Gale Encyclopedia Of American Law 3Rd Edition Volume 1 P36 docx

or voters have been defeated, because the exclusion of groups such as illegal aliens, nonvoters, and children could significantly affect some areas of the country, because some states have large populations of thes e groups. Shifting political power away from an area means fewer legislators to demand a fair share of government resources for that area. One such effort to exclude these groups occurred during the 1866 debates over the passage of the FOURTEENTH AMENDMENT and ultimately led to a congressional vote to continue basing apportionment on total popu- lation and to count the “whole number of persons in each state.” In contrast, state legislatures have only been required to be based substantially on population since 1964 (Rey- nolds v. Sims, 377 U.S. 533, 84 S. Ct. 1362, 12 L. Ed. 2d 506). In 1968, the U.S. Supreme Court extended this requirement to municipal govern- ments (Avery v. Midland County, 390 U.S. 474, 88 S. Ct. 1114, 20 L. Ed. 2d 45). Apportionment is related to, but is not the same as, the electoral system and the districting process: Apportionment is the manner in which representation is distributed; the electoral system is the way an individual representative is elected; and the districting process establishes the precise electoral boundaries of a representative’s dis- trict. Apportionment for the U.S. Congress, which consists of the Senate and the House of Representatives, has always been determined by the Constitution. Each state is assigned two senators, who were originally elected by state legislatures but since the adoption of the SEVENTEENTH AMENDMENT in 1913 have been chosen by direct voter election. Membership in the House of Representa- tives is also assigned to the states and is apportioned according to population, with each state being constitutionally guaranteed at least one representative. The House of Representa- tives grew proportionally with the population of the United States until 1912, when the House froze its size at 435 members. Since 194 1 the Census Bureau has used the system of equal proportions to determine how many of the 435 representatives each state is entitled to have. This method, developed in 1920 by Edward V. Huntington of Harvard University, establishes the smallest possible difference between the representation of any two states, because a state’s fair share of representatives will rarely be a whole number. The 1941 federal statute 2 U.S.C.A. §§ 2a and 2b provides that under the equal proportions method, the priority list of states or counties among which Representatives in excess of one per state or county are to be allocated is obtained by dividing the population of each state or county by the geometric mean of successive numbers of Representatives. Congress must decide how to treat the fractional components whenever it reapportions congressional seats based on new census data. This decision affects the distribution of only a few seats in Congress and the ELECTORAL COLLEGE, but in closely contested elections, such as the presidential election of 1876, those seats could mean the difference between victory and defeat. (The electoral college is the body of electors of each state chosen to elect the president and VICE PRESIDENT . Apportionment affects the electoral college because it influences the number of electoral votes coming from various areas of the country.) Each state legislature is responsible for establishing the district boundaries of the congressional seats apportioned to the state by the federal government. From 1842 to 1911 Congress required that all congressional districts be of compact and connecting territory. That stipulation was not continued after 1912, and by the 1960s the districts within some states differed greatly in size. These dispari ties were caused in some cases by gerrymandering, which is the process of drawing boundaries for election districts so as to give one party a greater political advantage. Large disparities led a group of urban Tennessee voters to bring suit against their state’s electoral commission on the ground that the apportion- ment of the legislature was unfair. The Supreme Court’s March 1962 decision in favor of the voters in Baker v. Carr (369 U.S. 186, 82 S. Ct. 691, 7 L. Ed. 2d 663) established the rule that a citizen may bring suit against legislative malap- portionment when it deprives that citizen of EQUAL PROT ECTION under the la w as guaranteed by the Fourteenth Amendment. Previously, in Colegrove v. Green (328 U.S. 549, 66 S. Ct. 1198, 90 L. Ed. 1432 [1946]), the Court had refused to accept jurisdiction in apportionment cases. Although the Supreme Court’s decision in Baker was limited, it did rule that if a system other than one based on population is used for GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 338 APPORTIONMENT apportionment, the resulting districts must not be arbitrary or irrational in nature. In 1964 the Supreme Court extended Baker by ruling in Wesberry v. Sanders (376 U.S. 1, 84 S. Ct. 526, 11 L. Ed. 2d 481) that legislative districts for the House of Representatives must be drawn so as to provide “equal representation for equal numbers of people,” a concept often referred to as the one-person, one-vote standard. Later that same year, in lawsuits directly involving 15 states, the Supreme Court ruled in Reynolds v. Sims (377 U.S. 533, 84 S. Ct. 1362, 12 L. Ed. 2d 506) that districts for state legislatures must also be substantially equal in population. Further extending the principle, the Court ruled in Avery v. Midland County (390 U.S. 474, 88 S. Ct. 1114, 20 L. Ed. 2d 45 [1968]) that if county, city, and town governments elect their representa- tives from individual districts, the districts must be substantially equal in population. Other individuals and states have subse- quently challenged the method