CONTRACTUALLY_EXPANDED_REVIEW_OF_ARBITRATION_AWARDS

WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev Harv Negot L Rev 171 Harvard Negotiation Law Review Spring 2003 Articles CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION AWARDS Lee Goldmand1 Copyright (c) 2003 Harvard Negotiation Law Review; Lee Goldman Introduction Arbitration, a contract-based form of dispute resolution, is increasingly popular because it allows the parties to avoid court litigation and structure dispute resolution in a manner that best suits each party’s needs Parties can choose the decisionmaker, define her powers, select the procedures to be used, and decide whether a written opinion is required As such, arbitration can be faster, cheaper and more private than litigation To ensure that these advantages are not lost, the law severely limits the availability of judicial review of arbitration proceedings Specifically, the Federal Arbitration Act (“FAA”),3 which applies to written arbitration clauses in “a contract evidencing a transaction involving commerce,” generally requires the court to enforce the arbitrator’s decision unless the award was procured by fraud or the arbitrator was guilty of misconduct or exceeded her powers Courts have also refused to enforce an arbitration *172 award where the award “violates public policy” or is “arbitrary or capricious” or “in manifest disregard of the law.” These non-statutory bases for vacating an arbitration award have been interpreted very narrowly For example, courts have interpreted “manifest disregard of the law” to require more than error or misunderstanding of the law Rather, the record must show that the arbitrator knew the law and explicitly disregarded it In recent years, there has been “growing concern” about the “risks presented by arbitration’s limited scope of review.” 10 Arbitrators selected for their familiarity with a particular industry often lack *173 the sophistication to appreciate all of the legal issues raised.11 As a result, there have been “several conspicuous, high stake disputes” and countless lower-profile cases in which arbitrators have issued decisions “well outside the reasonable expectations of the parties.” 12 To offer protection against such unpredictable or biased decision-making, without sacrificing all the benefits of arbitration, parties have begun to include clauses in their arbitration agreements seeking to expand the scope of judicial review 13 The legal status of such clauses remains uncertain The federal courts that have addressed the issue are split 14 Similarly, commentators have disagreed about the enforceability of such provisions 15 *174 As arbitration clauses are increasingly included in agreements between businesses and their customers, employers and employees, brokers and their clients, and insurers and their insured,16 the issue of the enforceability of clauses expanding the scope of judicial review can be expected to arise more frequently and in a greater variety of contexts 17 Virtually all of the discussion to date has assumed that the answer to the question of enforceability is either yes or no This article rejects this binary approach Rather, this article assumes that the circumstances in which such clauses appear represent a continuum and accordingly adopts a more textured analysis Part I briefly discusses the primary cases favoring enforcement of clauses seeking expanded judicial review Part II provides an abbreviated description of the cases against enforcement of such provisions Part III assesses the merits of the arguments for and against contractual expansion of judicial review in two diametrically opposed situations an individually negotiated contract between commercial sellers and a standard form contract for small consumer goods Building on this analysis, this part examines the proper treatment of the many intermediate cases and concludes that clauses expanding the scope of judicial review should be honored in individually negotiated contracts, but not in standard form agreements Finally, Part IV suggests possible legislative action that might be necessary to achieve the suggested optimal results I The Cases Supporting Contractual Expansion of Judicial Review © 2011 Thomson Reuters No claim to original U.S Government Works WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev The leading case for expanded judicial review of arbitration awards, Gateway Technologies, Inc v MCI Telecommunications Corp.,18 involved a contract between two large commercial enterprises After MCI contracted to design and implement a telephone *175 system for the Virginia Department of Corrections, it subcontracted with Gateway to furnish, install and maintain all the equipment and technology 19 The subcontract contained a clause calling for binding arbitration of any disputes that could not be settled by good faith negotiations The clause further provided that “errors of law shall be subject to appeal.”20 After Gateway installed the phone system, MCI complained to Gateway that the system improperly completed many collect calls.21 To alleviate this problem, MCI integrated its own system to bypass Gateway’s system 22 At the ensuing arbitration, the arbitrator found that MCI’s unwillingness to negotiate in good faith about a possible cure constituted a breach of contract and awarded Gateway actual damages, as well as $2,000,000 in punitive damages 23 On appeal, the threshold issue was whether the court should review the decision for errors of law pursuant to the contract language or whether the policy of the FAA required a more restrictive review The Fifth Circuit, relying heavily on Supreme Court language in other arbitration cases, held that expanded review was permissible 24 The Gateway Court reasoned that contractual modification of the standard of review was acceptable because “as the Supreme Court has emphasized, arbitration is a creature of contract,” 25 and any other result would be “inimical to the FAA’s purpose of ensuring that private agreements to arbitrate are enforced according to their terms.” 26 In the Court’s view, the FAA merely provided a default standard of review and parties were free to expand judicial review by agreement 27 As support, the Court cited Volt Information Sciences, Inc v Board of Trustees of Leland Stanford Junior University, 28 in which the Supreme Court stated, “there is no federal policy favoring arbitration under a certain set of procedural rules; the federal policy *176 is simply to ensure the enforceability, according to their terms, of private agreements to arbitrate.” 29 The Ninth Circuit, in Lapine Technology Corp v Kyocera Corp., 30 relying on much of the same Supreme Court language cited by Gateway, followed the Fifth Circuit’s decision and allowed the parties to expand judicial review to a “substantial evidence and legal validity” standard.31 The Fourth Circuit, in Syncor International Corp v McLeland, 32 also permitted expanded review of an arbitration award McLeland involved a dispute between an employer and employee rather than between two commercial entities Nonetheless, the Fourth Circuit, without acknowledging that difference, followed Gateway.33 The Third Circuit in Roadway Package Sys v Kayser, relying on Gateway, Lapine and McLeland, also held that parties should be free to adjust the standard of review on appeal of an arbitration decision 34 Recently, the Fifth Circuit itself applied Gateway to agreements between an individual and her employer 35 In Hughes Training Inc v Cook, the Court specifically rejected the argument that Gateway should not be followed because the employment contract was a contract of adhesion.36 In sum, the cases endorsing contractually expanded judicial review of arbitration awards are primarily premised on Supreme Court *177 cases which find the legislative intent of the FAA to be to ensure that arbitration agreements are enforced according to their terms Contractually expanded judicial review has been countenanced in both the commercial and employment settings II The Cases Refusing to Enforce Clauses Expanding the Scope of Judicial Review The Tenth Circuit, in Bowen v Amoco Pipeline Co, 37 has made the most persuasive case for rejecting contractually expanded judicial review.38 In Bowen, the plaintiff landowners filed suit against Amoco, alleging damages to real property resulting from the Amoco’s pipeline oil leak 39 Pursuant to an arbitration agreement entered into by the predecessors of both parties as part of a right-of-way covenant, the district court issued an order compelling arbitration 40 Prior to the arbitration, the parties agreed to expand the scope of judicial review They agreed that both parties would have the right to the timely appeal of any award to the district court “on the grounds that the award is not supported by the evidence.” 41 The parties also agreed that the district court decision “shall be final.” 42 The panel of three arbitrators found in favor of the plaintiffs On motion to enforce or vacate, the district court refused to apply the parties’ expanded scope of judicial review, and granted plaintiffs’ motion to confirm the award.43 Amoco appealed, alleging that the district court’s refusal to apply the contractually agreed upon standard of review constituted legal error The Tenth Circuit rejected Amoco’s argument and affirmed the district court decision.44 *178 The Tenth Circuit acknowledged the Fifth and Ninth Circuits’ decisions permitting contractual expansion of the scope of judicial review45 and again reviewed Supreme Court precedent emphasizing that the purpose of the FAA was to ensure contracts were enforced according to their terms.46 The Court, however, disagreed with the conclusions of the Fifth and Ninth Circuits The Court noted that the Supreme Court has permitted parties to determine by contract what issues to arbitrate and the procedures used in arbitration, but has not ever stated that the parties were free to control the judicial process 47 The © 2011 Thomson Reuters No claim to original U.S Government Works WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev Court found not only a lack of authority clearly permitting expanded review, but also that the strict language of the statute was in fact to the contrary.48 The Court observed that “unlike section of the FAA, which allows parties to petition a federal court for an order compelling arbitration ‘in the manner provided for in [the] agreement,”’ the provisions governing judicial review of awards, sections 10 and 11, contain no similar language 49 Moreover, the court noted that “even Volt, the case often cited in support of contractually created standards of review,” focused on whether the rule at issue “conflicted with the federal policies and objectives of the FAA.” 50 Unlike Volt, the Tenth Circuit found that enforcing the parties’ contract in Bowen would threaten the policies of the FAA According to the Court, the provisions providing for limited review were not mere default rules, but manifested a congressional intent to further the federal policy favoring arbitration by preserving the independence of the arbitrator 51 The Court further found the FAA’s narrow review standards reflected the Supreme Court’s view of the proper relationship between arbitration and judicial process: “By agreeing to arbitrate, a party ‘trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration.”’ 