “operat [e] … as a prospective waiver of a party’s right to pursue statutory remedies.” 473 U.S., at 637, n. 19, 105 S.Ct. 3346 (emphasis added). Dismissing concerns that the arbitral forum was inadequate, we said that “so long as the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum, the statute will continue to serve both its remedial and deterrent function. …”
As we have described, the exception finds its origin in the desire to prevent “prospective waiver of a party’s right to pursue statutory remedies,” Mitsubishi Motors, supra, at 637, n. 19, 105 S.Ct. 3346 (emphasis added). That would certainly cover a provision in an arbitration agreement forbidding the assertion of certain statutory rights. And it would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable. See Green Tree Financial Corp.–Ala. v. Randolph, 531 U.S. 79, 90, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) (“It may well be that the existence of large arbitration costs could preclude a litigant … from effectively vindicating her federal statutory rights”). But the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.
In other words, once a disputing party can afford to get inside the bubble, the Court will not allow the judiciary to review, or even see, what actually happens inside the bubble.
Perhaps my vision of the Court’s arbitration jurisprudence is overly child-like; but perhaps the Court’s view of arbitration is overly simplistic. How can it be that a party that cannot afford to prove a claim in a forum has any more effective vindication of statutory rights than a party that cannot afford to submit proof of a claim to that forum? Congress needs to burst that bubble.