of apportion- ment used in the United States when that method has proved unfavorable for them. For example, in Franklin v. Massachusetts (505 U.S. 788, 112 S. Ct. 2767, 120 L. Ed. 2d 636 [1992]), Massachusetts and two of its registered voters filed an action against Secretary of Commerce Barbara B. Franklin, alleging, among other things, that the dec ision to allocate overseas employees was inconsiste nt with the Constitu- tion. In June 1992 the Court reversed a federal district court decision in favor of Massachusetts, ruling that the allocation of overseas federal employees to their designated home states was consistent with the usual-residence standard used in early censuses and served the purpose of making representation in Congress more equal. The state of Montana sued the U.S. COMMERCE DEPARTMENT, following the 1990 census, when it and 11 other states each lost one House seat. In seeking to keep the two seats it had held since 1910, Montana argued that the method of equal proportions was unconstitu- tional because it left the state with a single congressional district of 803,655 people—a number almost 40 percent larger than “ideal district size,” which is a national average of 572,466 people. Montana also alleged that the variance between the single district’s population and that of an ideal district could not be justified under the one-person, one-vote stan- dard developed in Wesberry. The Montana case was appealed to the U.S. Supreme Court, which in March 1992 unanimously upheld the method Congress uses to reallocate congressional seats among the states after a census (United States DEPARTMENT OF COMMERCE v. Montana, 503 U.S. 442, 112 S. Ct. 1415, 118 L. Ed. 2d 87). The political impact of the census on congressional apportionment was made appar- ent when the Commerce Department proposed that statistical sampling be used for the 2000 census. (Statistical sampling is a method of surveying a subset of a larger population and applying the findings to the larger group.) Republicans in Congress reacted hostilely to this proposal from the Democratic administra- tion of President BILL CLINTON, fearing that the proposed statistical sampling of hard-to-count persons (e.g., racial and ethnic minorities, poor persons, children, illegal aliens, renters) would favor large urban areas that were aligned with the DEMOCRATIC PARTY. Members of Cong ress filed suit to block the use of sampling and the Supreme Court agreed with their position in Commerce Dept. v. U.S. House of Representatives (525 U.S. 316, 119 S. Ct.765, 142 L.Ed.2d 797 [1999]). The Court held that the Census Act, which was first enacted in 1954 (and amended a number of times), expressly prohibited the use of sampling to determine populations for congressional apportionment purposes. This ruling did not end the controversy over what constituted sampling. Following the 2000 census, the state of Utah filed suit against the Commerce Department, alleging that it should have increased its congressional representation from three seats to four. According to the census, the state had achieved a dramatic 30- percent population growth in ten years. Despite this growth, the number of representatives in the state did not increase. North Carolina, however, did pick up an additional seat through a statistical method called imputation. This method permits the Census Bureau to impute, or estimate, the number of members in a household after census takers repeatedly try to make direct contact. Comparing the numbers of imputed residents of Utah and North Carolina, Utah realized that if it could have these numbers thrown out by a federal court, the North Carolina seat would shift to Utah. A three-judge panel rejected Utah’s argu- ments that imputed numbers amounted to statistical sampling as prohibited by the 1999 GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION APPORTIONMENT 339 Supreme Court decision. The panel concluded that it was common sense to realize that census takers would not be able to count every person and that reasonable alternatives needed to be employed to fill in the missing numbers. The actual enumeration required by the census clause did not mean that the court should reduce the number of persons imputed to households to zero. The imputation method was on the whole fair because it was adjusted for local neighborhood demographics and it was employed only after census takers failed on repeated attempts to contact the households in question. Therefore, the panel ruled that reducing the number to zero would be “inconsistent with the constitutional imperative of actual enumeration,” for actual residents would not be counted. In Utah v. Evans (536 U.S. 452, 122 S. Ct. 2191, 153 L.Ed.2d 453 [2002]), the Supreme Court affirmed the lower court ruling. The Court, in a 5–4 decision, rejected the idea that actual enumeration under the Census Clause was intended as a description of the only methodol- ogy for counting U.S. citizens. The Court pointed out that an interest in accuracy was favored by the Census Bureau, which used imputation as a LAST RESORT only after other methods had failed. The majority also decided that this method, used as a last resort, was not the same as sampling. Justice STEPHEN BREYER noted that “sampling seeks to extrapolate the features of a large population from a small one, but the Bureau’s imputation process sought simply to fill in missing data as part of an effort to count individuals one by one.” Moreover, the imputa- tion method was not the equivalent of statistical sampling because the two methods were viewed as distinctly different w hen an amendment to the Census Act was passed in 1958. The Commerce Department announced in 2009 that it would not use statistica l sampling for the 2010 census. FURTHER READINGS Bestor, Arthur. “‘Advice’ from the Very Beginning, ‘Consent’ When the End Is Achieved.” 