The "vanishing trial": a Hayekian perspective.

AuthorWendt, George J.
PositionDecline of civil jury trials, Friedrich Hayek
  1. INTRODUCTION

    The "vanishing trial" is the conceptual metaphor academics use to describe the decline of civil jury trials over the past thirty years. (1) This term first appeared in a 2002 ABA article by Hope Viner Samborn. Professor Samborn titled her article, "More and More Cases Are Settled, Mediated or Arbitrated Without a Public Resolution. Will the Trend Harm the Justice System?" (2)

    Samborn's question started a continuing debate over the potential harm that alternative dispute resolution processes (ADR) could do to the justice system. Jurists and academics argue that the dramatic increase in the ADR processes of negotiation, mediation, and arbitration interferes with the common law tradition of establishing judicial precedent in case law and then adhering to that precedent through stare decisis. As a result, many alleged that the common law has developed in an aberrant fashion and the traditional legal system is no longer capable of providing just resolutions of disputes.

    In order to debate this position, it may be useful to apply the law and economic writings of Friedrich A. Hayek from his three volume work, Law Legislation and Liberty. (3) Hayek discusses his view of the similarities between economics and common law. Among these similarities is what he called the outcome of signals. In economics, billions of transactions are completed every day. Out of these transactions comes a signal: prices. Likewise, under common law, millions of cases are also "completed" or resolved. Out of these cases comes another signal: rule statements. Rule statements upon which the common law depends are based on millions of random cases being resolved in accordance with societal expectations and norms.

    Legal scholars argue that the incentives and disincentives created by the ADR movement prevent these societal norms and expectations from being realized. First, the sheer number of cases being settled through ADR is interfering with the resolution of random cases. In other words, before ADR, almost every legal dispute was processed in the courts, published in reporters, and the results of those cases were synthesized into rules of law that reflected societal expectations. However, the smaller number of cases tried in a public forum today means that case law from modern courts is less likely to be in line with societal expectations. Second, the cases tried in a public forum are no longer random because the cases no longer reflect the most common factual disputes. The most common and simplest cases are resolved by ADR; only the oddest cases (which make for "bad law") are tried in court.

    The debate offers two alternative views of the consequences from the separation of societal expectations and legal outcomes. One view is that the trend will continue to degrade the common law. This is the view of most scholars and jurists. The other view contemplates that common law is an evolutionary system incorporating societal expectations, so degrading common law is simply the next step in the evolution of the system and therefore should be neither demonized nor applauded. The authors take the latter position based on Hayek's economic and political philosophies. Hence, the article answers the problem of the vanishing trial from a Hayekian perspective.

  2. THE RISE OF ADR AND THE REACTION AGAINST IT

    A. The Misconceptions of ADR

    The 1980s saw the beginning of a fascination with ADR. (4) As the public perceived the trial process as broken, disputes became increasingly settled through ADR processes. (5) Legal scholars at the time called "for the gentler arts of reconciliation and accommodation" and a turn to the "new voluntary mechanisms" of dispute resolution. (6) Since then, ADR has become popular with the public notwithstanding reported disadvantages.

    First, the average person may believe that ADR offers speed and efficiency over traditional litigation. Any list of the advantages to ADR will invariably include speed and efficiency as a primary benefit. (7) The expectation is that ADR costs less and can be accomplished in less time than traditional litigation. (8) However, empirical evidence may show a contrary result. Research conducted in 2005 revealed that more than half of seventy lawyers surveyed found that arbitration had not produced cost savings. (9) "[I]n the case of international commercial arbitration ... it is often far from the case that the proceedings are quicker and less expensive than litigation." (10)

    Second, the public may perceive that limited discovery is cost effective, though again, research may not support society's conclusion. Parties in arbitration are only entitled to the basic elements of due process and the opportunity to present their cases. The discovery process in arbitration is much more limited than in litigation, leading to potential reductions in expenses, burden, and delay. (11) Rather than an advantage, a prospective litigant may view the limitations on discovery generally applied in arbitration as a serious disadvantage. When attorneys are not encouraged to be a part of the process, the claimant may not have the financial resources or the specialized knowledge to collect, analyze, and interpret the information requisite to the protection of their rights. Without the assistance of a law firm, the claimant may not have the financial resources necessary to successfully obtain significant amounts of additional research and discovery, or retention of experts required to move their case forward.

