Parties’ choice of a seat of arbitration has especially important ramifications with respect to the law to be applied in disputes that may arise.  As the New York Convention reflects,² the jurisdiction in which the seat of arbitration lies determines the lex arbitri to be applied, meaning that the chosen jurisdiction’s courts will determine the existence, validity, and scope of the parties’ arbitration agreement.  Thus, the choice of a seat of arbitration, in addition to determining the choice of substantive law and the law to be applied to the arbitration agreement, will determine the tools available to a party to enforce an arbitration agreement and the costs associated with dispute resolution.

When used to enforce an arbitration agreement, an antisuit injunction usually arises under the following scenario: Parties A and B enter into a contract that includes an agreement to settle any disputes in arbitration to be held in Country 1, which is often a neutral country.  Party B, either ignoring the arbitration agreement or contesting its validity, brings or threatens to bring a parallel proceeding in Country 2, which is likely to be Party B’s home jurisdiction.  In response, Party A petitions a court of Country 1 to enjoin Party B from continuing with its action in Country 2 on the basis of their arbitration agreement.  Country 1’s court may issue an antisuit injunction against Party B, meaning that the court will hold Party B in contempt if Party B continues its Country 2 action.  If Party B ignores the injunction, it puts any assets or future business prospects that it may have in Country 1 at risk.

Technically, a court does not direct an antisuit injunction to a foreign court.  The effect of an antisuit injunction to enforce an arbitration agreement is to encourage the party that brings a parallel action in violation of the arbitration agreement to submit to arbitration and to save the party seeking the injunction the costs of litigating that parallel action.  The availability of an antisuit injunction can reassure parties whose agreement contains an arbitration clause that their disputes will likely stay in arbitration and not devolve into a multijurisdictional litigation nightmare.  If a party can bring a parallel action in violation of an arbitration agreement with impunity, the most frequently cited advantages of arbitration—namely confidentiality, neutrality of the arbitral tribunal, choice of procedure, and the ability to enforce an arbitral award worldwide—suddenly evaporate.

Civil-law jurisdictions have historically viewed antisuit injunctions as a violation of international comity and interference with a foreign court’s jurisdiction.  Common-law jurisdictions typically consider antisuit injunctions to be acceptable if certain criteria are met.  Following the common-law tradition, U.S. federal courts are willing, to varying degrees depending on the circuit, to issue antisuit injunctions to enforce arbitration agreements.  In this Editorial, after a brief discussion of West Tankers, I point to recent U.S. case law that demonstrates the lamentable lack of clear criteria by which a court can determine whether to grant such an injunction.  I then argue that it may be wise for a discernable group of parties, in light of the West Tankers decision, to choose a U.S. location as the seat of arbitration in the event of a dispute.

I.
West Tankers

A.     The House of Lords’ Defense of Antisuit Relief to Enforce Arbitration Agreements

Confronting the question of the compatibility of antisuit injunctions to enforce arbitration agreements with the Brussels Regulation,³ the House of Lords, rather than deciding the issue itself, referred the question to the ECJ.  In the House of Lords’ opinion, after acknowledging the ECJ’s demonstrated scorn for any measure taken by a court of a member state that has the effect of limiting the jurisdiction of another member state, Lord Leonard Hoffmann attempted to use the ECJ’s own jurisprudence to carve out an exception for antisuit injunctions to enforce arbitration agreements.  He drew upon the doctrine of Kompetenz-Kompetenz, arguing that member states should trust arbitrators and the court exercising supervisory jurisdiction to determine whether an arbitration agreement is binding and, if so, whether a given dispute falls under that arbitration agreement.  He also noted that the Brussels Regulation specifically excludes arbitration from its sphere of application.

Perhaps more interesting than the legal aspects of his argument, however, was Lord Hoffmann’s practical appeal regarding the utility of antisuit relief in the realm of arbitration.  In his view, such injunctions serve “as an important and valuable weapon . . .[,] promot[ing] legal certainty and reduc[ing] the possibility of conflict between the arbitration award and the judgment of a national court.”⁴ London—and by extension, Europe—could lose its attractiveness as a seat for international commercial arbitration if the ECJ lost sight of the fact that “[t]he courts are there to serve the business community rather than the other way round.”⁵ Specifically, Lord Hoffmann pointed to New York, Bermuda, and Singapore as jurisdictions willing to issue antisuit injunctions in support of arbitration agreements and worried that Europe would “handicap itself by denying its courts the right to exercise the same jurisdiction.”⁶

B.     The ECJ Decision

As is typical of ECJ jurisprudence, the Advocate General’s opinion, although it does not have the force of law, provides a clearer picture of the ECJ’s rationale than the ECJ decision itself.  The Advocate General stressed the importance of the concept of mutual trust among the courts of EU member states and insisted that member states’ courts be entitled to determine for themselves whether the Brussels Regulation’s arbitration exclusion is applicable.  This is in line with the civilian view that the fundamental subject matter of a dispute, rather than the existence of an arbitration agreement, determines the competence of a court.

In the final portion of the Advocate General’s opinion, she dismissed in a single sentence Lord Hoffmann’s concerns that Europe could lose a competitive edge if the ECJ were to prohibit antisuit injunctions to enforce arbitration agreements: “To begin with it must be stated that aims of a purely economic nature cannot justify infringements of Community law.”⁷ Attempting to lessen the harshness of the opinion, the Advocate General insisted that parallel litigation in a forum other than the seat of arbitration would only ensue if the parties disagreed as to the validity and scope of their arbitration agreement.  This makes light of the very real possibility that a party with superior resources to pay for a protracted legal battle in multiple forums might be inclined to bring parallel litigation simply to delay arbitration proceedings or obstruct a future enforcement attempt by the other party.  In the end, mutual trust and effet utile (effective judicial protection) won out over such worries.  The Advocate General did leave some consoling words for parties considering arbitration in an EU member state who now find themselves without recourse to an antisuit injunction to enforce an arbitration agreement: “If an arbitration clause is clearly formulated and not open to any doubt as to its validity, the national courts have no reason not to refer the parties to the arbitral body appointed in accordance with the New York Convention.”⁸ As any student of international commercial arbitration knows, this is easier said than done.

II.
The Availability of Antisuit Relief to Enforce Arbitration Agreements in U.S. Courts

In 2004, the Second Circuit decided the most recent significant appellate cases influencing the availability of antisuit injunctions to enforce arbitration agreements.  Judge Dennis Jacobs penned the opinions of both Paramedics Electromedicina Comercial, Ltda. v. GE Medical Systems Information Technologies, Inc.⁹ and LAIF X SPRL v. Axtel, S.A. de C.V.¹⁰ At first glance, the court appears to have employed differing standards in determining whether to issue an antisuit injunction to enforce an arbitration agreement.  In Paramedics, the Second Circuit, relying heavily on the federal policy in favor of arbitration, enjoined a party from continuing its parallel action in a Brazilian court.  In LAIF X, the same court gave much greater deference to comity concerns and rejected a party’s request for an antisuit injunction to stop a Mexican action from proceeding.  An examination of these cases and their progeny reveals that antisuit injunctions are certainly available as a remedy to enforce an arbitration agreement.  Unfortunately, parties interested in ensuring the availability of such relief may have trouble deciphering the formula required to do so.

