A couple weeks ago, Prof. Rau over at the law school (with whom Karl has co-spoken about arbitration at a number of CLE programs) sent us a copy of his recent dissection of the Hall Street vs. Mattel Supreme Court opinion (link is to .pdf file), about which we blogged when it came out. The Professor, ahem, is not impressed with either the result or the handiwork: What truly appalled me about Hall Street, however, is not so much the unfortunate result, but rather the grotesque deficiencies in craftsmanship, in rhetoric, in argument. What we have, to be precise, is a remarkably inept and amateurish performance: A hapless law student would merit a C- for this (Neither Life nor the Law should be graded on a “curve,” although our students — and the Justices’ clerks who were students so recently — are accustomed to benefiting from that more generous treatment). Alan Rau, “Fear of Freedom,” American Review of International Arbitration, Spring 2008. Given the obvious pleasure and skill with which Rau insults the U.S. Supreme Court, we are reluctant to dip our toe into this discussion, but, according to footnote 102 of his paper, blogs “are hardly intended as treasures of deliberate, judicious, thoughtful reflection,” so we trust that he’ll hold us to a lesser standard than Justice Souter (of whom he is doubly disappointed, given that they both attended Harvard Law School). Indisputably, the ADR Prof Blog, has already commented on the article and praised Prof. Rau’s writing style, which can be described as candid, or perhaps unfettered by the normal conventions of academic journal writing (“the Hall Street opinion must, then, represent a new low in context-free, policy-free, abstract, non-functional decision-making”). Rau, in other words, calls em like he sees em, and he has published an outright mockery of the Hall Street opinion that would be an entertaining read even for those who have not devoted years of thought to the question of whether or not it makes sense to be able to write a customized standard of review into an arbitration clause (presumably – Karl and I actually wrote an entire CLE paper about this issue back in early 2005 – that paper, of course, is now “wrong,” based on Hall Street – so this actually is an issue we’ve thought about for years). At any rate, as readers of this blog know, Hall Street held that parties cannot write customized standards of review into arbitration clauses; the only permitted bases for vacating an arbitral award under the FAA are those set out in the statute. Prior to that opinion, the Fifth Circuit had allowed parties to contract for arbitral appeals, on the basis that arbitration is a creature of contract, and if parties are allowed to decide the scope of possible disputes that they will arbitrate, then they ought to be allowed to decide whether or not the eventual arbitral award will be appealable. This was the subject of our 2005 CLE paper, and it is, of course, no longer the law. Prof. Rau, to use his own analogy, performs a careful dissection of Justice Souter’s opinion which is liberally sprinkled with footnotes to sources such as Samuel Johnson, Gerald Dworkin, Francis Jeffrey and Elias Canetti. One remarkable footnote (No. 60) spends more than a page debunking a claim from Justice Stevens’ dissent (the overall substance of which Rau actually thinks is correct) by revealing that the sources Stevens cites for a proposition in fact say the opposite: How morbidly fascinating I find this process of tracking ignorance to its lair, of discovering one lame and empty assertion that turns out to be supported only by another. This is of course a classic illustration of the perpetuation of error by serial citation — a common problem notably with “student articles” — but I am reminded above all of Brueghel’s chilling version in Naples of the parable of the blind leading the blind. And what a revelation, that one can not only spout any kind of historical nonsense with impunity, but even be rewarded with recognition at the highest levels. We will not attempt to summarize his article here; instead, we will simply note that anyone who finds this blog remotely interesting should read it. What we will do, though, is point out a couple practical lessons those of us fussing about these things can learn from the Professor. First of all, notwithstanding Hall Street, it is probably still possible to achieve the result that the Hall Street parties wanted. The Hall Street arbitration clause basically allowed for judicial review of the arbitral award to correct legal error (which is in fact exactly what had happened in the case). In Texas, as Prof. Rau notes, it is possible to submit a dispute to the Court for trial upon an agreed statement of facts. Tex. R. Civ. P. 263. That being the case, parties who wish to maintain some appeal of legal issues could, frankly, save a few bucks by only referring factual issues to arbitration, and then using the facts determined by the arbitrator as the agreed facts to submit to the Court. The trial court’s ruling on those facts would be subject to appeal. Furthermore, as Prof. Rau notes, this system would enjoy the bonus of having the appellate review performed by courts of appeals, rather than by trial courts. In any event, the point remains that while Hall Street and the FAA clearly restrict any attempts to expand judicial review of an award, nothing precludes parties from restricting the scope of whatever potential disputes they want to refer to arbitration. That being the case, parties can simply leave certain aspects of their case to the courts from the beginning. Prof. Rau also spends some time discussing the state of the law with respect to “non-statutory” grounds for vacatur (manifest disregard for the law and public policy), even going as far as to cite to a blog (his first such citation, according to the note). The […]