1989. American Journal of International Law 83 (October). Corpus Juris Secundum United States, vol. 91, secs. 11–12. Cox, Gary W., and Jonathan N. Katz. 2002. Elbridge Gerry’s Salamander: The Electoral Consequences of the Reappor- tionment Revolution. New York: Cambridge Univ. Press. “Fair Representation: Meeting the Ideal of One Man, One Vote.” 1984. Michigan Law Review 82 (February). The Federalist Nos. 37, 38, 52, 54, 56, 57, 58, 62, and 63. 1787–88. “Lies, Damn Lies and Statistics: Dispelling Some Myths Surrounding the United States Census.” 1990. Detroit College of Law Review (spring). “Montana’s Lost Seats Begs Issue.” 1992. National Law Journal (March 2). “Politics and Purpose: Hide and Seek in the Gerrymander- ing Thicket after Davis v. Bandmer.” 1987. University of Pennsylvania Law Review 136 (November). “Reapportionment: The Supreme Court Searches for Standards.” 1989. Urban Law 21 (fall). Scher, Richard K. 1996. Voting Rights and Democracy: The Law and Politics of Districting. San Francisco: Wads- worth. “The Thickest Thicket: Partisan Gerrymandering and Judicial Regulation of Politics.” 1987. Columbia Law Review 87 (November). “Understanding Dworkin.” 1993. George Mason Independent Law Review 1 (spring). Yates, Christopher St. John. “A House of Our Own or a House We’ve Outgrown? An Argument for Increasing the Size of the House of Representatives.” 1992. Columbia Journal of Law and Social Problems 25. Yarbrough, Tinsley E. 2002. Race and Redistricting: The Shaw-Cromartie Cases. Lawrence: Univ. Press of Kansas. CROSS REFERENCES Congress of the United States; Voting APPRAISAL A valuation or an approximation of value by impartial, properly qualified persons; the process of determining the value of an asset or liability, which entails expert opinion rather than express commercial transactions. APPRAISER A person selected or appointed by a competent authority or an interested party to evaluate the financial worth of property. Appraisers are frequently appointed in probate and condemnation proceedings and are also used by banks and REAL ESTATE concerns to determine the MARKET VALUE of real property. APPRECIATION The fair and reasonable estimation of the value of an item. The increase in the financial worth of an asset as compared to its value at a particular earlier date as a result of inflation or greater market demand. APPREHENSION A reasonable belief of the possibility of imminent injury or death at the hands of another that GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 340 APPRAISAL justifies a person acting in self-defense against the potential attack. An apprehension of attack is an element of the defense of SELF-DEFENSE that can be used in a criminal prosecution for ASSAULT AND BATTERY, MANSLAUGHTER,orMURDER. An individual who acts under apprehension of attack does not have to fear injury. It is sufficient that there is a likelihood of actual injury to justify the person’s taking steps to protect himself or herself. APPRENTICE A person who agrees to work for a specified time in order to learn a trade, craft, or profession in which the employer, traditionally called the master, assents to instruct him or her. Both minors and adults can be legally obligated under the terms of an apprenticeship contract, and any person who has the capacity to manage his or her own affairs may engage an apprentice. In some states, a minor may void a contract of apprenticeship, but in cases where the contract is beneficial to the minor, other jurisdictions do not permit the minor to void it. There must be strict compliance with statutes that govern a minor’s actions concerning an apprenticeship. An apprenticeship must arise from an agreement, sometimes labeled an indenture, which possesses all the requisites of a valid contract. If the contract cannot be performed within a year, it must be in writing, in order to satisfy the STATUTE OF FRAUDS,anoldENGLISH LAW adopted in the United States, which requires certain agreements to be in writing. The apprentice, the employer, and, if the apprentice is a minor, his or her parents or guardians must sign the apprenticeship agreement. Some jur- isdictions require explicit consensual language in addition to the signature or signatures of one or both parents, depending upon the applicable statute. The contract must include the provisions required by law and drafted for the benefit of the minor such as those relating to his or her education and training. A breach of apprenticeship contract might justify an award of damages, and, unless authorized by statute, there can be no assignment, or transfer, of the contract of apprenticeship to another that would bind the apprentice to a new service. A person who lures an appren tice from his or her employer may be sued by the employer, but the employer cannot recover unless the DEFENDANT knew of the apprentice relationship. The apprenticeship may be concluded by either party for GOOD CAUSE, where no definite term of service is specified, by mutual consent, or by a dismissal of the apprentice. Auto matic termination ensues from the expiration of the term of service, involuntary removal of the apprentice from the jurisd iction where he or she was bound, or service in the armed forces even though voluntary and without the consent of the employer. The death of either party terminates the relationship, as does the attain- ment of the AGE OF MAJORITY by the apprentice, in most instances. Courts may terminate suc h contracts when they violate statutes. The master’s cruelty, immorality, interference with the apprentice’s religious beliefs or duties, or other misconduct and the misbehavior of the appren- tice also constitute grounds for termination. APPROPRIATION The designation by the government or an individual of the use to which a fund of money is to be applied. The selection and setting apart of privately owned land by the government for