Identifying some common threads in recent case law, however, creates a clearer picture of the current availability of antisuit relief to enforce an arbitration agreement.  The first is the vexatiousness of the parallel litigation that a party seeks to enjoin.  U.S. courts have shown little tolerance for parties that bring a parallel proceeding in violation of an arbitration agreement with the aim of delaying adjudication of a dispute or seeking preferential treatment in their home jurisdiction.  Another factor that enters into U.S. courts’ calculus in determining whether to issue an antisuit injunction to enforce an arbitration agreement is the substantive law of the parties’ agreement.  For example, if parties choose the law of New York State to govern their agreement and New York City as their seat of arbitration, a U.S. court is less likely to hesitate before issuing an antisuit injunction against a party that brings a parallel action in a foreign jurisdiction.  Comity concerns in this scenario are minimal, as the foreign court could hardly complain that a U.S. court was improperly applying U.S. law.

III.
Potential Beneficiaries of Antisuit Relief from U.S. Courts and How Parties Can Ensure Its Availability

A.     Potentially Interested Parties

As a result of the ECJ’s decision in West Tankers, a discernable class of parties would benefit from choosing a U.S. location rather than a European location as a seat of arbitration.  As a threshold matter, the contract in question must be commercial in nature and must not implicate any serious public policy.  Additionally, the parties must be in a financial position to participate in arbitration and litigation in either the United States or Europe.  Quite obviously, regional European parties with little or no experience in the United States will be loath to participate in arbitration or seek enforcement of an arbitral award in a U.S. city because options such as Geneva, London, or Paris are far more convenient.  The cost of participating in arbitration in the United States may well be prohibitive for such parties.  For multinational corporations with greater resources and experience hiring counsel on both sides of the Atlantic, such a problem would not be present.

For an antisuit injunction to have its intended effect, both parties must also have somewhat substantial and nonfungible assets in both the United States and Europe.  An antisuit injunction from a U.S. court will not necessarily persuade a party with no assets in the United States and no interest in developing business there to cease a parallel action in an EU member state.  Again, multinational corporations with significant operations in the United States and Europe will easily fulfill this requirement.

Parties that satisfy these threshold criteria would do well to consider the United States as a seat for arbitration largely for the same reasons that parties choose arbitration over public litigation in the first place.  Parties see the neutrality of arbitral tribunals as one of the main advantages of arbitration as compared to public litigation.  If parallel proceedings are brought in violation of an arbitration agreement in one party’s home jurisdiction, suddenly the other party faces exactly the risk that it sought to avoid by agreeing to arbitrate: the risk of bias.  A U.S. party engaged in arbitration with a non-U.S. party might conceivably benefit from such bias in seeking an antisuit injunction from a U.S. court, but this concern evaporates if neither of the parties involved is American.  In that situation, both the arbitral tribunal and the U.S. court entertaining a petition for antisuit relief would presumably be neutral.

B.     Maximizing the Availability of Antisuit Relief

After parties have determined that the availability of antisuit relief is important enough a factor to choose a U.S. city as the seat of their potential arbitration, what can they do to increase the likelihood that, should a dispute arise, a U.S. court will enjoin any attempt to bring parallel proceedings in violation of the arbitration agreement?  Unfortunately, as described in Part II, given the current state of the law regarding antisuit injunctions to enforce arbitration agreements, there is no guaranteed way to have access to antisuit injunctions.  Taking a lesson from the recent antisuit-relief jurisprudence in U.S. courts, however, parties are able to take some steps to increase the likelihood of access to antisuit relief.

Drafting an arbitration agreement is no simple task.  To ensure that arbitration takes place as the parties envision, parties must give serious consideration to drafting as airtight a clause as possible.  Under the New York Convention, the law of the seat of arbitration serves as the lex arbitri and partially governs the enforceability of an arbitral award.  Thus, if parties are explicit in choosing a location within the United States as their seat of arbitration, U.S. courts will not hesitate to apply U.S. lex arbitri and will entertain the possibility of antisuit relief.

Parties desiring the availability of antisuit injunctions from U.S. courts may also want to specify that U.S. law governs the arbitration agreement itself.  This precision will lessen the likelihood that U.S. courts will defer to other jurisdictions in determining the validity of an arbitration clause.  If parties choose another country’s law to govern their contract and choose a seat of arbitration within the United States without specifying that U.S. law shall govern the arbitration agreement, a court will likely apply the law governing the container contract to decide whether the arbitration clause is valid.  Moreover, a clause identifying the law governing the arbitration agreement will permit a court to regard an arbitration agreement purely as a contractual term and potentially reduce comity concerns.  Parties could go even further and specify in their arbitration agreement that any proceedings contesting the existence, validity, or scope of the arbitration agreement shall be held in the courts of the chosen seat of arbitration.  This language would render courts of other forums incapable of complaining that their jurisdiction had been usurped, unless a significant public policy issue was at stake.

Finally, if parties choose the law of a U.S. jurisdiction as the substantive law governing their contract, a U.S. court will be less likely to tolerate parallel proceedings brought in violation of an arbitration agreement.  With the law of a U.S. jurisdiction governing the agreement, the diminished relevance of a foreign jurisdiction’s input lessens comity concerns.  Obviously, many considerations enter into the fray when parties choose the substantive law that will govern performance of a contract.  However, parties identified in Part III.A with commercial contracts that do not implicate a specialized domain of law in which the United States is not as highly developed as another jurisdiction may not hesitate to choose, for example, New York law over the commercial law of a European jurisdiction.

Conclusion

Considering the attention that West Tankers has received, the bark of the ECJ decision may end up having more impact than its bite.  It is possible that the reputational costs that London may suffer as an arbitration venue will be larger than they should be.  Paradoxically, Lord Hoffmann’s plea to the ECJ to preserve the availability of antisuit injunctions to enforce arbitration agreements could actually do more harm than good to London’s status as an arbitration venue.  Lord Hoffman’s opinion gives arbitration counsel who argue that such equitable relief is important for parties wishing to avoid parallel litigation ammunition to convince their clients that the result of West Tankers makes London a less arbitration-friendly venue.  Thus, in the manner of a self-fulfilling prophecy, parties may choose jurisdictions that do offer antisuit relief not for substantive reasons, but simply because of Lord Hoffmann’s prediction that parties would do so if the ECJ disallowed such relief.

Despite the lack of a clear standard in U.S. courts for the issuance of an antisuit injunction to enforce an arbitration agreement, parties can expend the resources necessary at the outset of their contractual relationship to ensure that antisuit relief will be available by drafting their arbitration agreements carefully.  Presumably, if more parties choose to seat their arbitration in the United States as a result of West Tankers, U.S. courts will consider more petitions for antisuit relief.  Perhaps this will push courts, in the interest of judicial expediency, to adopt a clearer standard to which parties can refer when crafting their arbitration agreements.

Acknowledgments:

Copyright © 2010 Cornell Law Review.

Daniel Rainer is a 2011 J.D. candidate at Cornell Law School and a 2011 Master en Droit candidate at Université Paris 1 Panthéon-Sorbonne.

This Legal Workshop Editorial is based on the following Student Note: Daniel Rainer, The Impact of West Tankers on Parties’ Choice of a Seat of Arbitration, 95 CORNELL L. REV. 431 (2010).

This Article is also about the United States asylum adjudication system. Asylum challenges the national conscience in distinctive ways. It generates hard questions about our moral responsibilities to fellow humans in distress; the recognition of human rights and our willingness to give them practical effect; the extent of our obligations to those who are not U.S. citizens; U.S. legal and moral obligations to the international community; the roles of state sovereignty and borders; foreign relations; allocation of finite national resources; and racial, religious, linguistic, and ideological pluralism.