52 With contractually expanded review, arbitrators might be required to issue findings of fact and conclusions of law 53 or be discouraged from seeking particularized solutions (for *179 which their expertise was sought) for fear that their decisions would be vacated on appeal 54 Such a policy, the court reasoned, would undermine the independence of the arbitrator and jeopardize the “simplicity, expediency, and cost-effectiveness of arbitration.”55 Arbitration would become “just another step” in the litigation dance 56 Additionally, contractually expanded review could put courts in the awkward position of having to apply unfamiliar rules and procedures 57 Finally, the Bowen court alluded to earlier opinions suggesting that expanded review might impermissibly create federal jurisdiction.58 Thus, the Court concluded that contractual expansion of judicial review was not permissible, desirable or appropriate If parties wanted additional review, the Court suggested that they follow Judge Posner’s advice and appoint an appellate arbitration panel.59 III An Analysis of When Contractually Expanded Judicial Review of Arbitration Awards Should Be Enforced In Bowen and Gateway the courts were faced with negotiated contracts between commercial parties However, arbitration clauses are also contained in contracts between employers and their non-unionized employees, insurance companies and their insureds, lessors and lessees and commercial sellers and consumers 60 The issues are not necessarily the same in each of these situations This section posits that contractually expanded judicial review should be enforced *180 in large, individually negotiated contracts between commercial entities, but rejected in standard form contracts for small consumer goods between parties of unequal bargaining power By examining these two diametrically opposed situations, this article isolates the factors that should be most relevant in deciding the issue of enforceability in the spectrum of intermediate cases, and concludes that the ideal result would honor individually negotiated clauses for expanded review, but reject such clauses in standard form contracts A Individually Negotiated Contracts Between Commercial Parties The structure of the Bowen court’s analysis of clauses expanding the scope of judicial review in individually negotiated commercial contracts is sound To evaluate whether contractually expanded judicial review is allowable, it is proper to examine the language of the statute, legislative intent and public policies such as maintaining judicial integrity 61 The problem is with the Court’s review of these factors The language of the statute is ambiguous, but evidence of legislative intent and policy considerations support permitting contractually expanded judicial review, under familiar standards, when commercial parties have individually negotiated for such review Statutory Language The strongest argument against contractually expanded judicial review of arbitration awards rests upon the language of the statute Section 10 provides that a court “may” vacate an arbitration award in “any” of the listed situations 62 One might initially infer from these discretionary terms that the grounds for vacatur listed in the provision are non-exclusive 63 However, section 10 must be read in conjunction with section The latter section states that a court “must” confirm an award unless the award is vacated as prescribed in section 10 64 Thus, the discretionary terms of section 10 suggest the presumption in favor of confirmation is so strong that even if an exception applies, a court still may confirm the award Rather than providing support for new bases to deny confirmation, the sections, *181 when read together, suggest that confirmation is compelled except under the limited circumstances contained in section 10 Despite this possible reading of the FAA, section 10 should not be interpreted as rejecting the possibility of contractual expansion of judicial review First, the introductory sentence of section indicates that confirmation is compelled (subject to vacatur as prescribed in section 10) “[i]f the parties in their agreement have agreed that a judgment of the court shall be © 2011 Thomson Reuters No claim to original U.S Government Works WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev entered upon the award made pursuant to the arbitration ” 65 One can easily argue that a contract providing for expanded review does not agree to court confirmation unless supported under the standard provided for in the agreement Second, courts already have recognized several grounds for vacatur not contained in section 10 In particular, courts have authorized vacatur if the arbitration award violates public policy, or is arbitrary and capricious or in manifest disregard of the law 66 Although it is true that courts not often vacate arbitration awards on these bases, 67 the fact that courts, including the Supreme Court, recognize some or all of these exceptions indicates that courts have not interpreted section 10(a)(4) as exclusive Congress has neither overruled nor expressed dissatisfaction with these non-statutory grounds for vacatur Finally, a clause providing for expanded judicial review could be redrafted to come within the express provisions of section 10(a)(4) For example, the agreement could limit the arbitrator’s power to issue decisions supported by substantial evidence and/or existing law.68 In that case, expanded judicial review would be required to determine whether the “arbitrators exceeded their power.”69 The language of the statute should not be so inflexible that *182 the legality of clauses with identical meaning and intent depends upon how cleverly they are drafted Legislative Intent Given the indeterminate nature of the statutory language, it is appropriate to consider evidence of legislative intent The purpose behind the passage of the FAA was to overrule existing hostility to arbitration clauses and ensure that courts enforce such agreements as they would any other contract 70 The Supreme Court has repeatedly emphasized that this requires that “private agreements to arbitrate [be] enforced according to their terms.” 71 In Volt, for example, the parties entered into an agreement containing both an arbitration clause and a clause stating that California law would govern the contract California law permitted a court to stay any litigation involving a third party The Supreme Court found that the parties, by agreeing to the choice of law clause, intended to have the California stay provision apply The Court deferred to the terms of the contract and refused to compel arbitration pursuant to the express language in section of the FAA If parties contractually provided for expanded judicial review, the Supreme Court would similarly defer to the terms of the parties’ agreement rather than apply the “express” language of section 10, much as Gateway and its progeny did The Bowen court and commentators have claimed that the Supreme Court’s emphasis on enforcing agreements according to their terms only refers to agreements defining the rules and procedures to be used in the arbitration process It would distinguish agreements that seek to interfere with the judicial process 72 But this distinction is without merit, given that parties often contractually “interfere” with the judicial process: Liquidated damage clauses tell courts how to measure uncertain damages, choice of forum clauses tell courts where the parties want suit and choice of law clauses tell courts what *183 law to apply.73 Indeed, it was the latter type of clause that was involved in Volt Moreover, the drafting solution offered above74 would undermine the argument that contractually expanded judicial review permits parties to interfere with the judicial process The judiciary would merely be required to follow Congressional direction to determine if the arbitrator exceeded her powers.75 Nonetheless, ensuring that arbitration agreements were enforced pursuant to their terms was not the only FAA policy Advocating the enforcement of arbitration agreements, Congress recognized that arbitration is a quick and relatively inexpensive method of dispute resolution that can help relieve the burden on the federal courts 76 The Bowen court opined and some commentators opine that expanded review might complicate the arbitration process, require arbitrators to issue findings of fact and conclusions of law, and encourage a plethora of additional appeals 77 This would sacrifice the simplicity, informality, and expedition of arbitration and further burden an already overworked judiciary It is not clear that the cost and speed of dispute resolution should be considered if parties truly indicate that they prefer to partially sacrifice those interests for more reliable decision making To the contrary, where the intent of the parties and the speed and cost of dispute resolution conflict, the Supreme Court has made clear that the intent of the parties must control 78 If speed and cost were the primary considerations, Congress would have required arbitration of *184 all cases, and not enacted a statute calling for enforcement of voluntary arbitration agreements according to their terms 79 Under this view, section 10 should be considered a set of default rules, 80 chosen because Congress presumed parties wanted the speed and simplicity of arbitration Where the parties have expressed an intent to the contrary, section 10 should not be read to preclude greater review Furthermore, the dire consequences predicted by the opponents of expanded review are overstated Undoubtedly, expanded judicial review would increase the time and expense of the dispute resolution process compared to arbitration without expanded review However, it might well be that if negotiated clauses expanding judicial review were not recognized, many parties would not agree to arbitration in the first place 81 It is doubtful many parties would take the time and expense © 2011 Thomson Reuters No claim to original U.S Government Works WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev necessary to negotiate expanded judicial review unless the opportunity was important to them Without judicial review, a party might so fear the work of a maverick arbitrator that arbitration