public use, such as a military reservation or public building. The diversion of water flowing on public domain from its natural course by means of a canal or ditch for a private beneficia l use of the appropriator. An appropriation bill is a proposal placed before the legislative branch of the government by one or a group of its members to earmark a particular portion of general revenue or treasury funds for use for a governmental objective. Federal appropriation bills can originate only in the House of Representatives as mandated by Article I, Section 7 of the Constitution. Once an appropriation law is enacted, a definite amount of money is set aside so that public officials can pay incurred or anticipated expenditures. When a law authorizes funds to be used for a particular purpose, it is known as a specific appropriation. The appropriation of money by an individ- ual occurs within the context of a debtor- creditor relationship. If a creditor is owed two separate debts by the same debtor who makes a payment without spe cifying the debt to which it is to be applied, the creditor can appropriate the payment to either debt. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION APPROPRIATION 341 Appropriation also refers to the physical taking and occupation of property by the government or its actual, substantial interfer- ence with the owner’s right to use the land according to personal wishes by virtue of the government’s power of EMINENT DOMAIN. This right of an individual to use water that belongs to the public is embodied in the prior appropriation doctrine applied in arid western states where water supplies are not available in sufficient quantity to all who might need them. An individual landowner who first diverts water for personal benefit is entitled to its continued use as long as there is a reasonable need and the water is actually used. CROSS REFERENCES Federal Budget; Water Rights. APPROVAL The present confirmation, ratification, or assent to some action or thing done by another, which is submitted to an individual, group, or governmen- tal body for judgment. The acceptance by a judge of a bond, security, or other document that is required by law to meet with the judge’s satisfaction before it becomes legally effective. APPURTENANCE An accessory or adjunct that is attached and incidental to something that has greater impor- tance or value. As applied to real property, an object attached to or a right to be used with land as an incidental benefit but which is necessary to the complete use and enjoyment of the property. When a landowner has been given an easement for the passage of light and air over an adjoining lot, the easement is an appurtenance to the land. Other common appurtenances to land include barns, outhou ses, fences, drainage and irrigation ditches, and rights of way. ARBITER [Latin, One who attends something to view it as a spectator or witness.] Any person who is given an absolute power to judge and rule on a matter in dispute. An arbiter is usually chosen or appointed by parties or by a court on their behalf. The decision of an arbiter is made according to the rules of law and equity. The arbiter is distin- guished from the arbitrator, who proceeds at his or her own discretion, so that the decision is made according to the judgment of a REASONABLE PERSON . An arbiter may perform the same function as an umpire, a person who decides a controversy when arbitrators cannot agree. CROSS REFERENCES Alternative Dispute Resolution; Arbitration. ARBITRAGE The simultaneous purchase in one market and sale in another of a security or commodity in hope of making a profit on price differences in the different markets. In its simplest form, arbitrage is “buying low and selling high.” In this sense, any trader who buys something in one market—whether it is a commodity like grain, financial SECURITIES such as stock in a company, or a currency such as the Japanese yen—and sells it in another market at a higher price is engaged in arbitrage. That trader is called an arbitrageur. In economic theory, arbitrage is a necessary activity in any market, helping to reduce price disparities between different markets and to increase a market’s liquidity (ability to buy and sell). Arbitrage can be divided into the categories of riskless and risk. As an example of riskless arbitrage, imagine that the price of Microsoft Corporation COMMON STOCK on the Pacific Coast Stock Exchange is less than the price of the same stock on the New York Stock Exchange. A trader who buys Microsoft stock at the lower price on the Pacific Coast exchange and simultaneously sells it for a higher price on the New York exchange is engaging in an essentially riskless transaction. Aided by the speed of modern communications, the buying and selling occur at virtually the same time. This type of exchange occurs daily in the currency market, where a trader may buy French francs at a lower price in London and sell them at a higher price in Singapore. Much arbitrage falls into the risk category. This type of arbitrage is not always completed with a sale at a higher price; it involves a risk that the price of the item being traded will fall before the trad er can sell it. RISK ARBITRAGE came into prominence during the 1980s, when investors began to take advantage of a business atmosphere encompassing a large number of company MERGERS AND ACQUISITIONS. In a merger GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 342 APPROVAL or acquisiti on, one company buys or takes over another company. When the management of the targeted company does not want to be acquired by a particular investor or group of investors, the merger is called a hostile takeover. Quite often, the aggressors in such takeovers are smaller in terms of assets than their targets. A hostile takeover is usually initiated when someone believes that the stock of a