Into this emotional and political fray, one often better known for polemic than for hard data, recently ventured Professors Jaya Ramji-Nogales, Andrew Schoenholtz, and Philip Schrag. Through painstaking and thoughtful empirical research, they collected massive data from several different federal bureaucracies and shed important light on the results asylum adjudicators reach. Their impressive study, Refugee Roulette: Disparities in Asylum Adjudication (Asylum Study), highlights the striking disparities in asylum approval rates from one adjudicator to another at various stages of the process.¹ As the authors convincingly demonstrate, asylum outcomes often depend as much on the luck of the draw as on the merits of the case.

The present Article has two aims. The first, which is asylum-specific, addresses the “so what” question. What are the normative implications of the findings reached in the Asylum Study? What problems have the sharp disparities in asylum approval rates caused, and what, if anything, should we do about them? To answer those questions, the Article sets a second objective—to examine, more generically, the role that consistency should play in any justice system. What, exactly, is the relationship between consistency and justice? What forces influence consistency? What instruments might enhance it? And what trade-offs do those instruments present?

Many readers will find the patterns revealed by the Asylum Study shocking. One’s visceral reaction might be that we need to “rein in” the adjudicators. Perhaps, one might think, the answers lie in terminating or demoting the outliers, or subjecting all adjudicators to performance evaluations, or making vastly increased use of agency head review of adjudicators’ decisions, or even imposing mandatory minimum and maximum approval rates.

I argue here that these impulses should be resisted. There are times when we simply have to learn to live with unequal justice because the alternatives are worse. Disparities in asylum approval rates just might be one of those instances. As long as adjudicators are flesh-and-blood human beings, as long as the subject matter is ideologically and emotionally volatile, and as long as limits to the human imagination constrain the capacity of legislatures to prescribe specific results for every conceivable fact situation, there will be large disparities in adjudicative outcomes and justice will depend, in substantial part, on the luck of the draw.

This is not to suggest that inconsistent outcomes are harmless; they impede justice in several ways.  Consistency is a reasonably good proxy for accuracy. If, for example, sixty percent of a group of decisions go one way and the remaining forty percent the opposite way, and the facts are similar enough that the two sets of outcomes cannot be reconciled, it seems likely that at least forty percent of the decisions—and perhaps sixty percent—were wrong.  That conclusion is not inevitable, because not all issues lend themselves to uniquely correct results, and because, even for those issues that do, sometimes the forty percent are right and the sixty percent are wrong.  Still, rational human choice is more likely than random selection to produce correct outcomes. On that assumption, a high degree of consensus makes the hypothesis of the majority being right more likely than the hypothesis of the majority being wrong. There is some reason, therefore, to assume that consistency correlates positively with accuracy.

Probably the most intuitive benefit of consistency, however, is the principle of equal treatment—the notion that inconsistent outcomes are substantively unfair. When two people are situated identically in all legally relevant respects, the law should treat them the same. To the extent reasonably avoidable, the outcomes should not hinge on the biases of whichever adjudicator the individual had the good or bad luck to draw.

Certainty, and the predictability that it brings, are commonly cited as a third set of reasons to strive for consistent adjudication.  Conflicting results breed uncertainty in two ways. They do so directly, by preventing the parties from predicting how their dispute is likely to be resolved. Consistency might also contribute to certainty and predictability indirectly, by enhancing the stability of the law.  Conflicts among equally authoritative bodies have ways of being reconciled eventually, either by gradual evolution or by pronouncements from above. The mere presence of a momentary conflict, therefore, can create at least the perception of imminent change, leaving affected sectors of the population uncertain how to plan for the future. Consistency reduces this uncertainty.

Inconsistency can also impair efficiency. The very fact that two decisions are inconsistent means that the second adjudicator had to revisit the analytical efforts of the first one rather than simply adopt the first adjudicator’s reasoning and result. It also means that, at some point, some government actor will have to step in to resolve the issue definitively. Moreover, the resulting uncertainty leaves the parties with less incentive to accept the first ruling in their case and more incentive to appeal it. The fact that they cannot predict the result might also discourage future parties from settling. Apart from conserving judicial and administrative resources, encouraging litigation and appeals rather than settlements and acceptance of initial decisions prolongs the waiting times—a key consideration for both the applicant and the government in asylum cases.

A final benefit of consistency is acceptability to both the parties and the general public, a central concern of every adjudication process. The public has a direct interest in consistency, since uncertainty can be problematic for the reasons already given. In addition, there is ample evidence that the public simply perceives inconsistent outcomes to be unfair. As the authors of the Asylum Study observe, we inscribe the equal justice admonition at the entrance to the Supreme Court building, follow stare decisis, promulgate uniform federal sentencing guidelines, employ pattern jury instructions, and allow judges to modify civil verdicts that veer too far from the norm.

All else equal, therefore, it is hard to be against consistency. Indeed, fidelity to the rule of law demands attention to consistency. But all else is seldom equal. Since strategies that enhance consistency can have costs, the real question is how much cost should be accepted in return for whatever amount of increased consistency it will purchase. For one thing, conflicts can have positive effects of their own. As others have observed, a judicial conversation that includes differing views expressed over a reasonable time period can be part of a healthy maturation process that ultimately aids the thoughtful resolution of a difficult issue. In addition, even when the net impact of conflicts is negative (as I assume to be the norm), some solutions might be too costly. Strategies like reductions in adjudicators’ decisional independence, broader or more frequent agency head review of adjudicators’ decisions, heightened judicial deference to administrative tribunals, or even elimination of judicial review of the decisions by centralized tribunals, for example, might well enhance consistency, but at a price that I argue would be excessive.

I offer two caveats: First, balance is not the same as, and does not promote, consistency. At best, balance prevents asymmetric inconsistency. An immigration judge corps that comprises one hundred anti-immigrant zealots and one hundred pro-immigrant zealots would be “balanced” in some sense, but in such a corps the outcomes would be more likely to diverge, not less. Second, inconsistency is a two-edged sword. It can result in an outcome favorable to the asylum seeker when another adjudicator would have reached a different result, or vice-versa. Consequently, neither one’s general ideology nor one’s specific preferences on immigration or asylum should drive one’s degree of tolerance for inconsistent outcomes.

It is useful, therefore to identify the determinants of consistency. I suggest there are at least fifteen, which the full version of this article considers in more detail. Some of those determinants relate to numbers—the number of people who decide each case, the total number of adjudicators or panels in the entire system, and the number of cases. Some of the other determinants relate to the attributes of the adjudicators, including the criteria and procedures for appointing them and their post-appointment training and guidance. Still others relate to the adjudicators’ roles—their degree of independence, the level of deference they are expected to give to other decision-makers, and their obligations with respect to the preparation of reasoned opinions and the use of stare decisis. Finally, I suggest that the level of consistency reflects the nature of the subject matter—in particular, how specialized, complex, dynamic, ideologically charged, and determinate the concepts are.