would not be an option It is clear that arbitration with expanded judicial review, even if the number of appeals increases, places a lesser burden on the judiciary than full litigation in the court system 82 To the extent the parties are concerned about an increase in appeals, they also can include a provision that any party losing a judicial appeal (or failing to achieve a result at least ten percent better than the arbitration award) pay the other party’s costs and/or attorneys fees 83 Obviously, such a provision would force a party to think twice before choosing to appeal Similarly, there is no guarantee that *185 the arbitration process prior to appeal will become slower or any more costly as a result of clauses providing for expanded judicial review Although an expanded review may require arbitrators to write opinions they would not otherwise be required to, the parties could, and likely would, require such opinions in the absence of expanded review Parties who negotiate expanded review presumably have some questions about the arbitrator or the process If expanded review were not permissible, such parties would presumably want an opinion to have some basis to appeal under the existing statutory and non-statutory grounds Judicial Integrity and Other Public Policy Considerations Although legislative intent supports recognizing contract clauses providing for expanded judicial review of arbitration awards, courts may properly consider both the effect of such clauses on the integrity of the courts 84 and whether there is some overriding public policy that dictates invalidating such clauses 85 Opponents of contractually expanded judicial review have suggested three reasons why such clauses interfere with the integrity of the court system First, they argue that the federal workload would be increased at the behest of the parties rather than Congress.86 Second, courts would be placed in the awkward position of reviewing proceedings conducted under potentially unfamiliar rules and procedures 87 Third, in many cases courts would be requested to review decisions in the absence of a complete record or written decision, which would require arbitrary and capricious decision-making, thereby undermining the courts’ institutional integrity 88 None of *186 these concerns, however, justifies refusing to permit contractually expanded judicial review Expanded review is more burdensome than the narrow review provided for in section 10 of the FAA Nevertheless, as suggested above, it is quite possible that refusing to permit contractually expanded review will encourage parties to forego arbitration altogether and to litigate their entire dispute in federal court 89 Moreover, parties, by their agreement, are already permitted to increase the work of the judiciary Choice of law provisions may require judges to spend extra hours in the library Furthermore, clauses limiting which disputes are subject to arbitration also result in a heavier judicial workload, yet no one suggests that such clauses are improper or undermine judicial integrity The fear that courts would be placed in the position of applying unfamiliar standards of review or appraising strange rules and procedures is overstated and does not justify a blanket rejection of clauses expanding judicial review To date, every case providing for expanded judicial review has required substantial evidence either to support the arbitrator’s award and/or that the arbitrator did not commit legal error These are standards that courts routinely apply If an arbitration agreement included a clause that did threaten judicial integrity, such as a provision requiring the court to “review the award by flipping a coin or studying the entrails of a dead fowl,” the court could and should refuse to enforce that term 90 Given the unlikelihood that parties would choose such an arbitrary standard, case by case review is sufficient Finally, section 10 of the FAA and the judicially created exceptions to award confirmation, already require courts to review arbitration decisions Expanded review does not make the procedures and rules of arbitration any more unfamiliar The fear that expanded review would sabotage the integrity of the court system by requiring arbitrary and capricious decision-making is totally vacuous It is likely that parties wanting expanded review will provide a record of the arbitration and require a written opinion Even if a party were foolish enough to seek expanded review *187 without such a record, the court would not be asked to make an arbitrary decision Rather, given that a party seeking to vacate an arbitration award has the burden of establishing grounds for vacatur, 91 the lack of an adequate record merely would require denial of the motion to vacate The opponents of expanded judicial review also argue that “[a]rbitrators are chosen for their specialized experience and knowledge, which enable them to fashion creative remedies and solutions ” 92 They claim expanded review would inhibit arbitrators from fashioning particularized solutions for fear that their decision would be overturned on appeal 93 The short answer is that if the parties wanted the arbitrators’ specialized expertise, they would not agree to expanded review Indeed, parties include such clauses in part because they fear arbitrators’ so-called “creative” solutions 94 Constitutional Argument © 2011 Thomson Reuters No claim to original U.S Government Works WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev Of course, whatever the language of the statute or intent of Congress, parties cannot contractually expand judicial review if it would violate the Constitution It is suggested that increased review is tantamount to creating federal jurisdiction by contract and the judicial exercise of that jurisdiction would violate the separation of powers doctrine 95 The FAA does not create federal jurisdiction, rather, the parties can only be in federal court if there is an independent basis of *188 jurisdiction.96 Thus, the claim that expanded review would be an unconstitutional assumption of power necessarily rests upon the premise that Congress intended to limit judicial review to the circumstances enumerated in section 10 97 That position has been discussed and rejected above 98 Quite simply, there is no independent constitutional argument against expanding judicial review In sum, when commercial parties have individually negotiated for expanded judicial review, the court should honor the parties’ preference, at least where the parties not impose an arbitrary or unreasonable standard of review Although the statutory language is indeterminate, both legislative intent and public policy strongly support such a result There is no need to protect commercial parties who have knowingly and willingly agreed upon a contract term, and any harm to the public’s interest relies on the very questionable premise that without such clauses the parties would still arbitrate Recognition of such clauses may reduce the judicial workload by encouraging arbitration, while furthering the long-established American policy of “freedom of contract.” B Contractually Expanded Judicial Review in Standard Form Contracts for Small Consumer Goods by Parties of Unequal Bargaining Power If a clause seeking to expand the scope of judicial review of arbitration awards appears in a contract of adhesion 99 for small consumer goods, the above analysis changes dramatically In such a *189 case, it is doubtful the parties freely and knowingly consented to the clause expanding judicial review, it is more likely that rejecting the clause will result in arbitration without review rather than court litigation, and upholding the provision might effectively prevent the consumer from vindicating her rights Given these differences, the language of section 10 remains indeterminate, but legislative intent and policy considerations strongly support courts’ refusal to recognize such clauses There is No True Consent to a Clause Expanding Judicial Review in a Standard Form Contract The vast majority of consumers of small consumer goods not read the terms of standard form contracts offered on a takeit-or-leave-it basis “Virtually every scholar who has written about contracts of adhesion has accepted the truth of this assertion, and the few empirical studies that have been done have agreed.” 100 Several reasons explain this fact Form contracts are notoriously long and complex 101 It does not make sense to undergo the arduous task of reading the entire form when the item purchased is inexpensive, particularly when the consumer knows that she may not understand the *190 legal jargon, when she is powerless to negotiate about the terms, and when most competitors have identical forms 102 Rather, consumers tend to be concerned only with the primary terms of the contract price, quantity, perhaps credit and warranties 103 They rely on the courts and the seller’s interest in its reputation for protection 104 Social pressures tend to exacerbate consumers’ reluctance to read the terms of standard form agreements 105 For example, consumers might be uncomfortable reviewing terms when they are in a rush or when reading the contract would delay others waiting on line 106 Similarly, the purchaser might feel awkward reading a contract closely, fearing that such behavior implies distrust of the salesperson who has just served her.107 In some cases, the arbitration terms are not even disclosed until after purchase and receipt of the goods.108 At that time the purchaser might be psychologically committed to the transaction or not want to bear the costs of reshipment Even if consumers did read these complex and detailed form agreements, they may not be able to comprehend the clause or properly evaluate the risks covered 109 Many consumers not understand the significance of an arbitration clause, much less a term altering the standard of review on appeal of the arbitration award Indeed, given the small likelihood that a dispute would occur that could not be handled by the store itself, consumers’ failure to read all the terms of their contract could actually be rational conduct Under these circumstances, to say that the consumer consented to or expressed an intent to be bound by the terms of the contract is a complete fiction 110 With the advent of e-commerce and the use of *192 “clickwrap” and “browsewrap” contracts, the fiction of consent has become ludicrous 111 Nor will a requirement of additional disclosure 112 be sufficient to remedy this market failure Consumers are no more willing to read disclosure forms than form agreements They will, as a group, simply sign where they are told to sign *193 Rejection of Expanded Review Will Reduce the Judicial Workload Sellers insert arbitration clauses in standard form consumer contracts because of the perceived advantages of arbitration, © 