Academic journal article St. John's Law Review

Judicial Review and the Limits of Arbitral Authority: Lessons from the Law of Contract

Academic journal article St. John's Law Review

Judicial Review and the Limits of Arbitral Authority: Lessons from the Law of Contract

Article excerpt

There are two ways to conceptualize the role of an arbitrator. First, we might think of an arbitrator as a private judge, hired by the parties but tasked with performing the same sorts of functions that public judges normally perform: finding facts and applying predetermined rules (normally legal rules) to those facts in order to assign rights and obligations. The other way to conceptualize the arbitrator's role is as a "contract reader." From this perspective, the arbitrator serves as the parties' agent, designated by them in advance to supply the terms of their agreement that they did not foresee and that are necessary to resolve a conflict between them.1 The arbitrator focuses on the parties' relationship and interests rather than on the application of rules to facts.

Of these conceptions, or models, of arbitration, the former has the longer pedigree. Arbitration has existed as a method of dispute resolution for centuries,2 and for most of that time the formal courts have considered arbitrators to be minor league judges. In part, that explains their long-lived hostility to arbitration. Common-law courts saw formal adjudication as too important and too fundamental a right to be left to minor leaguers. As a consequence, they typically refused to enforce arbitration agreements that would have the effect of "ousting" a court of its jurisdiction.3

The model in which the arbitrator is viewed as a contract reader, what I call the "contractarian model,"4 is of much more recent vintage. It was put forward early in the twentieth century by proponents who emphasized the advantages of arbitration in commercial matters.5 Its most important advocate, indeed the most important advocate arbitration has ever had, was Julius Henry Cohen, the principal drafter of what would become the Federal Arbitration Act ("FAA").6 Probably to make arbitration more palatable to hostile courts, he stressed that his version of arbitration would not function as second-class adjudication, because it would not really involve adjudication at all:

[Arbitration] has a place also in the determination of the simpler questions of law-the questions of law which arise out of the[] daily relations between merchants as to the passage of title, the existence of warranties, or the questions of law which are complementary to the questions of fact which we have just mentioned. It is not the proper method for deciding points of law of major importance involving constitutional questions or policy in the application of statutes.7

The contractarian model made sense when applied to commercial relationships because the merchants who employed it typically subscribed to a common set of business practices. When they had disputes, they wanted neutrals grounded in those practices to make decisions based on custom and mutual interest. They did not want anyone, whether a genuine judge or a minor league one, to mechanically apply fixed legal rules.

With Cohen as its champion, the American Bar Association's Committee on Commerce, Trade, and Commercial Law succeeded in pushing the FAA through Congress.8 The FAA was intended to overcome the judiciary's resistance to arbitration, and it seems clearly to assume a role for the arbitrator consistent with the contractarian model. That perspective comes through in the provisions for judicial review of awards. section 10 of the FAA contains a list of four grounds for vacating arbitral awards:

(1) [W]here the award was procured by corruption, fraud, or undue means;

(2) [W] here there was evident partiality or corruption in the arbitrators, or either of them;

(3) [W] here the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4) [W] here the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon tbe subject matter submitted was not made. …

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