Of these variables, which ones might account for the disparate outcomes observed in the asylum setting? Given the persistence of large variances at all levels, the elimination of country of origin as an explanatory factor, and the adjudicator-specific patterns revealed by the authors of the Asylum Study, it seems easy to identify the principal contributors. They include the adjudicators’ differing ideologies and attitudes, which affect their preexisting inclinations to grant or deny asylum, and the subject matter, which is indeterminate enough, complex enough, and dynamic enough to give adjudicators relatively broad freedom to reach the outcomes they desire. The attitudes that asylum adjudicators inevitably bring to their work include not only their general philosophies about asylum or immigration, but also their normative conceptions of the adjudicative role, their levels of suspicion about the credibility of the applicants, and the weights they attach to erring on the side of either the individual or the government.

That is unequal justice to be sure, but my basic thesis is that for the most part we shall have to live with it. Unless the adjudicators can be made ideologically homogeneous—a goal I find neither desirable nor achievable—there will always be substantial asylum approval rate disparities and many outcomes will reflect the luck of the draw.

This is not, however, a call for complacency. Consistency is a positive virtue for all the reasons I have acknowledged, and I suggest steps that might enhance it at the margins. The key is to aim low and to settle for treating the symptoms.

Some worthwhile steps could achieve modest gains at the margins.  More detail could be added to the statutes, regulations, and subordinate legislation on such issues as what constitutes “persecution,” though it would be hard to anticipate every conceivable means of persecution from which the law should afford protection.  More adjudicators might complicate the task of achieving consistency, but the increased attention that an enlarged judge corps would allow an adjudicator to devote to each case might well generate a higher degree of consistency. Larger decisional units—for example through the restoration of three-member Board of Immigration Appeals panels in greater numbers of cases and increased use of en banc decisions on recurring issues—could enhance the Board’s internal consistency.  Strengthening the support staff could have the same effect.  So, too, could the provision of counsel to indigent asylum seekers at government expense—at least in cases in which the applicant has cleared some specified threshold requirement of  meritoriousness.  New quality controls for the hiring of asylum adjudicators seem warranted as well.  While personal ideology will always be part of what an asylum adjudicator brings to the job or at least soon develops, the process might more consciously avoid affirmatively factoring a candidate’s ideology into the hiring decision.  Enhancement of the various programs for professional development, the internal and perhaps even the public dissemination of each adjudicator’s asylum approval rates, expanding the Board of Immigration Appeals’ (BIA) scope of review over fact questions (from “clearly erroneous” review to de novo review, for example), and the broader use of reasoned and binding opinions carry additional potential for modest gains in consistency.

Other possible policy responses, while potentially enhancing consistency, are bad ideas nonetheless.  The Attorney General, for example, may review any BIA decision that he or she wishes. This is not an unusual arrangement; Congress often authorizes agency heads to review adjudicative decisions that fall within their domains. To reduce the approval rate disparities identified in the Asylum Study, one might be tempted to urge more frequent Attorney General review of BIA decisions.  Agency head review is often extolled as a means for agency heads to assure inter-decisional consistency and to maintain control over basic policy at the same time.  But agency head review is not essential to either goal. When there is a designated appellate authority such as the BIA, an en banc decision of that tribunal can yield the same consistency as agency head review. Congress could even authorize the agency head to require the appellate tribunal to go en banc in a particular case if there is a concern that an overworked adjudicative tribunal would not do so on its own.

The need for agency primacy over policy matters can be conceded, but again, agency head review is not essential to agency policy primacy. Rulemaking and other policy mechanisms are also available. The multiple experts from whom the agency head can distill advice and perspectives will be just as available in a rulemaking proceeding as they are in agency head review of adjudication. The agency head will be just as capable of asserting agency policy primacy via rulemaking as he or she would be via review of adjudication. And rulemaking will be just as effective in promoting agency policy coherence as review of an adjudicative decision would have been—more so, if anything, since the facts of a particular case will not constrain the reach of the rule. In the asylum context, the arguments based on agency policy coherence are particularly inapt, since the immigration judges and the BIA are within the Department of Justice while the analogous policymaking agencies are now located within the Department of Homeland Security. Agency policy coherence, therefore, is simply not an issue in this context. Moreover, as Jeffrey Lubbers has observed, there is normally a lessened need for political control in “high-volume, fact-based” adjudication processes and those in which benefits are sought.  Asylum fits both descriptions.

While I acknowledge that even adjudicative decisions will often require policy judgments—particularly if the decisions are designated as precedential—the basic functions of the adjudicators are, after all, to find facts, interpret law, and exercise specific statutory discretionary authority. Even when a case presents an important policy question, the agency head can supersede the decision by issuing a generally applicable regulation if he or she wishes—provided, of course, that Congress has delegated the relevant rulemaking authority to the agency head. If Congress has not done so, then Congress’s inaction is itself a policy decision that requires respect.

Further, as the consultants’ report for a leading Administrative Conference study acknowledges, rulemaking has tremendous advantages over adjudication as a vehicle for policy formation.² These advantages include broader public input, notice to Congress, avoidance of adjudicative hearings to resolve issues of legislative fact, avoidance of litigating the same issues repeatedly, more enforceable rules, clearer advance notice of allowable and prohibited conduct, fairer applicability of the rules to similarly situated individuals at different points in time, and the opportunity for affected individuals to make policy submissions before the rule is adopted.  To be sure, notice-and-comment rulemaking can be slow and cumbersome.  But if on a given issue the agency feels that the notice-and-comment procedure would be too onerous, interpretative rules might be an alternative method of influencing adjudicative outcomes in ways that promote the agency’s policy agenda. Interpretative rules do not bind the public, and it is not clear whether they can bind the adjudicators, but they can be issued quickly and without the fiscal cost of notice-and-comment machinery. And when, “for good cause,” an agency feels that the notice and comment procedure would be “impracticable, unnecessary, or contrary to the public interest,” such as when the timing is urgent, the agency can issue an interim regulation. For all these reasons, the need for agency head review is seldom pressing.

Moreover, the central rationale for agency head review—the agency’s political accountability—is also precisely what makes agency head review affirmatively troublesome. The agency head and any subordinates to whom he or she delegates the review function are subject to popular and political pressures. On matters of policy that reality is not problematic; consideration of the public’s preferences is at home in democratic theory. But the essence of the adjudicative function is to find facts and interpret the law, not to please the public. While policy admittedly is implicated in a certain number of cases, the adjudicative function generally requires independence, not political accountability, as discussed below.

Agency head review has other costs as well. It permits a dangerous concentration of power in the hands of a single individual. When the decision being reviewed was rendered by a multi-member panel, agency head review entails the substitution of one person’s judgment for the collective judgment of several adjudicators. And the probability that a strong ideological bias will influence the result is greater when one person is deciding than when the decision is rendered by a randomly selected multi-member panel.

To sum up: There is little need for agency head review. Decisional consistency can be achieved through a combination of the administrative appellate process, legislative rules (including interim rules when necessary), and interpretative rules. Rulemaking and other powers can also preserve agency policy primacy and agency policy coherence. Moreover, agency head review poses inherent dangers to the dispensation of justice, including especially the substitution of a political outcome for one based on an independent adjudicative tribunal’s honest reading of the evidence and the law. All of these considerations have special force in the asylum context, where the stakes are high and the potential for inappropriate political and ideological influence has been amply demonstrated.

Restrictions on judicial review might also be perceived as a way to increase consistency, since the twelve general courts of appeals collectively have far more decisional units than the one BIA.  But the courts are already forbidden to review at least two important categories of asylum denials—those reached in expedited removal proceedings and those based on findings that failure to file the claim within the one-year deadline was not attributable to changed or extraordinary circumstances.³ Still, for the ostensible purpose of reducing disparities in the asylum approval rates, some might be tempted to advocate further restrictions on judicial review of asylum denials. Those restrictions could conceivably include barring judicial review of other selected subcategories of asylum cases, making judicial review discretionary, or narrowing the scope of review.