2011 Thomson Reuters No claim to original U.S Government Works WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev including eliminating customers’ recourse to the courts Removing access to the courts can effectively limit the evidence available to a party as discovery is generally very limited in arbitration 113 It also ensures that no negative legal precedent is created.114 The inability to file in court also removes the possibility of a class action 115 or resolution of the dispute in small claims court.116 The absence of these alternatives can make dispute resolution more expensive than any possible recovery and therefore deter the filing of any complaint.117 A clause expanding the scope of judicial review may be added to protect against an arbitrary ruling or to further deter the filing of a complaint Given that sellers are repeat players in the seller-customer dispute game and that the amount in dispute in small consumer goods cases is likely to be small, sellers should not be risk averse Any mistake by an arbitrator effectively can be amortized over the number of disputes properly decided Therefore, avoiding arbitrary decision-making probably is not the dominant interest of the seller Given the benefits of denying court access, if the expanded review provision was held unenforceable, unlike in the case of individually negotiated commercial contracts, sellers almost surely would prefer arbitration, not court litigation.118 Obviously, this would result in quicker resolution of disputes and a reduced federal workload *194 Expanded Review May Prevent the Consumer From Vindicating Her Rights As suggested above,119 for many purchasers of small consumer goods, the cost of arbitration may be prohibitive Many arbitration associations have significant filing fees and consumers frequently have to share the costs of the arbitrator 120 Often the amount at stake is small If expanded review is permitted, consumers reasonably could fear that they also inevitably will face court litigation The prospect of that expense could further deter, if not prevent, consumers from effectively vindicating their rights.121 Indeed, as suggested above, 122 this might be precisely the reason such clauses are included in the contract The Analysis of the Statute, Legislative History and Policy Considerations These characteristics of a standard form consumer contract alter the analysis of section 10 The strict language arguments change little As discussed above, section compels enforcement unless otherwise provided in section 10 123 If there is no true consent, the argument that the parties have “agreed that a judgment of the court shall be entered” only if proper under expanded review loses force.124 Thus, rejecting contractually expanded judicial review in the case of standard form contracts has greater statutory support than when there is informed and voluntary consent Nevertheless, the language still is indeterminate First, section 10 has not been interpreted as *195 providing the exclusive grounds for vacatur of an arbitrator’s decision.125 Second, the suggested reading of the prefatory language of section would justify refusing to enforce an arbitration agreement in its entirety where there was no true consent to arbitration That is a position the Supreme Court has implicitly rejected.126 Finally, it still would be possible to redraft the challenged clause so that expanded review would be required to determine if the arbitrator “exceeded his powers.”127 Without true consent, however, the legislative intent identified by Gateway and Bowen strongly supports rejecting contractually expanded judicial review Imposing conditions that have not received the consent of both parties does not further the goal of enforcing agreements “according to their terms.” On the other hand, expanded review in the absence of true consent almost surely would have the effects predicted by the Bowen court additional appeals, increased litigation and a reduction in the simplicity, expediency and cost-effectiveness of arbitration 128 Finally, ample legislative history suggests that Congress intended the FAA to govern commercial disputes 129 and was concerned about application of the provisions to contracts of adhesion.130 Given this history, it is doubtful Congress intended consumers to be bound by an arbitration provision providing for expanded judicial review *196 Policy considerations, including the integrity of the court, also weigh heavily against enforcement of expanded review provisions in the consumer context Not only would enforcement create additional work for the judiciary, 131 but it also would prevent many valid claims from being brought Although a party who could not effectively vindicate her rights might be able to have the clause stricken as unconscionable, 132 many parties would be deterred from ever bringing suit Even if a party had the resources to challenge the provision, if a small amount was at stake, there would be little incentive to so 133 The law should not encourage provisions that preclude parties with valid claims from receiving a remedy In short, consideration of legislative intent and the interests of parties and the courts strongly support non-enforcement of provisions in standard form consumer contracts expanding the scope of judicial review of arbitration awards C Expanded Judicial Review In the Intermediate Cases In between the individually negotiated contract amongst commercial parties and the standard form contract for small consumer goods are a myriad of cases contracts for large ticket consumer goods, employer-employee contracts, agreements © 2011 Thomson Reuters No claim to original U.S Government Works WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev between small businesses and multi-national corporations, to name but a few The proper treatment of these situations depends upon the quality of consent between the parties, whether invalidation of a clause seeking expanded review will result in arbitration or litigation, the size of the amount at stake and the resources of the plaintiffs As illustrated above, these factors will influence the interpretation of the legislative intent and policy arguments behind section 10 of the FAA If the parties have truly consented to the clause for expanded review, the Volt-based argument that the FAA’s primary policy was *197 to ensure enforcement of agreements according to their terms should control, absent economic considerations making it impossible for the plaintiff to vindicate her rights 134 This certainly should include all individually negotiated contracts Consent is obvious and it is unlikely that someone would individually negotiate a provision that would make it impossible for it to vindicate its rights The more difficult question is whether it includes standard form contracts when the parties are knowledgeable about the provision for expanded review If a party signs a contract and knows all the terms, there is a strong argument that it truly has consented to them Nonetheless, this article suggests that the argument should not be dispositive First, there is the philosophical question: If a contract is offered on a take-it-or-leave-it basis so that there is no realistic option other than to sign, does an awareness of the terms really constitute consent? Second, given the difficulty of determining knowledge and the probable small percentage of cases in which it exists,135 the time and expense of litigating the question of knowledge militates in favor of a blanket presumption against it In any event, to the extent there is any doubt about consent, the federal policy favoring arbitration and considerations of judicial integrity should be considered Those factors recommend finding an expanded review clause in a standard form contract to be unenforceable If a clause providing for expanded review is deleted from a standard form contract, the vast likelihood is that the party providing the form will prefer to maintain arbitration in their standard form rather than face litigation The party providing the form, by definition a repeat player, should not be risk adverse Accordingly, its preference for expanded review should be small.136 Yet in most situations there would remain many benefits from arbitration The party could define the process in its favor137 and eliminate a plaintiff’s recourse to the courts 138 Consequently, unenforceability would accord with the *198 FAA’s policy to favor the benefits of arbitration and the court’s interest in reduced court dockets This is true whether or not the provision would have any effect on a party’s ability to vindicate its rights Of course, the argument for non-enforcement is stronger still if the clause expanding the scope of judicial review would deter a party from filing a complaint or would preclude effective enforcement of its rights Relevant to these possibilities would be the resources of the complaining party and the amount in dispute Nonetheless, this article recommends non-enforcement of clauses expanding the scope of judicial review in any standard form contract Such a blanket rule has the benefit of clarity and ease of application The harm from erroneous non-enforcement is slight because the benefit to the party who drafted the form should be minimal As a repeat player, it should not be risk averse Moreover, what little harm exists can be reduced under this article’s recommendation If both parties want expanded review, they can individually negotiate a post-dispute expanded review clause that should be enforceable On the other hand, the harm from erroneous enforcement potentially is great It would almost certainly be adverse to the judiciary’s interest in reducing the volume of court litigation and, in at least some cases, deter the non-drafting party from pursuing any action or preclude effective enforcement of its rights Greater precision in determining the full harm is not worth the cost One might consider an exception for commercial form contracts Such parties are more likely to read their agreements and have sufficient resources to vindicate their rights Nonetheless, this article rejects such an exception Many commercial contracts, such as franchiser/franchisee agreements or agreements between small businesses and multi-national corporations, have more in common with consumer form contracts than with individually negotiated agreements Such contracts generally are offered on a take-it-or-leave-it basis This discourages the smaller party from reading the fine print Even if the smaller party reads and understands the significance of the provision providing for expanded review, it would have no real alternative but to accept As with other form contracts, non-enforcement should reduce the amount of court litigation The party providing the form, ostensibly not risk-averse, still should prefer the