Justice Scalia's Hat Trick and the Supreme Court's Flawed Understanding of Twenty-First Century Arbitration

Abstract

The Supreme Court has decided more than two dozen cases under the Federal Arbitration Act (FAA) since 2000 – arising primarily from commercial, consumer, employment, or securities disputes. Those decisions, particularly those interpreting FAA §2, have contributed to the Court’s modern arbitration jurisprudence that creates a strong national policy favoring arbitration, enforces agreements to arbitrate against virtually any defense, pushes many individual claims into arbitration against the will of one or more parties, and suppresses other claims, particularly those of small dollar value. Yet, those decisions describe the arbitration process as practiced when Congress enacted the FAA in 1925; not the process as practiced in the twenty-first century. This paper explores the dichotomy between the Supreme Court’s theoretical understanding of arbitration on which its FAA jurisprudence is based and the reality of the current and varied practice of arbitration. This paper identifies language from recent Supreme Court arbitration cases to demonstrate that the Court’s current depiction of arbitration is oversimplified and out-of-date. The Court’s uninformed and out-of-touch decisions have crafted a legal framework regulating an arbitration process that largely no longer exists.This paper argues that the Court’s flawed understanding of arbitration has fueled its misinterpretation of the FAA, harmed disputants and contributed to the widely-held perception that arbitration is unfair. This, in turn, has led to a shift away from arbitration as a favored method of dispute resolution for those who have a choice, while forcing the process on those without a choice.