John A. E. Pottow (University of Michigan Law School), Jacob Brege and Tara J. Hawley (J.D. Candidates, University of Michigan Law School) have published “A Presumptively Better Approach to Arbitrability”, Canadian Business Law Journal, Vol. 53, No. 3, March 2013/U of Michigan Law & Econ Research Paper No. 13-012/U of Michigan Public Law Research Paper No. 339. Here’s the abstract:
One of the most complex problems in the arbitration field is the question of who decides disputes over the scope of an arbitrator’s purported authority. Courts in Canada and the United States have taken different approaches to this fundamental question of “arbitrability” that necessarily arises when one party disputes the contractual validity of the underlying “container” contract carrying the arbitration clause. If arbitration is a creature of contract, and contract is a product of consensual agreement, then any dispute that impugns the underlying consent of the parties to the container contract implicates the arbitration agreement itself (i.e., no contract, no arbitration agreement).
The U.S. approach of “separability” dates back a half-century to a Supreme Court case that was controversial when it was decided and remains so today. The Supreme Court has added several more decisions trying to clarify its arbitrability rules within just the past few years. The Canadians too have tried to sort out this mess, seizing upon the hoary legal distinction between law and fact, also offering recent Supreme Court pronouncements. Neither country’s approach is normatively or functionally satisfying.
After discussing and critiquing the two approaches comparatively, we offer our own proposal. We too deploy legal presumptions, but in our case we focus on what we contend are the two most relevant criteria: (1) the nature of the legal challenge to the underlying container contract, and (2) the type of contract at issue. Challenges to consent in contract formation and contracts involving adhesion should be specially scrutinized by the courts before carting parties off to arbitration, whereas commercial agreements between sophisticated actors should presumptively be for arbitral resolution, even for “constitutive” challenges to the underlying contract.
A pdf copy of the paper is available for download on SSRN here.
- What Banks Should Know About Arbitration (americanbanker.com)
- Massachusetts High Court Strikes Down Arbitration Class Action Ban (pubcit.typepad.com)
- Comcast Lawsuit Shows Why Mandatory Binding Arbitration Is Just Plain Evil (consumerist.com)
- Is There Any Defense to a Lopsided Arbitration Agreement? (lawprofessors.typepad.com)
- Texas Allows Non-Signatories to Enforce Arbitration Agreements (northtexaslegalnews.com)
- You can thank lobbyist for the arbitration clause on your contracts (lobbynotinyourcorner.wordpress.com)
- Supremes Uphold Arbitral Class-Action Waivers (lawprofessors.typepad.com)
- Second Circuit Holds Class Action Waiver in Arbitration Agreement Enforceable Against Plaintiff’s FLSA Claims (nysbar.com)
- String of Recent Decisions Confirm Employer’s Right to Enforce Class Action Waivers in Arbitration Agreements (laborandemploymentlawupdate.com)