The Supreme Court's Emerging Endorsement of Arbitration

• Jurisdiction: United States,Federal
• Citation: Vol. 30 No. 9 Pg. 67
• Pages: 67
• Publication year: 2001

30 Colo.Law. 67 Colorado Lawyer 2001.

2001, September, Pg. 67. The Supreme Court's Emerging Endorsement of Arbitration

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67

Vol. 30, No. 9, Pg. 67

The Colorado Lawyer
September 2001
Vol. 30, No. 9 [Page 67]

Specialty Law Columns
Alternative Dispute Resolution Column
The Supreme Court's Emerging Endorsement of Arbitration
by James L Stone, Jonathon Boonin

During its recently completed 2000-2001 term, the U.S Supreme Court handed down four opinions affecting arbitration:1 Green Tree Fin. Corp. v. Randolph,2 Circuit City Stores v. Adams,3 Major League Baseball Players Ass'n v. Garvey,4 and Eastern Associated Coal Corp. v United Mine Workers of America, District 17.5 Together, these cases demonstrate a continuation of the Court's emerging wholesale endorsement of arbitration as a viable alternative to litigation. This article assesses the impact of these cases, first by placing them in the context of the Court's prior arbitration jurisprudence and then by considering their likely practical impact today and in the future

The Court's Historical
Treatment of Arbitration

Historically, courts tended to view arbitration as a potentially dangerous threat to their jurisdiction. For this reason, courts in the nineteenth and early twentieth centuries often refused to enforce arbitration agreements. However, in 1925, the Federal Arbitration Act ("FAA")6 was enacted to force courts to put aside their skepticism of arbitration by requiring them to enforce agreements to arbitrate certain contractual disputes.7

By the 1940s, the use of arbitration to resolve labor disputes arising under collective bargaining agreements was widespread. In 1955, the Uniform Arbitration Act ("UAA") was enacted and subsequently adopted in full, or with slight modifications, in forty-nine states, including Colorado.8 The UAA, like the FAA, endorsed the widespread use of arbitration to resolve contractual disputes.

With respect to arbitration of non-contractual claims, however, courts retained their historical skepticism. In 1953, in Wilko v. Swan,9 the Court refused to enforce a pre-dispute arbitration agreement between a stock purchaser and his broker. The agreement would have sent to arbitration claims arising under the 1933 Securities Act. The Court did not believe arbitration was a viable forum because, among other things: (1) arbitrators would be without "judicial instruction on the law" to make legal determinations in statutorily based cases;10 (2) arbitration decisions "may be made without explanation of [the arbitrator's] reasons and without a complete record of their proceedings";11 and (3) the arbitrator's decision would not be subject to adequate judicial review.12

However, in a series of cases beginning in the mid-1980s, the Court reversed course and began taking a pro-arbitration stance in cases involving statutory claims. From 1985 through 1989, the Court enforced pre-dispute arbitration agreements between parties relating to claims arising under federal antitrust laws,13 the Racketeer Influenced And Crime Organizations Act ("RICO"),14 the 1934 Securities Act,15 and the 1933 Securities Act (overturning Wilko v. Swan).16 During this period, the Court also held, in Southland Corp. v. Keating,17 that the FAA, being substantive rather than procedural in nature, preempted state arbitration laws to the extent they conflicted with the FAA's endorsement of arbitration.18

In 1991, the Court went a step further. In Gilmer v. Interstate/Johnson Lane Corp.,19 the Court moved beyond the sphere of commercial disputes by enforcing a pre-dispute arbitration agreement involving claims arising under federal anti-discrimination laws. Rejecting the arguments it once found compelling in Wilko, the Court held that arbitration can provide both a procedurally and substantively adequate forum to resolve federal anti-discrimination claims. The Court held:

so long as the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum, the statute will continue to serve both its remedial and deterrent function.20

After Gilmer, a number of questions remained. Among other things, the Court did not make clear what procedural and substantive safeguards were necessary for prospective litigants to "vindicate" their rights.21 Questions also remained regarding the precise scope of the FAA's coverage and the scope of judicial review to be applied to an arbitrator's decision. In the cases decided this term, the Court has started to answer these questions.

Developments in the
2000-2001 Term

In the 2000-2001 term, the Court decided cases concerning the allocation of costs and fees associated with arbitration, the arbitrability of employment disputes under the FAA, and the limited scope of judicial review of arbitration awards. These new decisions demonstrate a continuing, evolving, and wide-ranging endorsement of arbitration as a viable form of dispute resolution.

Payment of Arbitration Fees

The costs and fees associated with arbitration can be quite substantial. In Gilmer, the Court assumed that for an employee to "effectively . . . vindicate [his or her] statutory cause of action in the arbitral...