arbitration alternative A blanket rule provides predictability and easy administration No inquiry would be necessary concerning whether the parties were aware of the clause or the contract was one of adhesion It could also eliminate potentially difficult issues of classification For example, it would not be necessary to decide if labor *199 agreements are “commercial” contracts Again, what little harm exists from non-enforcement could be remedied by an individually negotiated post-dispute agreement IV Legislation That May Be Necessary Currently, the law relating to contractual expansion of judicial review has the worst of both worlds Some courts refuse to © 2011 Thomson Reuters No claim to original U.S Government Works WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev enforce provisions in individually negotiated agreements 139 and others honor such clauses in standard form contracts 140 These results are unfortunate, but are likely to continue absent intervention A legislative solution can provide businesses as well as individuals with the predictability that furthers the efficient operation of the marketplace Accordingly, this article recommends amending section 10 of the FAA to add the following clause: (a)(6) Where the award is not proper under the standard of review knowingly agreed to by parties to a non-standard form contract If agreement cannot be reached on such a provision, the legislature and courts should give serious thought to specifying that parties can never contractually expand the scope of judicial review of arbitration awards Although this would compromise the freedom of parties to negotiate individual contracts, it would eliminate the possible harm from such clauses in standard form contracts Given that standard form contracts comprise the vast majority of contracts, 141 the net benefit from nonenforcement should exceed the net harm from the inflexible application of a binary rule Ideally, however, this second-best solution will not be necessary Conclusion Courts are split concerning the permissibility of contractually expanded judicial review of arbitration awards With the burgeoning use of arbitration agreements, both on paper and through the Internet, the potential abuse of such clauses imposes a serious risk to consumers, employees, and others with little negotiating power An *200 ideal solution would prohibit contractually expanded review in standard form contracts In such contracts, there generally is little benefit to the party who includes the provision, no true consent by the party sought to be bound, and the very real threat that the judicial workload will increase and/or that a party’s rights will go unvindicated In contrast, enforcement of contractually expanded review, under a non-arbitrary standard, is recommended when parties individually negotiate the provision In that situation, the parties knowingly and willingly entered into the bargain, and real harm might result from non-enforcement These recommendations have support in the language of the statute, legislative intent, and considerations of public policy Nonetheless, given existing case law, a legislative solution might be necessary In the absence of legislation, if courts continue to analyze the question of enforceability of clauses expanding the scope of judicial review under a simplistic binary approach, the preferred, but secondbest solution, is to universally reject expanded review Footnotes d1 Professor of Law, University of Detroit Mercy School of Law; Stanford University School of Law, J.D 1979; Member, American Arbitration Association See Warren Burger, Isn’t There a Better Way?, 68 A.B.A J 274, 277 (1982); Sarah R Cole, Managerial Litigants? The Overlooked Problem of Party Autonomy in Dispute Resolution, 51 Hastings L.J 1199, 1200-01 (2000) See Bowen v Amoco Pipeline Co., 254 F.3d 925, 932 (10th Cir 2001); Cole, supra note 1, at 1200-01; Tom Cullinan, Note, Contracting for an Expanded Scope of Judicial Review in Arbitration Agreements, 51 Vand L Rev 395, 424 (1998) For a more thorough discussion of the potential benefits of arbitration, see Robert Fischer & Roger Haydock, International Commercial Disputes Drafting an Enforceable Arbitration Agreement, 21 Wm Mitchell L Rev 941, 947-56 (1996) Fed Arbitration Act, U.S.C §§ 1-16 (2000) Fed Arbitration Act, U.S.C § (2000) The scope of the FAA’s coverage has been broadly interpreted to correspond with Congress’ power under the Commerce Clause See Allied-Bruce Terminix Cos v Dobson, 513 U.S 265, 269-70 (1995) The statute, in relevant part, provides that a court may vacate an award: (1) Where the award was procured by corruption, fraud, or undue means; (2) Where there was evident partiality or corruption in the arbitrators, or either of them; © 2011 Thomson Reuters No claim to original U.S Government Works WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev (3) Where the arbitrators were guilty of misconduct by which the rights of any party have been prejudiced; or (4) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made Fed Arbitration Act, U.S.C § 10 (2000) LaPrade v Kidder, Peabody & Co., 246 F.3d 702, 706 (D.C Cir 2001); see also DiRussa v Dean Witter Reynolds Inc., 121 F.3d 818, 824-25 (2d Cir 1997) (stating rule, but finding no violation of public policy) The public policy exception emanates from the common law doctrine permitting courts to refuse to enforce a contract that violates public policy See Vimar Seguros y Reaseguros, S.A v M/V Sky Reefer, 515 U.S 528, 540 (1995); Seymour v Blue Cross/Blue Shield, 988 F.2d 1020, 1023 (10th Cir 1993) (“It derives legitimacy from the public’s interest in having its views represented in matters to which it is not a party but which could harm the public interest.”) The public policy exception, however, requires some “explicit public policy that is welldefined and dominant, and is to be ascertained by reference to the laws and legal precedents ” DiRussa, 121 F.3d at 824-25 (quoting United Paperworkers Int’l v Misco, 484 U.S 29, 43 (1987) [internal quotations omitted]); see also LaPrade, 246 F.3d at 706; accord Arizona Elec Power Coop., Inc v Berkeley, 59 F.3d 988, 992 (9th Cir 1995) Brown v ITT Consumer Fin Corp., 211 F.3d 1217, 1223 (11th Cir 2000) (“[A]n award cannot be vacated as arbitrary and capricious unless no ground for the decision can be inferred from the facts”); see also Ergobilt, Inc v Neutral Posture Ergonomics, Inc., Civ A No 3: 97-CV-2548-L, 2002 U.S Dist LEXIS 12459 at *13-14 (N.D Tex July 9, 2002) (“In the Fifth Circuit, an award is arbitrary and capricious when it ‘is so palpably faulty that no judge could ever conceivably have made such a ruling.”’ (citing Safeway Stores v Am Bakery & Confectionary Workers, Local 111, 390 F.2d 79, 82 (5th Cir 1968)) First Options of Chicago, Inc v Kaplan, 514 U.S 938, 942 (1995) (citing Wilko v Swan, 346 U.S 427, 436-37 (1953) (overruled on other grounds)); see also Rodriguez de Quijas v Shearson/American Express, Inc., 490 U.S 477 (1989); Bowen v Amoco Pipeline Co., 254 F.3d 925, 932 (10th Cir 2001); Halligan v Piper Jaffray, Inc., 148 F.3d 197 (2d Cir 1998) Westerbeke Corp v Daihatsu Motor Co., 304 F.3d 200, 208 (2d Cir 2002); Bowen, 254 F.3d at 932 For a comprehensive discussion of both the statutory and non-statutory grounds for vacating an arbitration award, see Stephen Hayford, Law in Disarray: Judicial Standards for Vacatur of Commercial Arbitration Awards, 30 Ga L Rev 731 (1996) 10 Stephen Younger, Agreements to Expand the Scope of Judicial Review of Arbitration Awards, 63 Alb L Rev 241, 241 (1999); see also John Peloso & Stewart Sarnoff, Appellate Review of Arbitration Decisions, 213 N.Y L.J (1995) 11 See Peloso & Stewart, supra note 10, at 3; Cole, supra note 1, at 1242 12 Younger, supra note 10, at 241 13 See id at 241-42, 253-54; Stephen Hochman, Judicial Review to Correct Arbitral Error An Option to Consider, 13 Ohio St J on Disp Resol 103, 104 (1997) A typical provision expanding the scope of judicial review may require the award to be supported by substantial evidence or seek review for legal error See Gateway Techs., Inc v MCI Telecomms Corp., 64 F.3d 993, 995 (5th Cir 1995); Lapine Tech Corp v Kyocera Corp., 130 F.3d 884, 889 (9th Cir 1997) 14 The Third, Fourth, Fifth and Ninth Circuits have indicated that they are willing to honor provisions seeking expanded review See Harris v Parker Coll of Chiropractic, 286 F.3d 790, 793 (5th Cir 2002); Hughes Training Inc v Cook, 254 F.3d 588, 593 (5th Cir 2001); Roadway Package Sys v Kayser, 257 F.3d 287, 292-93 (3rd Cir 2000), cert denied 534 U.S 1020 (2001); Lapine, 130 F.3d at 888; Syncor Int’l Corp v McLeland, No 96-2261, 1997 U.S App LEXIS 21248, at *16 (4th Cir Aug 11, 1997) (per curiam); Gateway, 64 F.3d at 996; accord New England Utils v Hydro-Quebec, 10 F Supp 2d 53, 64 (D Mass 1998); In re Fils Et Cables D’Acier De Lens, 584 F Supp 240, 244 (S.D.N.Y 1984) Opinions from the Seventh, Eighth and Tenth Circuits have © 2011 Thomson Reuters No claim to original U.S Government Works 10 WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev held to the contrary or hinted that such provisions are not enforceable See Bowen, 254 F.3d at 932; UHC Mgmt Co v Computer Scis Corp., 148 F.3d 992, 997 (8th Cir 1998); Chicago Typographical Union No 16 v Chicago Sun-Times, Inc., 935 F.2d 1501, 1505 (7th Cir 1991) 15 Compare Cole, supra note 1, at 1207, Kenneth Curtin, An Examination of Contractual Expansion and Limitation of Judicial Review of Arbitral Awards, 15 Ohio St J on Disp Resol 337, 339 (2000), Hans Smit, Contractual Modification of the Scope of Judicial Review of Arbitral Awards, Am Rev Int’l Arb 147, 149 (1997), Di Jiang-Schuerger, Note, Perfect Arbitration = Arbitration + Litigation?, Harv Negot L Rev 231, 232 (1999), Brian T McCartney, Note, Contracting for Judicial Review of Arbitration Awards: Can an “Errors of Law” Clause Provide Two Bites of the Apple?, 1997 J Disp Resol 151, 151 (1997) , Cynthia A Murray, Note, Contractual Expansion of the Scope of Judicial Review of Arbitration Awards Under the Federal Arbitration Act, 76 St Johns L Rev 633 (2002) and Kevin Sullivan, Comment, The Problems of Permitting Expanded Judicial Review of Arbitration Awards Under the Federal Arbitration Act, 46 St Louis L.J 509, 509 (2002) (all recommending against enforcement of clauses expanding the scope of judicial review) with Cullinan, supra note 2, at 400, Hochman, supra note 13, at 107, Margaret M Maggio & Richard A Bales, Contracting Around the FAA: The Enforceability of Private Agreements to Expand Judicial Review of Arbitration Awards, 18 Ohio St J Disp Res 151 (2002) and Recent Case, Arbitration Standard of Review-The Tenth Circuit Rejects Contractual Expansion of Judicial Review of Arbitration Awards: Bowen v Amoco Pipeline Co., 254 F.3d 925 (10th Cir 2001), 115 Harv L Rev 1267, 1272 (2002) (all arguing that parties should be allowed to contractually expand the scope of review) 16 See Richard Speidel, Consumer Arbitration of Statutory Claims: Has Pre-Dispute (Mandatory) Arbitration Outlived Its Welcome?, 40 Ariz L Rev 1069, 1072 (1998); Thomas Stipanowich, Punitive Damages and the Consumerization of Arbitration, 92 Nw U L Rev 1, 2-3 (1997); Peloso & Sarnoff, supra note 10 The Supreme Court has held that federal statutory claims also generally are subject to a properly drafted arbitration clause See Green Tree Fin Corp v Randolph, 531 U.S 79, 89 (2000) 17 For example, the Fifth Circuit has recently upheld a provision for expanding judicial review in a contract between an employer and an employee Harris, 286 F.3d at 793 18 64 F.3d 993 (5th Cir 1995) 19 Id at 995 20 Id 21 Id 22 Gateway, 64 F.3d at 995 23 Id at 995-1006 24 Id at 997 The Court went on to uphold the actual damage award, finding that MCI did not preserve its objection to the award, but vacated the punitive damage award as not authorized by state law Id at 998-1001 25 Gateway, 64 F.3d at 996 © 2011 Thomson Reuters No claim to original U.S Government Works 11 WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev 26 Id (citing Mastrobuono v Shearson Lehman Hutton, Inc., 514 U.S 52, 57 (1995) (quoting Volt Info Scis., Inc v Bd of Trs of Leland Stanford Junior Univ., 489 U.S 468, 479 (1989)) 27 See id at 997 28 489 U.S 468 (1989) 29 Gateway, 64 F.3d at 997 n.3 (citing Volt, 489 U.S at 469 (1989)) For a description of Volt, see infra notes 71-72 and accompanying text 30 130 F.3d 884 (9th Cir 1997) 31 Id at 889 Judge Kozinski, concurring, believed that the “strong policy of party empowerment embodied in the Arbitration Act,” supported the Court’s decision Id at 891 (Kozinski, J., concurring) However, he suggested that the result might be different if the parties’ agreed standard of review was a standard that was unfamiliar or threatened the integrity of the court (such as a clause requiring the court to review an award by “flipping a coin or studying the entrails of a dead fowl”) Id Judge Mayer, in contrast, argued that no authority explicitly empowered parties to dictate how an Article III court must review an arbitration Lapine, 130 F.3d at 891 (Mayer, J., dissenting) Absent such authority, Judge Mayer reasoned that the parties’ only alternative for expanded review was to provide for an appellate arbitration panel Id 32 120 F.3d 262 (4th Cir 1997) (unpublished per curium opinion) The agreement in Syncor provided that “the arbitrator shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected by judicial review for any such error.” Id 33 Id 34 257 F.3d 287, 292-93 (3rd Cir 2000), cert denied 534 U.S 1020 (2001) 35 Harris v Parker Coll of Chiropractic, 286 F.3d 790 (5th Cir 2002); Hughes Training Inc v Cook, 254 F.3d 588 (5th Cir 2001) 36 Hughes, 254 F.3d at 593-94 The Court held that a party seeking to avoid the terms of an arbitration agreement must demonstrate that the agreement was unconscionable, a very heavy burden under traditional contract law Id The Court found that the expanded review clause was not unconscionable because it was equally available to both parties Id at 594 37 254 F.3d 925 (10th Cir 2001) 38 See UHC Mgmt Co v Computer Scis Corp., 148 F.3d 992, 997 (8th Cir 1998); Chicago Typographical Union No 16 v Chicago Sun-Times, Inc., 935 F.2d 1501, 1505 (7th Cir 1991) 39 Id at 928-29 40 Id at 928 n.1 © 2011 Thomson Reuters No claim to original U.S Government Works 12 WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev 41 Id at 930 42 Bowen, 254 F.3d at 930 43 Id 44 The court first rejected the plaintiff’s argument that the Court did not have appellate jurisdiction because the agreement said that the district court’s decision “shall be final.” The Court found that the agreement did not clearly and unequivocally evince an intent to waive appellate jurisdiction Id at 931 Indeed, it found that the very statute from which its jurisdiction derived, 28 U.S.C § 1291, grants appellate jurisdiction from “all final decisions of the district court.” Id (emphasis added) 45 See Bowen, 254 F.3d at 933 46 See id at 933-34 47 See id at 934 48 See id 49 Bowen, 254 F.3d at 935 50 Id at 934-35 (citing Volt, 489 U.S at 479 (enforcing the parties’ contract gave “effect to the contractual rights and expectations of the parties without doing violence to the policies behind the FAA”) (emphasis added)) 51 See id at 935 52 Id (citing Gilmer v Interstate/Johnson Lane Corp., 500 U.S 20, 31 (1991)) 53 Professor Cole has suggested that expanded review without written opinions would be “arbitrary and capricious” and therefore call into question the integrity of the judicial system See Cole, supra note 1, at 1259-61 She recommends against expanded review on that basis alone Id at 1261 54 Bowen, 254 F.3d at 936 55 Id 56 Id © 2011 Thomson Reuters No claim to original U.S Government Works 13 WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev 57 See id at 935 Some commentators also argue that the increased judicial review will encourage appeals and further burden an already overworked judiciary Jiang-Schuerger, supra note 15, at 246; see McCartney, supra note 15, at 162 58 See Bowen, 254 F.3d at 936 n.8 (citing UHC Mgmt Co v Computer Scis Corp., 148 F.3d 992, 997-98 (8th Cir 1998); Chicago Typographical Union No 16 v Chicago Sun-Times, Inc., 935 F.2d 1501, 1504-05 (7th Cir 1991)) The Court, however, declined to decide whether contractually expanded review violated the Constitution Two constitutional arguments have been made First, Judge Posner, in dicta, stated that parties cannot create federal jurisdiction by contract Chicago Sun-Times, 935 F.2d at 1504-05; accord Lapine Tech Corp v Kyocera Corp., 130 F.3d 884, 891 (9th Cir 1997) (Mayer, J., dissenting) Second, commentators have suggested that for courts to honor a contractual provision to expand appellate review, in the face of the express limits of the statute, would be a violation of the separation of powers doctrine McCartney, supra note 15, at 162; see also Sullivan, supra note 15, at 557-58 59 See Bowen, 254 F.3d at 934 (citing Chicago Sun-Times, 935 F.2d at 1504-05) 60 See Speidel, supra note 16; Stipanowich, supra note 16 61 Public policy generally does not override statutory language or proof of legislative intent However, where the language is ambiguous and the legislative intent is unclear, public policy should be considered as an indicator of legislative intent It is not surprising that the statute does not provide a clear answer given the likelihood that Congress never considered the issue in the first place See Cole, supra note 1, at 1254-55 62 Fed Arbitration Act, U.S.C § 10 (2000) 63 See Recent Cases, supra note 15, at n.35 64 Fed Arbitration Act, U.S.C § (2000) 65 Id This language is very similar to the clause in section 4, absent from section 10, upon which the Bowen court placed great significance See Bowen, 254 F.3d at 935 66 See supra notes 6-8 67 See Curtin, supra note 15, at 350 68 The parties in Syncor used a similar clause See Syncor Inter Corp v McLeland, No 96-2261, 1997 U.S App LEXIS 21248, at *6 (4th Cir Aug 11, 1997) (per curiam) (stating “the arbitrator shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected by judicial review for any such error”) The Fourth Circuit, in their unpublished per curium opinion, relying upon Gateway, upheld expanded judicial review The Court did not analyze whether such a clause should be evaluated under U.S.C § 10(a)(4) A district court, however, has refused to analyze an analogous contract clause under that section See Bargenquast v Nakano Foods, Inc., No 02 C 5629, 2002 U.S Dist LEXIS 24737 at *4 (N.D Ill Dec 23, 2002) The court in Bargenquast simply interpreted the clause as a contractual expansion of judicial review and, following Bowen, refused to enforce it Id at *8 69 Fed Arbitration Act, U.S.C Đ 10(a)(4) â 2011 Thomson Reuters No claim to original U.S Government Works 14 WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev 70 See H.R Rep No 96, at 1-2 (1924); Green Tree Fin Corp v Randolph, 531 U.S 79, 89 (2000); Ian McNeil, American Arbitration Law 33 (Oxford Press 1992) 71 Mastrobuono v Shearson Lehman Hutton, Inc., 514 U.S 52, 54 (1995) (quoting Volt Info Scis., Inc v Bd of Trs of Leland Stanford Univ., 489 U.S 468, 479 (1989)) 72 See Bowen v Amoco Pipeline Co., 254 F.3d 925, 934 (10th Cir 2001); Curtin, supra note 15, at 362; Smit, supra note 15, at 150 73 It is true that each of these provisions remains subject to judicial review However, as discussed infra notes 84-85 and accompanying text, even if section 10 does not preclude contractually expanded judicial review, the parties’ agreement should be subject to limited court review 74 See supra notes 67-68 and accompanying text 75 See Fed Arbitration Act, U.S.C § 10(a)(4) (2000) 76 H.R Rep No 96, at (1924); see also McNeil, supra note 70, at 89, 92 (noting Congress’ recognition that advocating enforcement of arbitration agreements according to their terms would raise standards of commercial ethics, reduce litigation and enable parties to settle their disputes expeditiously and economically) 77 See Bowen, 254 F.3d at 936 n.7; McCartney, supra note 15, at 162; Sullivan, supra note 15, at 550-53 78 See First Options of Chicago, Inc v Kaplan, 514 U.S 938, 947 (1995), citing Dean Witter Reynolds, Inc v Byrd, 470 U.S 213, 219-20 (1985) In Dean Witter, the Court required arbitration of state law claims pursuant to an arbitration agreement even though non-arbitrable federal claims would remain in court See Dean Witter, 470 U.S at 220-21 Although acknowledging that the resultant piecemeal litigation likely would be inefficient, the Court held that the terms of the parties’ agreement must control Id 79 See id at 219 80 Default rules generally are preferable to mandatory rules because they preserve the concept of freedom of contract, allowing parties to opt out of them in favor of rules they prefer See Cole, supra note 1, at 1251 Mandatory rules are desirable only when society seeks to protect parties to the agreement or third persons affected by the agreement See Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 Yale L.J 87, 88 (1989) 81 See Hochman, supra note 13, at 105; Jiang-Schuerger, supra note 15, at 246; Younger, supra note 10, at 248 82 See Lapine Tech Corp v Kyocera Corp., 130 F.3d 884, 889 (9th Cir 1997); In re Fils Et Cables D’Acier De Lens, 584 F Supp 240, 244 (S.D.N.Y 1984); Jiang-Schuerger, supra note 15, at 247 Moreover, to the extent a party did specifically negotiate for a provision expanding the scope of judicial review, refusing to honor that clause would unfairly remove an advantageous term without eliminating the concession for which it was bargained The Court in Fils believed that would require a court to invalidate the entire