Clause Construction: A Glimpse into Judicial and Arbitral Decision-Making

Professor David Horton, University of California, Davis, School of Law, has published “Clause Construction: A Glimpse into Judicial and Arbitral Decision-Making,” Duke Law Journal, Vol. 68, Forthcoming.  In his journal article, Professor Horton compares clause construction decision outcomes for judicial and arbitral proceedings.

Here is the abstract:

For decades, the U.S. Supreme Court has insisted that forcing a plaintiff to arbitrate — rather than allowing her to litigate — does not affect the outcome of a dispute. Recently, the Court has invoked this “parity principle” to expand arbitral jurisdiction. Reasoning that it does not matter whether an arbitrator or a judge resolves a particular issue, the Justices have allowed arbitrators to decide important questions about the arbitral proceeding itself.

The parity principle has proven impossible to test. First, cases that are arbitrated differ from those that end up in the judicial system, complicating efforts to compare outcomes from each sphere. Second, arbitral awards are rarely published, and thus remain shrouded in mystery.

However, one important topic defies these limitations. Jurisdictions are divided over whether courts or arbitrators should perform a task known as “clause construction”: determining whether an arbitration clause that does not mention class actions permits such procedures. As a result, both judges and arbitrators have been weighing in on the same question. Moreover, because class members are entitled to notice of rulings that impact their rights, the American Arbitration Association requires arbitral clause construction awards to be available to the public. For once, then, it is possible to assess how the two decision-makers resolve the identical issue.

The Article capitalizes on this opportunity by analyzing a dataset of 134 recent judicial and arbitral clause construction decisions. Its logit regression analysis concludes that the odds of class actions being allowed increase nearly 27 times when an arbitrator, rather than a judge, resolves the issue. The Article then uses its findings to propose a solution to the circuit split over clause construction and inform the broader debate over the boundaries between judicial and arbitral power.

This and other scholarly works published by Professor Horton may be downloaded without charge from the Social Science Research Network.

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