Was Harry Shulman Right?: The Development of Arbitration in Labor Disputes
Getman, Julius, St. John's Law Review
I. EARLY JUDICIAL RELUCTANCE: WILKO V. SWAN
In 1952, a customer brought suit against the partners of a securities brokerage firm under section 12(2) of the Securities Act of 1933 ("Securities Act"),1 alleging misrepresentation.2 The firm moved to stay the trial on the grounds that the agreement between the parties specified that "arbitration should be the method of settling all future controversies."3 The district court denied the motion, determining that enforcing the arbitration clause would be "[in]consistent with the policy and language as expressed by Congress in the Securities Act."4 The court of appeals reversed, holding that Congress intended to favor arbitration in the Securities Act, and failed to express intent to forbid arbitration in suits brought pursuant to section 12(2).5 The Supreme Court, in reversing the court of appeals, concluded that requiring arbitration would deprive the plaintiff of advantages Congress intended him to have in a suit at law.6 The Court noted that, "[a]s their award may be made without explanation of their reasons and without a complete record of their proceedings, the arbitrators' conception of the legal meaning of such statutory requirements as 'burden of proof,' 'reasonable care' or 'material fact,'. . . cannot be examined."7
II. A CHANGING PARADIGM: SHULMAN'S HOLMES LECTURE
In 1955, Dean Harry Shulman of Yale Law School, who also served as permanent arbitrator under the collective bargaining agreement between the United Auto Workers Union and Ford Motor Company, delivered the prestigious Oliver Wendell Holmes Lecture at Harvard Law School.8 His lecture described the relationship between labor arbitration, productivity, and industrial relations in a large manufacturing enterprise.9 He noted that due to the pressure of the negotiation process, collective bargaining agreements inevitably contain areas in which disagreement between the parties is inevitable, such as seniority and discipline.10 Shulman concluded that at its best, labor arbitration is preferable to court litigation for such disputes because the arbitrator is in a position to consider the industrial relations implications of the decision and to become familiar with the parties and their specific needs.11 In dealing with the most complex and deeply felt issues, Dean Shulman argued that the arbitrator's role is "creative more than interpretive."12 Because the arbitrator is a creature of the parties, and not bound by adherence to precedents, legal doctrine, or the rule of law, he has wider latitude than a judge. He argued that "[a]nswer[s] in the form of rules or canons of interpretation is neither practical nor helpful. . . . In the last analysis, what is sought is a wise judgment."13
According to Shulman, it is the limited nature of the arbitrator's jurisdiction and his role as the servant of the parties that enables him to give wise answers to difficult questions of interpretation.
He is not a public tribunal imposed upon the parties by superior authority which the parties are obliged to accept. . . . He is rather part of a system of self-government created by and confined to the parties. He serves their pleasure only, to administer the rule of law established by their collective agreement. They are entitled to demand that, at least on balance, his performance be satisfactory to them, and they can readily dispense with him if it is not.14
Shulman noted that the arbitrator is expected to and should play a more active role in the process than would be appropriate for a judge because his decision should frequently be based on subtle non-legally relevant criteria.
And so, for several reasons, the arbitrator cannot simply sit back and judge a debate. He must seek to inform himself as fully as possible and encourage the parties to provide him with the information.
His choice from the more or less permissible interpretations of the language of the agreement, keeping the basic conceptions in mind, requires an appraisal of the consequences of each of the possibilities. …