particular company is lower than its potential value, whether because of poor management or because of a lack of information about the true value of that company. One way that hostile takeovers are initiated is through a device called the cash TENDER OFFER. The party attempting to initiate the takeover announces that it will pay cash for the target company’s stock at a price w ell above the current MARKET VALUE. At this point, risk arbitrageurs become involved in the game. They buy stock from shareholders in the target company, then attempt to sell that stock at the higher price to the party attempting the takeover. If the takeover succeeds and the arbitrageurs receive a higher price for their stock, they profit; if the takeover fails or the arbitrageurs receive a lower price for their stock, they lose. Gauging the risk of a takeover’s failure is therefore crucial to an arbitrageur ’s success. An arbitrageur who purchases securities on the basis of inside information—that is, infor- mation about a pending takeover that is not available to the general public—violates the Securities Exchange Act of 1934 (§ 10[b],as amended, 15 U.S.C.A. § 78j [b]). However, purchasing securities on the basis of rumors about an imminent takeover is not illegal. Ivan F. Boesky was one example of a risk arbitrageur who was found guilty of engaging in INSIDER TRADING. Boesky profited enormously from the many corporate takeovers of the mid- 1980s. By 1985 he had become famous in financial circles and had published a book, Merger Mania: Arbitrage: Wall Street’s Best Kept Money-Making Secret, that extolled the oppor- tunities in risk arbitrage and the benefits the practice gave to the market. In 1986 only one year later, Boesky admitted that he had illegally traded on insider information obtained from Drexel Burnham Lambert, the securities firm that arranged the financing of many of the takeovers of the era. In return for a reduced sentence of three years in prison, Boesky agreed to pay a $100 million penalty and to cooperate with the government’s continuing investigation. Boesky named Drexel employee Michael R. Milken as a member of the insider trading network. In 1990 Boesky was released from prison after serving two years. FURTHER READINGS Boesky, Ivan. 1985. Merger Mania. New York: Holt, Rinehart and Winston. “Complex Plan of Finance Successfully Navigates Arbitrage Rules.” 2003. Tax Management Memorandum 44 (February 10). Steuerle, C. Eugene. 2002. “Defining Tax Shelters and Tax Arbitrage.” Tax Analysts (May 20). Stokeld, Fred. 2001. “IRS on the Prowl for Illegal Arbitrage.” Tax Notes 92 (September 10). CROSS REFERENCES Corporations; Securities; Securities and Exchange Commission. ARBITRARY Irrational; capricious. The term arbitrary describes a course of action or a decision that is not based on reason or judgment but on personal will or discretion without regard to rules or standards. An arbitrary decision is one made without regard for the facts and circumstances pre- sented, and it connotes a disregard of the evidence. In many instances, the term implies an element of BAD FAITH, and it may be used synonymously with tyrannical or despotic. The term arbitrary refers to the standard of review used by courts when reviewing a variety of decisions on appeal. For example, the arbitrary and capricious standard of review is the principle standard of review used by judicial courts hearin g appeals that challenge decisions issued by administrative bodies. At the federal level and in most states, administrative law is a body of law made by executive branch agencies that have been dele- gated power to promulgate rules, regulations, and orders, render decisions, and otherwise decide miscellaneous disputes. Non-elected offi- cials in administrative agencies are delegated this authority in order to streamline the often lengthy and more deliberative process of legislative lawmaking that frequently grinds to a halt amid partisan gridlock. Although administrative agen- cies are generally designed to make lawmaking GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION ARBITRARY 343 and regulation simpler, more direct, and less formal, they still must provide due process to affected parties. They must also comply with administrative procedures created by popularly elected state and federal legislatures . One important right recognized in most administrative proceedings is the right of JUDICIAL REVIEW. Citizens aggrieved by the actions of an administrative body may typically ask a judicial court to review those actions for error. In establishing the standard by which judicial courts will review the actions of an administra- tive body, state and federal legislatures seek to provide agencies with enough freedom to do their work effectively and efficiently, while ensuring that individual rights are protected. Congress tried to maintain this delicate balance in the Administrative Procedures Act (APA). The APA limits the scop e of a reviewing court’s authority to determining whether the agency acted arbitrarily and capriciously in exercising its discretion. 