ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Wednesday, May 15, 2013

Boilerplate Symposium IV: David Horton on Mass Arbitration and Democratic Degradation

Horton2This is the fourth in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.

David Horton is Acting Professor of Law at the UC Davis School of Law.

One of Boilerplate’s most provocative claims is that mass contracting causes “democratic degradation.”  To be sure, this idea is not entirely new.  In 1931, Karl Llewellyn called standard forms “the exercise of unofficial government”; forty years later, W. David Slawson analogized to administrative law and argued that adhesive terms, like rules promulgated by unelected bureaucrats, suffer from a democracy deficit.  However, with the rise of public choice theory—which blurs the line between public and private lawmaking by conceptualizing statutes as “deals” between politicians and interest groups—these critiques have all but vanished.  Professor Radin seeks to reinvigorate them.  She contends that boilerplate replaces “the law of the state with the ‘law’ of the firm” and therefore undermines our commitment to representative democracy (p. 16). 

BoilerplateI’m particularly interested in how Professor Radin’s democratic degradation thesis plays out in the field of consumer and employment arbitration.  (For whatever it’s worth, I’ve explored similar issues here and here, and in my forthcoming review of Boilerplate).  Of course, unlike other controversial fine print terms, arbitration clauses can claim to have a democratic pedigree: Congress passed the Federal Arbitration Act in 1925 to encourage the use of private dispute resolution.  Nevertheless, it is widely accepted—even among the Justices—that the FAA’s current musculature is “an edifice of [the Court’s] own creation.”  In addition, the saturation of mandatory pre-dispute arbitration clausesat least among major companies in certain industries—rivals traditional lawmaking in its scale.  For instance, the class arbitration waiver in AT&T’s wireless service contract binds more customers than the combined populations of California, Texas, New York, and Florida.  Thus, to borrow from Professor Slawson, if by making “law” we mean creating or altering enforceable rights or duties, then companies make more law in a day by projecting arbitration across the economy than Congress makes in a year.

Is this spectacular display of private power legitimate?  Professor Radin suggests that it’s not.  She notes that “most people don’t know what arbitration is” and that arbitrators “are widely believed to be more favorable to businesses” (p. 4).  Yet a skeptical reader might push back.  What if, as the Court has repeatedly declared, the bare decision to resolve a dispute in the arbitral forum does not affect its outcome?  Arguably, then mass arbitration is an elegant shortcut to the meandering path of litigation.  Moreover, there are safeguards against drafter overreaching.  Courts can invalidate one-sided arbitration clauses under the contract defense of unconscionability.  Likewise, the vindication of rights doctrine entitles plaintiffs to a judicial forum if they prove that they can’t effectively vindicate federal statutory claims in arbitration.  Before we condemn mass arbitration as do-it-yourself law reform, shouldn’t we insist on evidence that it deprives consumers and employees of substantive rights?       

The rejoinder to this rejoinder can be found in the Court’s recent jurisprudence.  In AT&T Mobility LLC v. Concepcion, the Court held that class arbitration waivers must be enforced even if small-value consumer protection claims will “slip through the legal system.”  Thus, in perhaps the most fraught context in all civil litigation—the class action—the Court has disavowed the principle that the switch to an arbitral forum is outcome-neutral.  It has allowed drafters to engage in aggregate contracting—a practice that Professor Radin persuasively argues is not “contracting” at all—while denying adherents the ability to aggregate claims.  And in the pending case of American Express Co. v. Italian Colors Restaurant, the Court is expected to extend Concepcion and mandate bilateral arbitration of federal antitrust claims even though the cost of expert fees alone greatly exceeds any individual plaintiff’s potential recovery.  Just as Professor Radin contends, the casualties of this quiet revolution will be “rights that are granted through democratic processes” (pg. 16). 

[Posted, on David Horton's behalf, by JT]

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