Admittedly too, there are other costs of judicial review of administrative decisions. They include judges’ lack of political accountability, the risk of error when nonexperts review the decisions of experts, the fiscal expense, and the delays.

In my view, however, the benefits of judicial review overwhelm its costs, particularly in the asylum context. Those benefits too have been explored elsewhere and need only be summarized here.⁴ Probably the most obvious are the independence that judges bring to their work and the corresponding appearance of justice. Judicial independence, in turn, is beneficial for several reasons that are explored below and assumes special importance in asylum cases because of the recent threats to the independence of the immigration judges and the BIA members. Judicial review also adds the perspective of generalist judges to the existing perspectives of the specialists whose decisions are being reviewed. It provides a regime in which legal doctrine can evolve gradually, step by step, informed by the judicial conversation that multiple courts of appeals can supply. And the mere prospect of judicial review should add an incentive for the original decision makers to reach their conclusions thoughtfully and explain them carefully. Given all the recent criticism of the haste with which asylum claims are denied, any sobering effect of judicial review on the administrative adjudicators should be savored.

Despite the inconsistencies that judicial review of asylum claims inevitably introduces, and despite its other costs, therefore, any calls for further restrictions on judicial review of asylum claims should be vigorously resisted. To the contrary, the existing restrictions should be repealed. The Asylum Study demonstrates beyond doubt that ideology explains a large part, if not most, of the striking disparities in asylum adjudication. There is simply no reason to assume that the same biases are strangely absent when the asylum decisions are rendered in expedited removal proceedings or on the basis of no “changed circumstances” or no “extraordinary circumstances.” Nor is there any reason to assume that in these cases the consequences of error are any less grave.

By the same token, there is no convincing reason to narrow the scope of review. It is narrow enough already. As in other removal cases, the court may set aside a finding of fact only if “any reasonable adjudicator would be compelled to conclude to the contrary.”⁵

Replacing review by the general courts of appeals with review by a specialized tribunal might possibly enhance the consistency of the ultimate outcomes, since specialization reduces the total number of different adjudicators who will be needed to handle a given caseload.  Specialization also heightens the adjudicators’ familiarity with analogous decisions. But that strategy too would come at a price—the loss of the generalist perspective, which enables judges to draw guidance from other subject areas and to approach the specialty area with fewer preconceptions or biases. A diet of specialized cases might also make the positions less attractive to potential adjudicators and staff, thus hampering both recruitment and retention of the most talented personnel. Specialization might render the appointment process more susceptible to lobbying pressures, and it might cause the adjudicators to become too cozy with the litigators who appear before them regularly.

Still other policy prescriptions carry the potential for greater gains in consistency but in my view would be especially bad ideas.  Quotas or other direct controls on outcomes would undoubtedly reduce the disparities in asylum approval rates, but as the authors of the Asylum Study point out, there is no way to locate either the “right” percentages or the “right” range; any figures would be arbitrary. Besides, they observe, rapid changes in human rights conditions would render the announced percentages continually obsolete. In addition, most source countries have too few asylum applicants to provide a statistically significant sample.

Other objections might be added. The argument that statistically reliable percentages would be too hard to fashion for many countries assumes a system in which each source country is allotted a different approval rate range. That feature would itself be problematic, reminiscent of the discredited national origins quota system in place from 1921 to 1965.⁶ Yet, without such differentiation, the combination of drastically different human rights conditions from one source country to another and different mixes of cases by source country from one asylum office or immigration court to another would cause outcomes to hinge needlessly on the particular office or court in which the cases are filed. The end result would be less consistency, not more. Finally, numerical controls would require adjudicators to rank asylum claims. There is no uniquely correct way to do so. Some might base their rankings on the probability of persecution, others on the severity of the alleged persecution, still others on the quality of the nexus between the persecution and one of the protected groups. The range of choices would introduce another element of inconsistency, as different adjudicators would attach different weights to different factors and might even misuse that freedom to reintroduce ideology.

I have saved my most serious worry for last. Given the glaring disparities in the asylum approval rates from one adjudicator to another, one temptation might be to “rein them in.” This could be done by taking wayward adjudicators aside, quietly “encouraging” them to increase or decrease their approval rates, and then, after a decent interval, terminating or reassigning those who remain recalcitrant. Performance reviews that take approval rates into account and serve as a criterion for retention or promotion might be another device for eliminating adjudicators who veer too far from the mean.

Any of these strategies might well reduce the disparities in asylum approval rates. But threats to adjudicators’ job security inherently compromise their decisional independence. The actions of attorneys general in the recent past have already dangerously sapped the independence of the immigration judges and the BIA.

In a previous article I explored the implications of decisional independence more generally;⁷ here, they will be just briefly recounted. Decisional independence has costs that have to be acknowledged. Probably the most controversial cost is that, by definition, decisional independence eliminates the adjudicator’s political accountability. When the decision has broader policy implications, as is especially likely when it is designated as binding precedent, that consequence can be viewed as a cost to the democratic process. It is a cost that we readily accept when courts interpret an entrenched Constitution, use judgment in interpreting ambiguous statutory language, or make common law. It is a cost nonetheless.

Some might feel that decisional independence erodes agency policy primacy. The earlier discussion on agency head review of adjudicative decisions, however, showed how agency policy primacy can be preserved through rulemaking and other devices. The admittedly substantial logistical constraints can be minimized. But whether or not one shares that assessment, the point here is that even a passionate advocate of agency head review can applaud decisional independence. Precisely that combination—adjudicator independence in reaching the decision but agency head authority to reverse it—lies at the heart of the compromise philosophy enshrined in the Administrative Procedure Act.⁸

In the administrative context, a further cost, many would argue, is the kind of decisional inconsistency exposed by the Asylum Study. Earlier discussion suggested that decisional independence might have mixed effects on decisional consistency, but let us assume arguendo that the net effect is negative. There is also the related problem of assuring that adjudicative decisions cohere with other expressions of agency policy.

Decisional independence might also impair good faith measures to boost adjudicators’ productivity. While there might be ways for agencies to impart productivity expectations to adjudicators without threatening their independence, the key variable is the consequence of failure to meet those expectations. If the consequences are significant enough to alter the adjudicators’ behavior—and communicating expectations would be useless if they are not—then they will necessarily give adjudicators an incentive to trade off care and quality for quantity, since only the latter can be statistically compiled. For that reason, independence and productivity will always be in tension.

In an adjudicative setting, my view is that decisional independence, despite these potential costs, is critical to the rule of law and to the dispensation of justice. The most familiar benefit of decisional independence is procedural fairness—minimizing adjudicative bias. An adjudicator should decide each case based on his or her honest reading of the evidence, interpretation of relevant legal sources, and exercise of any delegated discretion—not by choosing whichever outcome seems most likely to please the officials who will control his or her professional future. Decisional independence can also discourage what I have called “defensive judging”—playing it safe by avoiding rulings that might prove controversial. Decisional independence can be a vital safeguard for unpopular individuals, minorities, and political viewpoints, and it is crucial to safeguarding constitutional rights against transient majoritarian preferences. And decisional independence is integral to at least the U.S. version of separation of powers.