5 USCA § 701. In making this determination, the reviewing court will not find that the administrative body acted arbitrarily unless the agency failed to follow proper procedures or rendered a decision that is so clearly erroneous that it must be set aside to avoid doing an injustice to the parties. Specifically, a reviewing court must deter- mine whether the agency articulated a rational connection between the factual findings it made and the decision it rendered. The reviewing court must also examine the record to ensure that the agency decision was founded on a reasoned evaluation of the relevant factors. Although agencies are given wide latitude, reviewing courts must be careful not to rubber-stamp administrative decisions that they deem inconsistent with a statutory mandate or that frustrate the congressional policy underly- ing a statute. Typically, reviewing courts look at the whole record in making this determination, take into account the agency’s expertise on any particular matters, and accept any factual findings made by the agency. However, the reviewing court is free to determine how the law should apply to those facts. If the reviewing court concludes that the agency’s actions were so arbitrary as to be outside any reasonable interpretation of the law, the court may overturn the agency’s decision or remand the case back to the agency for further proceedings in accordance with the court’s decision. A reviewing court’s determination that an agency acted in an arbitrary manner will often depend on the technical requirements of the governing law. For example, courts are often asked to determine whether a federal agency has acted arbitrarily under the National Environ- mental Policy Act (NEPA). Pub.L. 91-190, § 2, Jan. 1, 1970, 83 Stat. 852, as amended, 42 U.S.C. A. §§ 4321 et seq. In one case the Ninth Circuit ruled that the TRANSPORTATION DEPARTMENT acted arbitrarily under NEPA, when it failed to prepare an environmental impact statement, failed to consider whether its regulations would have violated air quality limits, and failed to perform localized analyses for areas most likely to be affected by increased truck traffic. Public Citizen v. Department of Transportation, 316 F. 3d 1002 (9th Cir. 2003). CROSS REFERENCES Administrative Procedure Act of 1946; Bad Faith; Due Process of Law; Judicial Review; Relevancy. ARBITRATION Arbitration is the submission of a dispute to an unbiased third person or person s designated by the parties to resolve the controversy; the arbitration award is the decision issued after a hearing at which both parties have an opportunity to be heard. The two general types of arbitration are binding arbitration and non-b inding arbitra- tion. In binding arbitration, the arbitration award is usually final, and courts rarely reexamine it. In non-binding arbitration, the arbitration award is a recom mendation, and the parties may choose whether to accept it. In either type of arbitration, the award is a decision issued after a hearing at which both parties have an opportunity to be heard. Arbitration is a well-established and widely used means to end disputes. It is one of several kinds of ALTERNATIVE DISPUTE RESOLUTION, which provide parties to a controversy with a choice other than LITIGATION. Unlike litigation, arbitra- tion takes place outside the court system, generally allowing less formal adherence to the rules of evidence and procedure and leading to a faster, less expensive resolution of a controver- sy. In the arbitration, the two sides select an impartial THIRD PARTY or parties, known as an GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 344 ARBITRATION arbitrator or an arbitrat ion panel; they partici- pate in a hearing at which both sides can present evidence and TESTIMONY; and they agree in advance whether they will be bound by the arbitration award. If the parties to a non- binding arbitration decline to adopt the award, they remain free to pur sue their claims within the court system or to submit the dispute to another type of alternative dispute resolution. Traditionally, labor and commerce were the two largest areas of arbitration. However, since the mid-1970s the technique has seen great expansion. Some states have mandated arbitra- tion for certain disputes such as auto insurance claims, and court decisions have broadened into areas such as SECURITIES, antitrust, and even employment discrimination. International busi- ness issues are also frequently resolved using arbitration. Arbitration in the United States dates back to the eighteenth century. Courts frowned on it, though, until attitudes started to change in 1920 with the passage of the first state arbitration law, in New York. This statute served as a model for other state and federal laws, including, in 1925, the U.S. Arbitration Act, later known as the Federal Arbitration Act (FAA) (9 U.S.C.A. § 1 et seq.). The FAA was intended to give arbitration equal status with litigation and, in effect, created a body of federal law. After WORLD WAR II, arbitration grew increasingly important to labor-management relations. Congress helped this growth with passage of the TAFT-HARTLEY ACT (29 U.S.C.A. § 141 et seq.) in 1947, and over the next decade the U.S. Supreme Court cemented arbitration as the favored means for resolving labor issues, by limiti ng the judiciary’s role. In the 1970s arbitration began expanding into a wide range of issues that eventually included prisoners’ rights, MEDICAL MALPRACTICE, and consumer rights. By 2003 all 50 states had modern arbitration statutes. Arbitration can be voluntary or required. The traditional model is voluntary and closely linked to contract law: Parties often stipulate in contracts that they will arbitrate, rather than litigate, when disputes arise. For example, unions and employers almost always put an arbitration clause in their formal negotiations, known as COLLECTIVE BARGAINING agreements. By doing so, they agree to arbitrate any future employee grievances over wages, hours, working conditions, or job security; in essence, they agree not to sue if disagreements occur. Similarly, a purchaser and a provider of services who disagree over the result of a business deal may submit the problem to an arbitrator instead of a court. Mandatory arbitration was a later phenomenon. States such as Minnesota, New York, and New Jersey enacted statutes that force disputes over automobile insurance claims into this forum. In addition, courts sometimes order disputants into arbitration. In theory, arbitration has many advant ages over litigation. Efficiency is perhaps the greatest. Proponents say arbitration is easier, cheaper, and faster. Proponents