arbitration agreement See Fils, 584 F Supp at 244 Obviously, this would eliminate all benefits of arbitration and further burden the judiciary © 2011 Thomson Reuters No claim to original U.S Government Works 15 WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev 83 See Hochman, supra note 13, at 115-16 Not only would such a clause reduce the number of frivolous appeals, but it also would encourage a party defending an aberrational award to settle 84 For example, despite satisfying the literal language of a service statute, courts will invalidate personal service when the defendant is fraudulently induced into the jurisdiction because “[s]uch a fraud is one affecting the court itself and the integrity of its process.” Tickle v Barton, 95 S.E 2d 427, 431 (W Va 1956) (citation omitted); see also U.S Bancorp Mortgage Co v Bonner Mall P’ship, 513 U.S 18, 26-27 (1994) (judicial integrity is one basis upon which a court may refuse to vacate a judgment at the parties’ request); Link v Wabash R.R Co., 370 U.S 626, 630-31 (1962) (courts have an inherent power “to manage their own affairs so as to achieve the orderly and expeditious disposition of cases”); Lapine, 130 F.3d at 891, (Kozinski, J., concurring) (suggesting he would not allow expanded review under an unfamiliar or arbitrary standard); Cole, supra note 1, at 1258-61 (arbitrary and capricious decision making would undermine the courts’ institutional integrity) 85 See supra note 86 See Smit, supra note 15, at 151; McCartney, supra note 15, at 162; Sullivan, supra note 15, at 548-49 87 See Bowen v Amoco Pipeline Co., 254 F.3d 925, 935 (10th Cir 2001) 88 See Cole, supra note 1, at 1259-61; Sullivan, supra note 15, at 553 89 See supra notes 81-82 and accompanying text 90 Lapine Tech Corp v Kyocera Corp., 130 F.3d 884, 891 (9th Cir 1997) (Kozinski, J., concurring) 91 See ANR Coal Co., Inc v Cogentrix of N.C., Inc., 173 F.3d 493, 500 (4th Cir 1999) , cert denied, 528 U.S 877 (1999); Willemijn Houdstermaatschappij, BV v Standard Microsystems Corp., 103 F.3d 9, 12 (2d Cir 1997) ; O.R Sec., Inc v Prof’l Planning Assoc., 857 F.2d 742, 748 (11th Cir 1988) 92 Bowen, 254 F.3d at 936; see also Smit, supra note 15, at 151-52 (noting importance of role of sophisticated arbitrators in developing the law by fashioning creative solutions that may not be endorsed by lower courts); Sullivan, supra note 15, at 552-53 (heightened judicial scrutiny would require arbitrators to focus less on reaching an efficient solution, and more on building a complete record of negotiations that would allow their awards to survive later judicial challenge) 93 Smit, supra note 15, at 151-52 94 See supra notes 12-13 and accompanying text An appellate arbitration panel is not a satisfactory alternative That would be adding yet another step in the review process, not merely expanding the scope of review at an existing stage It would also be increasing costs substantially 95 See Chicago Typographical Union No 16 v Chicago Sun-Times, Inc., 935 F.2d 1501, 1505 (7th Cir 1991) ; Jiang-Schuerger, supra note 15, at 237-39; McCartney, supra note 15, at 161-62 © 2011 Thomson Reuters No claim to original U.S Government Works 16 WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev 96 See Moses H Cone Mem’l Hosp v Mercury Constr Corp., 460 U.S 1, 25 n.32 (1983) (stating that “there must be diversity of citizenship or some other independent basis for federal jurisdiction” before a court can act under the FAA) 97 That position necessarily implies that the “manifest disregard of the law” standard also is an unconstitutional exercise of judicial power The Supreme Court, having endorsed that standard obviously disagrees See First Options of Chicago, Inc v Kaplan, 514 U.S 938, 942 (1995) (citing Wilko v Swan, 346 U.S 427, 436-37 (1953) (overruled on other grounds)); Quijas v Shearson, 490 U.S 477 (1989); Bowen v Amoco Pipeline Co., 254 F.3d 925, 932 (10th Cir 2001); Halligan v Piper Jaffray, Inc., 148 F.3d 197 (2d Cir 1998) 98 See supra notes 62-69 and accompanying text 99 A contract of adhesion has been defined in numerous ways For example, Professor Rakoff identified seven characteristics of the typical contract of adhesion: (1) The document whose legal validity is at issue is a printed form that contains many terms and clearly purports to be a contract (2) The form has been drafted by, or on behalf of, one party to the transaction (3) The drafting party participates in numerous transactions of the type represented by the form and enters into these transactions as a matter of routine (4) The form is presented to the adhering party with the representation that, except perhaps for a few identified items (such as the price term), the drafting party will enter into the transaction only on the terms contained in the document This representation may be explicit or may be implicit in the situation, but it is understood by the adherent (5) After the parties have dickered over whatever terms are open to bargaining, the document is signed by the adherent (6) The adhering party enters into few transactions of the type represented by the form few, at least, in comparison with the drafting party (7) The principal obligation of the adhering party in the transaction considered as a whole is the payment of money Todd Rakoff, Contacts of Adhesion: An Essay in Reconstruction, 96 Harv L Rev 1173, 1177 (1983) (footnotes omitted) Professor Farnsworth prefers a simpler definition a standardized form agreement offered on a take-it-or-leave-it basis E Allan Farnsworth, Contracts at 297 (3d ed 1999); see also Cooper v MRM Inv Co., 199 F Supp 2d 771, 777 (M.D Tenn 2002) (adhesion contract, by definition, is presented in a standardized form and does not afford consumer a “realistic opportunity to bargain,” nor allows consumer to “obtain the desired product or service except by acquiescing to the form of the contract”); Martindale v Sandvik, Inc., 800 A.2d 872, 880 (N.J 2002) (defining “contract of adhesion” as a contract ‘presented on a take-itor-leave-it basis, commonly in a standardized printed form, without opportunity of the ‘adhering’ party to negotiate except perhaps on a few particulars‘) This article uses contract of adhesion and standard form contract interchangeably It is difficult to imagine a standard form agreement with a clause for expanded review that is not offered on a take-it-or-leave-it basis 100 Rakoff, supra note 99, at 1177 (footnotes omitted) 101 See id at 1226 102 See Robert Hillman & Jeffrey Rachlinski, Standard Form Contracting in the Electronic Age, 77 N.Y.U L Rev 429, 435-36 (2002) 103 See id at 451-52 104 See id at 436 105 See id at 447-50 © 2011 Thomson Reuters No claim to original U.S Government Works 17 WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev 106 See Hillman & Rachlinski, supra note 102, at 448 107 See id 108 See, e.g., Hill v Gateway 2000, Inc., 105 F.3d 1147 (7th Cir 1997) (upholding validity of an arbitration clause that was enclosed with shipped goods after the sale had occurred) 109 See Rakoff, supra note 99, at 1226 110 Although this article has suggested that the consent in a standard form contract is a fiction, it is a fiction that the courts traditionally have adopted As stated by the court in Haskins v Prudential Ins Co.: One who accepts a written contract is conclusively presumed to know its contents and to assent to them, in the absence of fraud, misrepresentation, or other wrongful act by another contracting party Thus, ignorance of the contents of the contract does not ordinarily affect the liability of one who signs it or accepts it otherwise than by signing it 230 F.3d 231, 239 (6th Cir 2000), cert denied, 531 U.S 1113 (2001) (quoting 17A Am Jur 2d Contracts 224 (1991)); accord Restatement (Second) of Contracts § 211 (1981); see also Emeronye v CACI Int’l, Inc., 141 F Supp.2d 82, 86 (D.C 2001) (“It is hornbook law that one who signs a contract will normally be bound by its terms .”) (quoting Mueller v Commonwealth, 426 S.E.2d 339, 342 (Va Ct App 1993)) There are many good reasons for this presumption If the law were to the contrary, businesses effectively would be precluded from using standard form agreements Yet standard forms are used in virtually every sector of our contemporary economy See John Burke, Contract as Commodity: A Non-Fiction Approach, 24 Seton Hall Legis J 285, 290 (2000) (“the standard form contract accounts for more than 99% of all contracts used in commercial and consumer transactions”); accord Hillman & Rachlinski, supra note 102, at 431 Such agreements are efficient They eliminate the costs of individual negotiation and enhance the efficient organization of the firm See Rakoff, supra note 99, at 1220-24; Stephen Ware, Comment, A Critique of the Reasonable Expectations Doctrine, 56 U Chi L Rev 1461, 1467 (1989) For example, if form agreements were not used, a firm would need a greater degree of training and ability from sales agents responsible for negotiating agreements See Rakoff, supra note 99, at 1223 One would expect the agents’ salary to increase as a result See id A greater level of supervision also would be required See Ware, supra Standard form contracts allow the party who is in the best position to know the risks involved to allocate those risks most efficiently See Hillman & Rachlinski, supra note 102, at 440 To the extent some consumers are unaware of the terms of the contract, their interests often are protected by the savvy consumer and the sellers regard for its reputation Id at 442 Moreover, striking many types of clauses probably just would result in an increase in price Id For many of these reasons courts are unwilling to strike arbitration clauses in contracts of adhesion, absent a showing of invalidity under traditional contract law See Adkins v Labor Ready, Inc., 303 F.3d 496, 501-02 (4th Cir 2002); Haskins, 230 F.3d at 239; Seus v John Nuveen & Co., 146 F.3d 175, 180 (3rd Cir 1998); Emeronye, 141 F Supp.2d at 86 But see Prudential Ins Co v Lai, 42 F.3d 1299, 1304 (9th Cir 1994), cert denied, 516 U.S 812 (1995) (arbitration clause is unenforceable as to statutory rights unless the parties knowingly accepted the clause) The Court in Adkins v Labor Ready, Inc., upholding an arbitration clause in a contract of adhesion, reasoned, “it is not the province of the judiciary to try to eliminate the inequities inevitable in a capitalist society.” 