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Unpublished Paper
HAPPILY NEVER AFTER: WHEN FINAL AND BINDING ARBITRATION HAS NO FAIRY TALE ENDING
ExpressO (2007)
  • Michael H LeRoy
Abstract

We launched this empirical study 15 years after the Supreme Court decided Gilmer v. Interstate Johnson/Lane Corp., a key decision that enforced a mandatory arbitration agreement. Gilmer led to the widespread adoption of individual employment arbitration but provided courts no standards for reviewing these arbitration awards.

Until now, researchers have examined the fairness and legality of Gilmer agreements and other aspects of employment arbitration. Our timing is significant because employment arbitration has matured beyond the initial phase of pre-arbitration challenges to this forum. By now, a critical mass of individuals and their employers have been to arbitrations and appealed arbitrator rulings to courts.

But little is known about why parties appeal adverse arbitration rulings. There is no empirical information about the legal arguments that parties use to challenge awards. No data exist to explain how federal and state courts rule on these challenges.

We extracted data from 212 federal and 124 state court decisions from 1975-2006. These 336 cases show that the grounds for challenging employment awards are far more numerous than those for labor awards that are reviewed under the Supreme Court’s Trilogy standards. Too many courts and legislatures have presented arbitration losers with an abundance of choices to sue on the award. These grounds include federal bases such as the four statutory grounds under the Federal Arbitration Act (FAA), common law standards, all the Trilogy arguments that are used to challenge labor arbitration awards; and numerous state statutes and common law grounds.

Federal district courts confirmed awards in 93.4% of the cases, compared to 88.0% in appellate cases. State courts were less deferential, confirming 86.4% of awards in initial reviews and 74.1% at the appellate level. While state courts confirmed a high percentage of awards, these rates were quite variable. Texas courts confirmed 100% of awards, followed by Louisiana, Florida, and Arkansas. Two Midwestern states, Michigan and Ohio, had much lower confirmation rates (respectively, 58.3% and 64.2%).

We also observed a recent spurt of award-review cases— exemplified by the finding that 62.5% of our federal district courts decisions occurred since 2000. This means that courts will likely face a growing docket of post-arbitration appeals as parties seek to re-litigate the claims that were privately adjudicated. This upsurge also suggests that employment arbitration serves too many masters— an uncoordinated array of legislatures and courts that regulate this process— despite the fact that the FAA appears to legislate uniform standards.

Comparing these findings with our companion studies on labor arbitration, we believe that unions and employers limit their award appeals to maintain a stable relationship. But fewer parties in employment arbitration seem committed to the norm of arbitral finality. We see more cases of a winner-take-all mentality in post-award appeals, suggesting that disputants are destined to be “happily never after” their arbitrations.

Disciplines
Publication Date
February, 2007
Citation Information
Michael H LeRoy. "HAPPILY NEVER AFTER: WHEN FINAL AND BINDING ARBITRATION HAS NO FAIRY TALE ENDING" ExpressO (2007)
Available at: http://works.bepress.com/michael_leroy/3/