    Third, proponents of ADR find value in the fact that a jury is replaced by expert decision makers who have greater qualifications and expertise in the area of dispute. However, an ADR opponent might characterize these experts as insiders who possess a vested interest in the outcome. The absence of juries is problematic given the imbalance of power between parties that often is the result of forced arbitration agreements. The result is a state of unequal bargaining power where the stronger party is able to exert improper influence on the outcome of the proceedings.

    A fourth and often cited advantage of ADR is freedom of contract. The ADR process is characterized as consensual. Parties to the dispute have the freedom to craft specialized procedures to meet their needs. The traditional advantage of the concept of party autonomy is that the parties have broad discretion to individualize the ADR process, including the selection and appointment of the decision makers, the selection or formulation of the rules to be applied, and the procedures by which the settlement will be conducted. (12) However, if the claimant has an immediate need for damage payments, he could waive his rightful future claims for a present, expedited payment. Therefore, the fourth disadvantage is that a defendant with superior finances could manipulate the weaker claimant into a "forced" settlement that is less than the net present value of the damaged party's actual losses. In this example, the individual claimant has no meaningful consent to the process.

    Finally, proponents also suggest that the finality of decisions and the absence of appeal are a further advantage to the ADR process over the litigation process. Finality provides certainty, and the lack of an appeal generally means a faster resolution of a case, because the arbitral panel acts as the judge, jury, and appellate court. Generally, there is very limited judicial review regarding the merits of the arbitrator's decision. According to the Federal Arbitration Act (FAA), the grounds for vacating an arbitral award are fraud, corruption, and wrongful conduct exhibited by the arbitrator. (13) The FAA looks to regularity or fairness of the procedure and if these elements are satisfied, it does not apply judicial review of the merits of the arbitral award.

    In Hall Street Associates, L.L.C. v. Mattel, Inc., the United States Supreme Court rejected the parties's attempt to expand the scope of judicial review of an arbitral award under the FAA. (14) An example of the likely result of this limited judicial review is that the BP oil spill claim awards made by the Gulf Coast Claim Facility (15) will not be judicially reviewed for legal error. (16) Prior to Hall Street Associates, some courts allowed parties to contractually expand the scope of judicial review. (17) By holding that, "[9 U.S.C.] [section] [section] 10 and 11 respectively provide the FAA's exclusive grounds for expedited vacatur and modification," the Court eliminates the possibility of expanded judicial review. (18)

    These are the realities facing ADR participants, some of which would seem to create a disincentive to participate in an ADR forum. Yet ADR continues to flourish, and civil jury trials continue to decline, so for the majority of litigants, the cons must be outweighed by the perceived benefits.

    B. The Result of Vanishing Trials

    In 2004, the Journal of Empirical Legal Studies published two articles compiling statistical data and examining the decline of civil jury trials beyond simple anecdotal evidence. (19) The general consensus among observers is that ADR processes are replacing the American civil jury trial. (20) Observers blame all types of private settlements, whether negotiated, mediated, or arbitrated. (21) Analyzing this phenomenon, scholars developed concerns that the justice system could be negatively affected by the privatization of disputes. Specifically, the absence of a meaningful number of jury trials might impede the proper functioning of stare decisis and hinder the development of the common law. Professor Samborn reported:

    [f]ederal statistics chronicle the trend: The percentage of jury and bench trials in civil cases has declined from 10 percent of cases resolved in 1970 to 2.2 percent in 2001. The percentage of civil jury trials alone didn't drop as much, but it didn't have as far to go. Juries resolved 4.3 percent of civil cases in 1970 and only 1.5 percent--3,633 cases in raw numbers--in...

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