Apart from those rationales, which I have argued all derive ultimately from fidelity to the rule of law, decisional independence has important side benefits. They include maintaining public confidence in the integrity of the justice system, avoiding “reverse social Darwinism” in which the weakest adjudicators are the ones most likely to survive ideological purges, attracting and retaining adjudicator candidates, and facilitating the continuity of adjudicative outcomes from one administration to its successor.

For all those reasons, further assaults on the decisional independence of the immigration judges and the members of the BIA would be regrettable. To the contrary, their prior decisional independence should be restored and further safeguarded despite any possible negative effects on either decisional consistency or agency policy coherence.

The hobgoblin of little minds it might well be, but consistency matters. The moral imperative of equal justice, the needs for certainty and predictability, the benefits of efficiency, and the objective of public acceptability all demand attention to consistency in any adjudicative framework. The Asylum Study—the product of a prodigious and highly successful effort by Professors Ramji-Nogales, Schoenholtz, and Schrag—has brought home the extraordinary extent to which the outcome of an asylum claim hinges on the particular adjudicators who are assigned the case.

But the forces that generate inconsistent adjudicative outcomes are not easy to constrain, at least not without costly trade-offs. In asylum cases, the unavoidable abstractness, complexity, and dynamism of the relevant legal language make it inevitable that the human adjudicators will bring their diverse emotions and personal values to bear on their decisions. Under those circumstances, we should not expect anything but the sorts of disparate outcomes that the Asylum Study has documented.

There are ways to reduce the inconsistencies at the margins, to be sure. These have been noted. But any strategies that would shrink the inconsistencies more dramatically—and some that would not do even that—have costs that I argue are unacceptably high. These include more frequent agency head review of BIA decisions, additional restrictions on judicial review, transferring review to a specialized court, and punishing wayward adjudicators. Each of those devices would either severely compromise decisional independence or impose other excessive costs.

In the end, we shall have to learn to live with some measure of unequal justice. It is not ideal, but, as they say, it beats the alternatives.

Acknowledgments:

Copyright © 2009 Stanford Law Review.

Stephen H. Legomsky is the John S. Lehmann University Professor at Washington University School of Law.

This Legal Workshop Editorial is based on the following full-length Article:   Stephen H. Legomsky, Learning to Live with Unequal Justice: Asylum and the Limits to Consistency, 60 STAN. L. REV. 413 (2007).

The Court is right to be attentive. Whether a rule is jurisdictional or not affects both litigants and the courts in important ways, and we ought to strive for a workable and sensible methodology for answering that question.²

But the jurisdictional inquiry implicates another question that has received less attention and thought: what does the determination that a rule is jurisdictional or not mean? For a jurisdictional rule, the answer usually is easy. For a nonjurisdictional rule, however, the answer is more complicated and far less studied. Too often, courts and commentators simply assume that nonjurisdictional rules have all of the inverse effects of jurisdictional rules, without any meaningful discussion of what attributes the nonjurisdictional rule in question should have as an analytical, institutional, or normative matter. As I will explain, that assumption is a false dichotomy that obscures a wealth of rule types that can be used to better understand and categorize difficult statutory rules and judicial doctrines.

 
I.
Understanding Nonjurisdictional Rules

Jurisdictional rules (usually) have clear and well-settled effects.³ A jurisdictional rule can be raised by any party at any time, including for the first time on appeal; it obligates the court to police compliance sua sponte; and it is not subject to principles of equity, waiver, forfeiture, consent, or estoppel.

By contrast, nonjurisdictional rules do not have the same rigid effects. Nevertheless, courts and commentators have tended to express nonjurisdictional rules as having the inverse effects of jurisdictional rules.⁴ Their assumption is that a jurisdictional characterization has one set of effects and a nonjurisdictional characterization has a wholly different set of effects.

This is a false dichotomy. Nothing prohibits nonjurisdictional rules from exhibiting attributes of jurisdictionality, and, in practice, many in fact do.⁵

Adherence to the dichotomy has at least two consequences. First, it obscures a rich swath of rule types that may provide the right characterization for the rule in question. Second, judicial adherence to the false dichotomy risks either overdeciding or underdeciding the case.

Take, as an example of these problems, the Supreme Court’s recent decision in Bowles v. Russell.⁶ There, Keith Bowles petitioned for a federal writ of habeas corpus, which was denied. After the deadline to appeal had passed, Bowles moved to reopen the time to appeal. The district court granted Bowles’ motion to reopen the time for appeal and gave Bowles seventeen days to file his notice of appeal. Bowles filed his notice of appeal sixteen days later. However, the statute that authorizes reopening of the appellate deadline limits a reopened time period to fourteen days.⁷ Thus, Bowles’ notice of appeal was timely under the district court’s order but untimely under the statute.

The state moved to dismiss Bowles’ appeal, arguing that the notice of appeal was untimely and that the Court of Appeals therefore lacked jurisdiction to hear the appeal. Bowles responded that the deadline was not jurisdictional and that his noncompliance with the statutory deadline should be excused for equitable reliance on the district court’s order.

The Supreme Court agreed with the state and affirmed the dismissal. The Court held the rule to be jurisdictional and, therefore, not susceptible to the equitable excuse proffered by Bowles.⁸ In so holding, the Court overdecided the case. The issue in Bowles, in its narrowest sense, was whether the district court had the power to extend the time to file the notice of appeal beyond the deadline for equitable reasons not recognized in the statute. By instead finding the deadline jurisdictional, the Court resolved a host of issues that, though neither presented by the facts nor addressed by the Court, necessarily follow from a jurisdictional characterization: that the deadline must be policed by the courts sua sponte, that the deadline is unsusceptible to waiver, forfeiture, or consent, and that noncompliance may be raised at any time by any party—including the party who missed the deadline in the first place.

For what it is worth, the dissent in Bowles would have underdecided the case. The dissent would have held the deadline nonjurisdictional and, therefore, amenable to the equitable excuse presented in the case.⁹ But a nonjurisdictional characterization, rather than leading to that result, merely begs it. Not all nonjurisdictional rules are amenable to equitable excuses, and there are good reasons why the deadline to file a notice of appeal is one of those that is not.¹⁰

Bowles therefore illustrates the two perverse effects that the false dichotomy engenders. First, the dichotomy focused the Court’s inquiry on a question whose answer was either broader than necessary (the majority’s jurisdictional characterization) or narrower than needed (the dissent’s nonjurisdictional characterization) to resolve the case. And, second, it hid from the Court a critical piece of the puzzle: the possibility that the rule might fall in the middle by being nonjurisdictional yet immune to the kind of equitable exception proffered by Bowles.

 
II.
A Role for Mandatory Rules

These hybrid rules, found between the two boxes in the false dichotomy, have a role to play. Jurisdictional attributes can be combined in various ways to create different species of hybrid rules, so let me discuss the one relevant to the rule at issue in Bowles, what I have called “mandatory rules.”

A mandatory rule is nonjurisdictional but nevertheless has the jurisdictional attribute of being unsusceptible to equitable excuses for noncompliance.¹¹ Thus, a mandatory rule has the nonjurisdictional attributes of being waivable, forfeitable, and consentable, and a court has no obligation to monitor it sua sponte. However, if the rule is properly invoked by the party for whose benefit it lies, a court has no discretion to excuse noncompliance.