Earlier this morning, the Florida Arbitration Blog, a blog we read regularly and think highly of, posted a fairly critical review of an article in the Defense Research Institute’s magazine that apparently laments the pervasive use of mandatory arbitration as an assault on the jury system. Since the DRI does not allow non-members access to its magazine, Florida Arbitration Blog could not share a link to the article itself. Since we are not members of DRI, we have not read the article but instead rely on FAB’s summary. At any rate, this interests us because the offending article was written by “the Texas representative to the [DRI]” (who was un-named in the review). The Florida review was more critical of the article’s tone than its content: In the April 2008 of the publication, “For the Defense,” the Texas representative to the Defense Research Institute claims that arbitation and ADR “meant simply ambush your adversary and steal his cattle, wife and daughters, and be done with it.” This anachronistic sentence is probably meant to be more Texan than misogenistic, but it is an interesting viewpoint coming from a DRI representative. Taken out of context, it is impossible for us to evaluate whether or not the quoted language was fairly reflective of the piece as a whole, but we do take some issue with FAB’s critique of the DRI article. The Florida Blog acknowledged that the concerns at the root of the article are in fact widespread (if, in their opinion, overstated); the blog seemed more worried about the forum for the discussion than the substance. According to the Florida Blog, the article in question was apparently out of line because it raised concerns about the pervasiveness of binding arbitration in a publication aimed at lawyers who are often hired by clients who put this system in place in the first place, who are often charged with enforcing arbitration clauses, and who simultaneously offer advice on how to enforce arbitration clauses. I actually find it refreshing that DRI has vocal representative members interested in the long-term affects of a policy which, arguably, implicates the jury system as a whole, a system which is in fact fundamental to American representative democracy. The Florida Blog, while acknowledging an increasing criticism of over-use of the arbitration process, says that “I am unaware of any serious suggestion that arbitration was intended ‘curtail or do away with the jury system.’” This seems to me to be a bit of a dodge. Any given arbitration clause is, of course, specifically designed to do away with the possibility of a jury trial with respect to the transaction to which the clause relates. Every case that is arbitrated curtails the jury system to some extent. Here in Texas, as this blog has tried to objectively report, the caselaw has been overwhelmingly pro-arbitration. That being the case, it does seem important to carefully consider the implications. In other words, whether or not arbitration as a construct was “intended” to curtail the jury system, it is in fact curtailing the jury system to some degree. We ought to be curious to what degree, and we ought to discuss whether or not, and to what extent, this is a big deal. Again, I have not had the opportunity to read the article in question, so I do not know if the Texas DRI representative’s language was over the top, as suggested by the Florida Arbitration Blog. I do know, though, that a discussion among the bar (even the defense bar) about the long-term ramifications of commonplace binding arbitration is something we consider to be of vital importance. To that end, we hate to see an involved lawyer get criticized for raising the issue, even if the manner in which Texans sometimes write ruffles some feathers for its apparent “anachronism.”

Karl recently presented a new paper on discovery in arbitration proceedings at the State Bar’s Advanced Evidence and Discovery Course in Houston and San Antonio. Since we get lots of requests for these papers, we’ve now created a permanent page for all of them on our main website. Help yourself. Remember, though, that the law changes quickly, and parts of even the most recent papers are outdated and, in some cases, flat out wrong. By way of example, Hall Street vs. Mattel makes an entire section of our main arbitration paper exactly wrong. Even so, though, we hope these are helpful.

Lately, we’ve been getting some requests to add a feature to the blog that allows for email subscription. So, you now ought to see a link in the sidebar which claims to provide just that service. If it works as promised, subscribers ought to get an email each day delivering content, if and to the extent new content has been generated that day. Hope this helps. As always, please do not hesitate to email or call us directly with any questions, or if this does not work for some reason.