also poi nt to the greater flexibility with which parties in arbitration can fashion the terms and rules of the process. Furthermore, although arbitrators can be law- yers, they do not need to be. They are often selected for their expertise in a particular area of business and may be drawn from private practice or from organizations such as the American Arbitration Association (AAA), a national nonprofit group founded in 1926. Significantly, arbitrators are freer than judges to make decisions, because they do not have to abide by the principle of stare decisis (the policy of courts to follow principles established by Contractual Arbitration Clause Standard Business ARBITRATION. The Parties agree that any claim or dispute between them or against any agent, employee, successor, or assign of the other, whether related to this agreement or otherwise, and any claim or dispute related to this agreement or the relationship or duties contemplated under this contract, including the validity of this arbitration clause, shall be resolved by binding arbitration by the American Arbitration Association (or name other firm providing arbitration services, e.g., National Arbitration Forum), under the Arbitration Rules then in effect. Any award of the arbitrator(s) may be entered as a judgment in any court of competent jurisdiction. Arbitration Clause A sample arbitration clause ILLUSTRATION BY GGS CREATIVE RESOURCES. REPRODUCED BY PERMISSION OF GALE, A PART OF CENGAGE LEARNING. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION ARBITRATION 345 legal precedent) and do not have to give reasons to support their awards (although they are expected to adhere to the Code of Ethics for Arbitrators in Commercial Disputes, established in 1977 by the AAA and the AMERICAN BAR ASSOCIATION ). These theoretical advantages do not always hold up in practice. Even when efficiency is achieved, some critics argue, the price is a lower quality of justice, and it can be made worse by the difficulty of appealing an award. The charge is freque ntly made that arbitration only results in “splitting the baby”—dividing awards evenly among the parties. The AAA roundly rejects this claim. Yet even arbitrators agree that as arbitration has become increasingly formal, it sometimes resembles litigation in its complexi- ty. This may not be an inherent problem with the process as much as a result of flawed use of it. Parties may undermine arbitration by acting as lawyers do in a lawsuit: excessively demand- ing discovery (evidence from the other side), calling WITNESSES, and filing motions. Ultimately, the decision to use arbitration cannot be made lightly. Most frequently, arbitration is binding, and courts in most jurisdictions enforce awards. Moreover, binding arbitration allows little or no option for appeal, expecting parties who arbitrate to assume the risks of the process. In addition, arbitration is subject to the legal doctrines of RES JUDICATA and COLLATERAL ESTOPPEL, which together strictly curtail the option of bringing suits based on issues that were or could have been raised initially. Res judicata means that a final judgment on the merits is conclusive as to the rights of the parties and their privies, and, as to them, operates as an absolute bar to a subsequent action involving the same claim, demand, or CAUSE OF ACTION . Collateral estoppel means that when an issue of ultimate fact has been determined by a valid judgment, that issue cannot be relitigated between the same parties in future litigation. Thus, often the end is truly in sight at the conclusion of a binding arbitration hearing and the granting of an award. The FAA gives only four grounds on which a court may vacate, or overturn, a binding arbitration award: (1) where the award is the result of corruption, FRAUD, or undue means; (2) where the arbitrators were evidently partial or corrupt; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing or hear pertinent evidence, or where their misbehavior prejudiced the rights of any party; and (4) where the arbitrators exceeded their powers or imperfectly executed them so that a mutual, final, and definite award was not made. In the 1953 case Wilko v. Swan, 346 U.S. 427, 74 S. Ct. 182, 98 L. Ed. 168, the U.S. Supreme Court suggested, in passing, that an otherwise- binding award may be set aside if it is in “manifest disregard of the law,” and federal courts have sometimes followed this principle. PUBLIC POLICY can also be grounds for vacating a binding arbitration award, but this recourse is severely limited to well-defined policy based on legal precedent, a rule emphasized by the Supreme Court in the 1987 case United Paperworkers International Union v. Misco (484 U.S. 29, 108 S. Ct. 364, 98 L. Ed. 2d 286). The growth of arbitration is taken as a healthy sign by many legal commentators. It eases the load on a constantly overworked judicial system, while providing disputants with a relatively informal, inexpensive means to solve their problems. One major boost to arbitration came from the U.S. Supreme Court, which held in 1991 that AGE DISCRIMINATION claims in employment are arbitrable (Gilmer v. Inter- state/Johnson Lane Corp., 500 U.S. 20, 111 S. Ct. 1647, 114 L. Ed. 2d 26). Writing for the majority, Justice BYRON R. WHITE concluded that arbitration is as effective as a trial for resolving employment disputes. Gilmer led several major employers to treat all employment claims through bindi ng arbitration, sometimes as a condition of employment. Arbitration clauses have become a standard feature of many employment contracts. This factor has led to conflicts concerning the applicability of these clauses when an employee seeks to sue an employer for a CIVIL RIGHTS violation under Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991. A provision of this law addressed, for the first time, the arbitration of Title VII claims . Section 118 of the act states that the parties could, “where appropriate and to the extent authorized by law,” choose to pursue alternative dispute resolution, including arbitration, to resolve their Title VII disputes. Since its enactment, the federal courts have been re- quired to determine what this clause means in practice. For example, in the securities industry, GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 346 ARBITRATION disputes arose over whether employers could require their employees to WAIVE their right to bring a Title VII claim in court. The circuit courts of appeal have uniformly ruled that Congress did not mean to preclude compulsory arbitration of Title VII claims. The EQUAL EMPLOYMENT OPPORTUNITY COMMIS- SION (EEOC) has contended that employment arbitration clauses do not prohibit the EEOC from filing an action against an employer for a civil rights violation. The Supreme Court agreed in Equal Employment Opportunity Commission v. Waffle House, Inc., 534 U.S. 279, 122 S. Ct. 754, 151 L. Ed. 2d 755 (2002), holding that the EEOC could seek damages on behalf of an employee. The commission could also seek injunctive relief to change a company’s discrim- inatory methods. In so ruling, the Court resolved an issue that had divided the circuit courts of appeal. The employee in question was fired from his job at the Waffle House after he suffered a SEIZURE. He filed a claim with the EEOC, arguing that his rights under Title I of the Americans with Disabilities Act (ADA) had been violated. Under this act, the EEOC has the authority to bring its own enforcement actions against employers and to seek reinstatement, back pay, and compensa- tory and PUNITIVE DAMAGES on behalf of an employee. Moreover, the ADA makes no excep- tion for arbitration agreements, nor does it even mention arbitration. Therefore the EEOC, which had not signed an arbitration agreement with the employer, was free to pursue its claims in court. The Court also concluded that the general policies surrounding the ADA, and the EEOC enforcement arm, justified the pursuit by the EEOC of victim-specific relief. It stated that punitive damages “may often have a greater impact on the behavior of other employers than the threat of an injunction.” The Supreme Court also has validated the enforceability of arbitration awards relating to collective bargaining agreements. In Eastern Associated Coal Corporation v. United Mine Workers of American, District 17, 531 U.S. 57, 121 S. Ct. 462, 148 L. Ed. 2d 354 (2000), the issue involved a labor arbitrator who ordered an employer to reinstate an employee who had twice tested positive for marijuana use. The employer filed a lawsuit in federal court seeking to have the arbitrator’s decision vacated, argu- ing that the award contradicted a public policy against the operation of dangerous machinery by workers who test positive for drugs. The Court unanimously agreed that the employee should be reinstated. The Court made it clear that the question was not whether the employee’s drug use itself violated public policy, but whether the agreement to reinstate him did so. However, the Court also pointed out that the public policy exception is a narrow one. Based on these principles, the Court ruled that the reinstatement did not violate public policy, as the award did not condone drug use or its impact on public safety. In addition, the arbitrator plac ed conditions on the employee’s reinstatement, which included suspension of work for three months without pay, participa- tion in a substance abuse program, and continued random drug testing. The fact that the employee was a recidivist did not tip the balance in favor of discharge. In 2009 the Arbitration Fairness Act was introduced in Congress, limiting the scope of the FAA and declaring that no predispute arbitration agreement shall be valid or enforce- able if it requires the arbitrat ion of certain disputes. Such disputes include an employment, consumer, or franchise dispute, or a dispute arising under any statute intended to protect civil rights. The act, which would amend Chapter 1 of Title 9 of the United States Code with respect to arbitration, further requires that the validity or enforceability of an arbitration agreement shall be determined by a court under federal law. Arbitration provisions in collective bargaining agreements, however, are exempt under the act. Although early criticism of the Arbitration Fairness Act opines that it is anti- business, other assessments point out that it does not cover traditional disputes between sophisticated commercial parties; hence, its impact in the business realm may be minimal. An April 3, 2009, decision from the Alaska Supreme Court supported a limitation on employment disputes, echoing the sentiment behind the Arbitration Fairness Act that perhaps the arbitration of such disputes gives employers an unfair advantage. In Gibson v. NYE Frontier Ford, Slip. Op. No. 6355 (Ala. S. Ct. Apr. 3, 2009), an employee ordered to arbitrate his wage and hour claim arising under state law consistent with the terms of an agreement governed by the FAA sought a declaration that the agreement was unconscionable. Among other factors, the GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION ARBITRATION 347 . VII of the Civil Rights Act of 19 64, as amended by the Civil Rights Act of 19 91. A provision of this law addressed, for the first time, the arbitration of Title VII claims . Section 11 8 of the. the 19 80s, when investors began to take advantage of a business atmosphere encompassing a large number of company MERGERS AND ACQUISITIONS. In a merger GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD. demand. APPREHENSION A reasonable belief of the possibility of imminent injury or death at the hands of another that GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 340 APPRAISAL justifies a person