The benefits of such a rule are numerous. Waiver, consent, and forfeiture allow the parties to designate which issues require court decision and which are of such relative unimportance to the parties that they would rather forgo the costs of litigating them. They promote finality by ensuring that a relatively unimportant rule that is waived and quickly forgotten will not rise later on its own to unravel months or years worth of litigation and the settled expectations and choices of the parties. And, they reduce the unfairness of allowing the noncomplying party to raise her own default as a basis for overturning an adverse result. In sum, mandatory rules further efficiency and economy, encourage settlement, maintain finality, and promote fairness, all while preserving litigant autonomy and the adversarial process.

In addition, a mandatory but nonjurisdictional characterization relieves the court of the burden to police the rule sua sponte, an obligation that can impose significant costs on a court. Thus, mandatory rules further accuracy and conserve judicial resources by ensuring that the courts need only resolve the issue when the parties have raised and briefed it.

Inflexibility—even in the face of equity—also has its virtues. Precluding equitable excuses incentivizes compliance, maintains finality and reliance interests, constrains judicial discretion and thus promotes fairness and equity across cases, furthers the rule of law, and conserves judicial resources by avoiding the need to litigate a host of potential equitable issues. The primary detraction is that the preclusion of equitable excuses might be harsh and unfair in specific cases. But, at least in theory, some situations call for a rule that values inflexibility over equity.

Neither a jurisdictional rule nor a nonjurisdictional, nonmandatory rule can boast of all of these benefits. That is not to say that a mandatory characterization is warranted in every situation. To the contrary, other situations may call for a jurisdictional rule, or perhaps for a nonjurisdictional rule that must be policed sua sponte by the courts. But my point is that we ought to break from the dichotomy to explore the various combinations available in the middle of the road that ought also, at least in theory, to occupy beneficial niches. Mandatory rules are just the one I have chosen to illustrate here.

 
III.
Mandatory Sovereign Immunity

In the Article, I make the case for a mandatory characterization of the deadline to file a notice of appeal. Though powerful, it is a relatively ordinary case of statutory interpretation. To demonstrate the value of a broader appreciation for mandatory rules and other hybrid rules, I want to show here how they might resolve a nonstatutory rule: the complex doctrine of state sovereign immunity, which, simply stated, is the prerogative of a nonconsenting sovereign not to be sued.

State sovereign immunity is a good example because it has fallen victim to the false dichotomy. Sovereign immunity is inherent in the nature of sovereignty and, as such, ought to be important enough to exhibit jurisdictional features. Yet it can be waived and consented to, which undermines its jurisdictional status, thereby defying both boxes in the false dichotomy. As a result, the Supreme Court has struggled to characterize it definitively, instead adding confusing gloss such as stating that immunity “partakes of the nature of a jurisdictional bar.”¹²

The answer may very well be to break away from the false dichotomy and look for hybrid possibilities, and a mandatory characterization may be just the ticket. To make the case, I will discuss each feature of a mandatory rule and explain how it fits with state sovereign immunity.

 
A.     Waiver and Consent

Waiver and consent have been part and parcel of state sovereign immunity since the beginning of its long historical acceptance.¹³ They advance the primary function of immunity, which is to protect the dignity of the state,¹⁴ by putting control of the immunity right in the hands of the right holder. And, they give the state the opportunity to strike a balance between the importance of redressability for wrongs and important policy considerations involving the state and its fisc. These are powerful reasons why waiver and consent should be features of state sovereign immunity.

 
B.     Sua Sponte Requirement

The existence of sovereign immunity as a bar to suit should not have to be raised by the court sua sponte if no party raises it. There is little reason for the court to take an independent interest in immunity, particularly when the entity in the best position to assert or waive it—the state—is a party defendant. That is not to say that a court may never raise the issue on its own. There may be compelling reasons to do so in individual cases. For example, if it is unclear whether an entity is an arm of the state entitled to assert immunity or not, and the court cannot determine if the entity is consenting to suit or merely does not realize that it may be able to assert immunity, then a court may wish to raise the issue to determine whether or not the entity is truly consenting to suit. But these situations are more likely to come up on a case-by-case basis and should not require a blanket requirement. Far better, and more consonant with the underlying policies, to allow courts discretion to raise the issue when the need arises. In sum, courts should not be required to raise the immunity issue sua sponte.

 
C.     Forfeitability

There are good reasons why immunity should be forfeitable like any other affirmative defense. Requiring the defense to be asserted in a timely fashion, such as in the answer, allows the issue to be litigated at the outset, potentially avoiding the waste of judicial and litigant resources if it is asserted late in litigation or for the first time on appeal. Also, requiring a timely assertion prevents the state from intentionally delaying the assertion for some tactical advantage. In addition, it promotes clarity, consistency, and fairness in the litigation. And, finally, if immunity exists in substantial part to protect states from the burdens of suit, it makes logical sense to require the defense to be raised as early in the litigation as possible.

If immunity were difficult to determine, I might rethink forfeiture. After all, state sovereign immunity is designed to ensure respect for the states, and a rule that requires a decision whether or not to assert immunity at an early stage in the litigation when that decision cannot yet be made does not show much respect for the states and the doctrine of immunity. But the availability of immunity should be, in the vast majority of instances, readily apparent at the outset. Even if the availability of immunity is unclear, an entity usually can—and will have ample incentive to—assert the defense early anyway.¹⁵

There are two practical arguments against forfeiture, but they strike me as fairly weak. The first is that a no-forfeiture rule would protect those state entities that erroneously believed that they were not entitled to assert immunity but suddenly realized their mistake before the litigation ended but after the forfeiture deadline had expired. A no-forfeiture rule for those cases might enable a court to resolve whether the state entities had consented to suit voluntarily. But, as I mentioned above, these cases strike me as very rare indeed, and, to the extent they arise, defendants already have the opportunity to amend their answers to assert affirmative defenses previously omitted if justice so requires.¹⁶ The risk that a nonconsenting state entity will unknowingly forfeit an available immunity defense and be unable to assert it, particularly with the opportunity of a court to raise the issue sua sponte, seems extremely low and provides very little support for a no-forfeiture rule of state sovereign immunity.

The second practical argument is that states may need time to consider carefully whether to waive immunity or not in specific cases, a decision that may not be able to be made without information from the discovery process. Respect for the states and their prerogative to invoke or waive immunity counsels against a strict and early forfeiture rule in these circumstances. However, it is not clear to me, as an empirical matter, whether such situations come up often enough to justify it. Even if so, there is an easy solution: a state should assert the immunity defense in its answer but decline to move to dismiss the case before discovery and, instead, after discovery has closed, either waive immunity or move for summary judgment. The point is that the state can preserve its immunity against forfeiture by asserting it in a timely fashion without seeking dismissal on the basis of immunity until it is ready to do so.

 
D.     Equity

The final attribute to consider is the availability of equity to prevent an assertion of the immunity bar. In other words, might there be equitable reasons why a court could hear a claim against an unconsenting state despite its otherwise proper invocation of immunity? Two reasons suggest that the answer is no. First, the Court’s stringent waiver rules indicate that anything outside of a clear and voluntary waiver or declaration of consent will not deprive a state of its immunity right. These rules suggest that equitable estoppel, to the extent that it is a kind of implied waiver or consent, should not be available to prevent a state from asserting immunity. Second, immunity is inherent in sovereignty, and, as a result, is of a mandatory and inflexible nature subject only to the prerogative of the sovereign. The sovereign interests served by state sovereign immunity—deference to state dignity and protection of the state fisc—transcend individualized notions of fairness that arise in the context of a specific litigation. Indeed, the whole point is to prevent an injured citizen from recovering for unlawful state conduct. They ought not be subject to the whim of circumstances or the parties’ actions, save where those actions manifest a valid waiver or consent by the state.

