ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, March 5, 2012

More Live Blogging (but with Time Delay) Saturday Morning Arbitration Panel

Mark-BurgeMark Burge, Associate Professor of Law at Texas Wesleyan University School of Law, presented a paper, “Too Clever by Half: A Cautionary Tale in Socio-Legal Legitimacy Starring the Uniform Commercial Code,” which focuses on the failure of the revised UCC Section 1-301 (relating to choice of law) to win adoption, despite the fact that 40 states have adopted the rest of the revisions to Article 1 of the UCC.   In Professor Burge's view, Section 1-301 failed because it violated a fundamental social idea of the American legal and political system in that it undermined the principle that laws ought to be generally applicable.

Revised Section 1-301 would have created different standards for choice of law for consumer and commercial transactions.  The proposed Section would have permitted parties in non-consumer transactions to choose the laws of any state to govern their transactions.  The proposal seemed a logical extension of the tendency in the common law.  While the First Restatement provided rules for choice of law from which the parties could not deviate, the Second Restatement allowed parties to choose which law will govern their agreement, so long as the forum jurisdiction bears some relation to the transaction.  The revised Section extended that logic by removing the restrictions and justified this move by noting that parties are already free to choose governing law if they opt for arbitration under the Federal Arbitration Act. 

Professor Burge’s thesis is that state legislatures rejected the revised Section because of a visceral abreaction to the possibility that parties would agree to have their agreements governed by the laws of an utterly random jurisdiction.  The visceral reaction arises, Professor Burge suggests, from the Section’s “un-American” diversion from the traditional rule that there must be some connection between the transaction and the jurisdiction whose laws will govern the transaction.

GravesJack Graves, Professor of Law at the Touro College Jacob D. Fuchsberg Law Center, presented his paper, forthcoming the American Review of International Arbitration, “Court Litigation over Arbitration Agreements: Is It Time for a New Default Rule?”  Professor Graves’ thesis is bold and simple: we need a new international convention making arbitration the default legal rule for the resolution of international commercial disputes, that is business-to-business international transactions.  Such a convention is necessary because arbitration is far more efficient and effective, but those advantages are negated by parties’ ability to litigate arbitrability, turning one relatively fast and inexpensive legal process into two, one of which is expensive and protracted.  At the heart of Jack's presentation was a wonderful extended metaphor of court proceedings torpedoing arbitration in a maritime case.

Horton2David Horton, currently a Professor at Loyola Law School – Los Angeles.  Starting next year, he will join the faculty at the University of California, Davis, School of Law, who has guest blogged for us in the past (more than once!), presented a paper on the vindication of rights doctrine.  For years, courts favored litigation over arbitration and held that federal statutory claims could not be adjudicated adequately in arbitral bodies.  In the 1980s, things shifted, as courts abolished this non-arbitrability doctrine in favor of the vindication of rights doctrine, placing the burden plaintiffs to provide concrete proof that arbitration thwarts federal statutory rights. 

Recent Supreme Court decisions seem to be moving us in the direction of universal enforcement of arbitration provisions.  But Professor Horton introduces the notion of inalienable rights that cannot be waived and are thus not subject to the policy favoring freedom of contract.  If one’s ability to vindicate one’s federal statutory rights is inalienable – that is, if one cannot agree ex ante to contract terms that would make it impossible for you to vindicate your rights – then certain arbitration provisions might be unenforceable on those grounds.

Professor Horton runs through traditional justifications of inalienability in terms of preventing certain negative externalities or promoting certain positive externalities.   However, Professor Horton concludes that the most promising justification for the inalienability doctrine is the non-commodification theory, according to which permitting certain things to be sold would change the very nature of the thing.


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