303 F.3d at 501-02 (citing Troy Mining Corp v Itmann Coal Co., 176 W Va 599, 346 S.E.2d 749, 753 (W Va 1986)) In Green Tree Fin Corp v Randolph, 531 U.S 79 (2000), the Supreme Court upheld an arbitration clause “in a form contract drawn by a commercial party and presented to an individual consumer on a take-it-or-leave-it basis.” Id at 94 (Ginsburg, J., dissenting) See also Circuit City Stores, Inc v Adams, 532 U.S 105 (2001) (upholding arbitration clause in employment contract) The Court found arbitration clauses enforceable even when a party asserted a violation of federal statutory rights, unless the costs of arbitration would preclude effective enforcement of those rights See Green Tree, 531 U.S at 90 It refused to accept generalized claims of poverty or expense, holding that a party claiming an inability to vindicate her rights must bear the burden of convincing the court with record evidence of that inability See id at 90-91 Nonetheless, many courts have indicated their suspicion of standard form contracts and upheld challenges to arbitration clauses in such contracts under traditional contract law See Ferguson v Countrywide Credit Indus., Inc., 298 F.3d 778 (9th Cir 2002) (finding arbitration agreement unconscionable); Prudential, 42 F.3d 1299 (finding that the form the parties signed agreeing to arbitration was not knowingly agreed to); East Ford, Inc v Taylor, No 2000-IA-01527-SCT, 2002 Miss LEXIS 212 (Miss July 18, 2002) (finding arbitration clause unconscionable); Kloss v Edward D Jones & Co., No 00-507, 2002 Mont LEXIS 223 (Mont Sept 25, 2002) (finding provisions in arbitration agreement were beyond parties’ “reasonable expectation”); Brennan v © 2011 Thomson Reuters No claim to original U.S Government Works 18 WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev Bally Total Fitness, 198 F Supp 2d 377 (S.D.N.Y 2002) (finding arbitration agreement unconscionable); Cooper v MRM Inv Co., 199 F.Supp 2d 771 (M.D Tenn 2002) (finding arbitration agreement unconscionable); Dunlop v Burger, 567 S.E.2d 265 (W Va 2002) (finding provisions in arbitration agreement unconscionable); see also Pa Life Ins Co v Simoni, 641 N.W 2d 807, 812 (Iowa 2002) (Iowa statute makes arbitration provision contained in a contract of adhesion or employment contract unenforceable) But see Hughes Training Inc v Cook, 254 F.3d 588, 593 (5th Cir 2001) (upholding expanded judicial review in employment contracts against an unconscionability attack) Additionally, many in Congress have sought to eliminate the use of pre-dispute mandatory arbitration clauses in situation where bargaining power was unequal See Pierre Paret, ADR Legislation of the 107th Congress An Overview, Disp Res Times 4-5 (Oct.-Dec 2002) To date however, Congress has only prohibited predispute mandatory arbitration clauses in franchise contracts between vehicle manufacturers and dealers Pub Law 107-273, cited in Paret, supra In any event, none of the traditional justifications for upholding standard form agreements apply in the context of clauses expanding the scope of judicial review Rejecting such clauses will not undermine the use of all standard form contracts Rather, the almost certain result will be standard forms with arbitration clauses, but no expanded review Accordingly, striking the clause should increase efficiency to the extent arbitration is thought to be more expeditious and less costly than litigation Indeed, it is this factor that distinguishes the cases upholding arbitration provisions against blanket challenges Courts willing to accept arbitration clauses so in part because of the strong federal support of arbitration See Green Tree, 531 U.S at 89; Adkins, 303 F.3d at 496 A clause in a form contract seeking expanded review of arbitration decisions undermines, rather than supports, that policy Striking the clause will not require employee retraining and should not result in an increase in price Finally, savvy consumers cannot protect the masses because there is likely to be an insufficient number of such consumers and, in any event, they can be isolated and treated differently 111 Clickwrap contracts “require consumers to click through one or more steps that constitute the formation of an agreement.” Hillman & Rachinski, supra note 102, at 464 Such contracts are commonly found during the installation of new software See id Browsewrap contracts generally provide that using a hyperlink on the web “to purchase goods or services offered (or just visiting the site) constitutes acceptance of the conditions contained therein.” Id 112 Cf Speidel, supra note 16, at 1087-88 (recommending additional disclosure of agreements to arbitrate in employee contracts, but arguing that most employees will defer to the authority of the written word especially absent any immediate economic consequences) 113 See Cole, supra note 1, at 1233-34; Fischer & Haydock, supra note 2, at 959; David S Schwartz, Enforcing Small Print to Protect Big Business: Employee and Consumer Rights Claims In An Age of Compelled Arbitration, 1997 Wis L Rev 33, 46 n.34 (1997) 114 See Richard M Alderman, Pre-Dispute Mandatory Arbitration in Consumer Contracts: A Call for Reform, 38 Hous L Rev 1237, 1263 (2001) 115 Most courts uphold arbitration clauses precluding class relief See, e.g., Adkins, 303 F.3d 496; Vigil v Sear Nat’l Bank, 205 F Supp 2d 566, 573 (E.D La 2002) But see Dunlop v Berger, 567 S.E.2d 265 (W.Va 2002) 116 See Alderman, supra note 114, at 1240-42, 1250; Adkins 303 F.3d at 496 117 Arbitration’s often high filing and administrative costs also deter filing See Schwartz, supra note 113, at 61 118 The form drafter, as a repeat player, may also prefer arbitration because of the symbiotic relationship between the company and the arbitrator See Alderman, supra note 114, at 1256; Cole, supra note 1, at 1242 An arbitrator’s livelihood depends upon how often she works This creates pressure, whether subconscious or conscious, to issue decisions favorable to the repeat player See Alderman, supra note 114, at 1256 © 2011 Thomson Reuters No claim to original U.S Government Works 19 WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev 119 See Schwartz supra note 113, at 61 and text accompanying note 117 120 See id 121 If a party can prove that a clause will prevent them him from effectively vindicating his statutory rights, the clause may be struck as unconscionable See Green Tree Fin Corp v Randolph, 531 U.S 79, 90 (2000); Gilmer v Interstate/Johnson Lane Corp., 500 U.S 20, 28 (1991); Nelson v Insignia/ESG, Inc., 215 F Supp 2d 143 (D.C 2002) However, unconscionability review does not provide adequate protection against clauses expanding the scope of judicial review It is often difficult to prove that a clause will prevent vindication of statutory rights See Green Tree, 531 U.S at 89-92 That difficulty and the costs of litigation often will deter a party from making a challenge to the clause in the first place Additionally, it is not clear if a clause is unenforceable if it prevents vindication of non-statutory rights But cf Dunlop v Berger, 567 S.E.2d 265, 265 (W.Va 2002) (indicating applicability of Green Tree and Gilmer to common law rights under state law that exist for the benefit and protection of the public) 122 See supra notes 117-118 and accompanying text 123 See supra note 64 and accompanying text 124 See supra note 65 and accompanying text 125 See supra notes 6-8 126 See Green Tree, 531 U.S 79 (enforcing arbitration clause in standard form finance contract); Gilmer, 500 U.S at 33 (1991) (“Mere inequality in bargaining power is not a sufficient reason to hold that arbitration agreements are never enforceable in the employment context ”) Nearly every court outside the Ninth Circuit has interpreted these cases to preclude a requirement that a signed agreement to arbitrate must be knowing Accord Emeronye v Caci Int’l Inc., 141 F Supp 2d 82, 87-88 (D.C 2001); see Haskins v Prudential Ins Co., 230 F.3d 231, 239-40 (6th Cir 2000), cert denied, 531 U.S 1113 (2001) 127 See Syncor Inter Corp v McLeland, No 96-2261, 1997 U.S App LEXIS 21248, at *6 (4th Cir Aug 11, 1997) (per curiam); supra text accompanying note 68 128 Bowen v Amoco Pipeline Co., 254 F.3d 925, 936 (10th Cir 2001) 129 See Circuit City Stores, Inc v Adams, 532 U.S 105, 133-143 (2001) (Souter, J., dissenting); Schwartz, supra note 113, at 77-78 As the Supreme Court has held that the FAA applies to arbitration agreements between employers and employees, see Circuit City, 532 U.S at 133-43, this article does not suggest the FAA is inapplicable beyond the commercial arena Rather, the legislative history is instructive as to whether Congress, if it had considered it, would have approved contractually expanded review in standard form contracts 130 For example, Senator Walsh, at the Senate Judiciary Subcommittee hearings on the bill stated: The trouble about the matter is that a great many of these contracts that are entered into are really not voluntary things at all Take an insurance policy; there is a blank in it You can take that or you can leave it The agent has no power at all to decide it Either you can make that contract or you can not make any contract It is the same with a good many contracts of employment Well, there is nothing for the man to except to sign it and then he surrenders his right to have his case tried by the court Sales and Contracts to Sell in Interstate and Foreign Commerce, and Federal Commercial Arbitration: Hearing on S 4213 and S 4214 Before the Subcomm of the S Comm on the Judiciary, 67th Cong (1923) (statement of Sen Walsh) © 2011 Thomson Reuters No claim to original U.S Government Works 20 WILLIAM GOLDMAN 10/3/2011 For Educational Use Only CONTRACTUALLY EXPANDED REVIEW OF ARBITRATION , Harv Negot L Rev Supporters of the bill reassured Senator Walsh that it was not their intention to cover such cases Id at 9-11 Subsequently, the Chairman of the ABA committee that drafted the FAA stated that the original bill was redrafted to alleviate Senator Walsh’s concerns Arbitration of Interstate Commercial Disputes: Joint Hearings on S 1005 and H.R 646 Before the Subcomms on the Judiciary, 68th Cong 10 (1924) 131 See supra note 118 and accompanying text 132 See supra note 110 133 See supra note 117 and accompanying text 134 The Court also would have the power to invalidate any provision which provided for an arbitrary standard of review See Lapine Tech Corp v Kyocera Corp., 130 F.3d 884, 891 (9th Cir 1997) (Kozinski, J., concurring) 135 See supra notes 100-11 and accompanying text 136 See supra notes 117-18 and accompanying text 137 This power is not unlimited The process cannot be so one-sided as to be unconscionable See, e.g., Kost v Farmers Auto Insur Assoc., 766 N.E.2d 676 (Ill App Ct 2002); Brennan, supra note 109; Cooper, supra note 109; Ferguson, supra note 109 138 See supra notes 113-17 and accompanying text 139 See, e.g., Bowen v Amoco Pipeline Co., 254 F.3d 925, 932 (10th Cir 2001) 140 See, e.g., Harris v Parker Coll of Chiropractic, 286 F.3d 790, 793 (5th Cir 2002); Hughes Training Inc v Cook, 254 F.3d 588, 593 (5th Cir 2001) 141 See Burke, supra note 110, at 290; Hillman & Rachlinski, supra note 102, at 431 End of Document © 2011 Thomson Reuters No claim to original U.S Government Works © 2011 Thomson Reuters No claim to original U.S Government Works 21