 
Conclusion

In sum, I believe that a good argument can be made that state sovereign immunity might best be characterized as a nonjurisdictional, mandatory rule. But if I am wrong, then I happily revert to my broader point—regardless of the specific balance struck here, we need a more nuanced lexicon to deal with doctrines like state sovereign immunity. Regardless of whether a mandatory rule or some other characterization ultimately carries the day, we have found our way out of the false dichotomy and toward a better way to conceptualize and understand the doctrine.

At bottom, this article is not so much about arguing for a specific characterization of state sovereign immunity or the statute at issues in Bowles. Rather, the broader goal is to develop more creative thinking about these difficult characterization issues, to open our minds to the myriad of possibilities that exist for them, and to resolve them with both honesty and principle.

Acknowledgments:

Copyright © 2009 Stanford Law Review.

Scott Dodson is Assistant Professor of Law at University of Arkansas School of Law.

This Legal Workshop Editorial is based on the following Article:   Scott Dodson, Mandatory Rules, 61 STAN. L. REV. 1 (2008).

In large-scale, high-stakes litigation, jury verdicts are likely both to garner national attention and to shape outcomes for other cases, filed and unfiled.  It is no secret that repeat players in these cases, best positioned to control their exposure to perceived jury bias, maneuver cases toward favorable jury pools.  This tactic in turn subjects the jury to criticism that local decisionmakers impose their will on the rest of the country.  The problem stems from a disconnect between the scope of these controversies and the scope of the pool from which jurors are drawn to decide them.  If the community affected by the litigation is national, then a local decisionmaker may not fairly represent the relevant constituency.  This disconnect compromises the constitutional assurance that the decisionmaker be drawn from a fair cross-section of the community, a community whose borders ought to be drawn with an eye toward the dispute.

The forum-seeking choices made by both plaintiffs and defendants (especially in mass tort cases) are driven by expectations about the identity of the decisionmaker, particularly for the first case to come to trial.  Plaintiffs usually file in state court—and fight to stay there—in order to secure the decisionmaker of their choice: the local jury.  Defendants typically want to avoid state court juries and routinely remove cases to federal court whenever possible.  They seek the federal forum in the hope that a judge will dispose of the case on a pretrial motion; failing dismissal, defendants hope to control the jury pool either by enlarging it to encompass a federal district or by transferring the case to a location where more favorable jurors are likely to be summoned.  Congress is well aware of the mass tort gamesmanship:  It recently passed legislation in an effort to control the phenomenon.¹

When parties litigate a case of national scope, I argue that the proper jury pool is neither local (as in state court, where jury pools are typically defined along county lines) nor regional (as might be true in a federal district):  A national case demands a national jury drawn from a national pool.  Because cases of national scope are now more likely than ever to be concentrated in federal court, the problem of summoning jurors outside the court’s sovereignty is obviated.  But many problems, political as well as logistical, remain.  In the end, we must assess whether the gains to populism and legitimacy are worth any efficiency loss.

This proposal connects the waning legitimacy of the civil jury in large-scale litigation to the disparity between the scope of the local jury pool and the scope of the cases.  I argue that the use of national juries for cases of national scope will improve both the actual and perceived quality of lay decisionmaking and will restore legitimacy to jury verdicts.  Moreover, the democratic values animating the constitutional right to jury trial can best be realized in large-scale litigation by empanelling a national jury.

The first step in evaluating the concept of a national jury is to identify the types of cases that would qualify for national jury treatment.  One issue that need not detain us long is the problem of state versus federal jurisdiction.  Although empanelling a national jury in a state court case might raise sovereignty problems, recent statutory innovations have already moved the vast majority of national cases into federal court.  The Class Action Fairness Act (CAFA) and the Multiparty, Multiforum Jurisdiction Act (MMTJA) replace the traditional federal jurisdictional requirement of complete diversity with one of minimal diversity, making it far easier for plaintiffs to file in federal court or, more commonly, for defendants to remove cases from state courts.² Implicit in both pieces of legislation is the notion that local juries should not be allowed to control the fate of a national business based on the fortuity that a local claimant has brought suit—or, worse, that a plaintiff has forum-shopped to get access to a particular local jury pool.  Indeed, these legislative initiatives are widely recognized as responsive to the defense bar’s common complaint that corporate defendants could not get a fair shake in state court.

Because most litigation of national scope will meet the minimal diversity requirements of CAFA and MMTJA, getting into federal courts will be straightforward.  The next step is to determine which of these cases best lend themselves to national jury treatment.  The federal courts’ experience with complex litigation over the last several decades suggests at least two types of cases that should qualify: nationally aggregated claims and individual cases that serve a “bellwether” function for related litigation.  Indeed, aggregation appears to be a clear trend.  In addition to the long-standing practice in federal court of concentrating all cases pending on a certain topic (Vioxx, say, or Firestone tires) in one particular federal district under multi-district litigation procedures for pretrial handling, Congress has facilitated the aggregation of many more cases that previously would have stayed in state court by federalizing them via CAFA and MMTJA.  Many of these aggregated cases encompass thousands, sometimes even millions, of individual claims.  Cases that serve as bellwethers can occur both within these aggregated juggernauts and outside them:  These are cases that are tried to test the value of claims to inform the settlement negotiations for other similar claims.  Thus, the decisionmakers in these aggregated and bellwether cases are making decisions that can impact potentially millions of people.  Yet we adhere to a system of jury composition that draws jurors from whatever locality in which the trial happens to take place, a vagary that may be driven by party forum-shopping or judges’ expertise, but does not reflect the scope of the task at hand.

The civil jury’s legitimacy is inextricably tied to its relationship with the community from which it is drawn.  The verdicts of local juries in local cases seem legitimate when the jury’s decisionmaking reflects local values.  If the legitimacy crisis in complex cases reflects the disconnect between the national scope of large-scale litigation and the local community from which the jurors hail, the question becomes whether the verdicts of a national jury would carry more legitimacy.  I think so for three interrelated reasons.  First, national juries would not be subject to the criticism that local values should not set national policies.  Judge Posner once famously argued that “a single trial before a single jury” produced by class certification of a national “issues” class would allow that one jury to “hold the fate of an industry in the palm of its hand.”³ He asserted that a better alternative would be to submit the issue to “multiple juries constituting in the aggregate a much larger and more diverse sample of decision-makers.”⁴ A national jury might address Judge Posner’s concerns:  The jury would be larger in number,⁵ commensurate in scope to the dispute, and representative of the community that will feel the effect of the decision.

The second reason that national juries may produce more legitimate verdicts is that parties will lose some of the incentive to forum-shop.  Filing a claim in a particular district will no longer carry the advantage of capturing a particular local jury pool.  After all, the perception of rampant forum manipulation motivated Congress to adopt legislation to shift most class actions and large-scale single-event tort cases to federal courts.  A national jury system would align the decisionmaker with Congress’s nationalization impulse.

Third, national jury verdicts will have greater legitimacy because the quality of decisionmaking is likely to improve when jurors are drawn from a national pool.  Venire members drawn from local pools are more likely to share local biases, and these biases are mutually reinforcing during deliberations.  Indeed, this bias factor is precisely why litigants forum-shop.  The national venire will negate that problem and could maximize diversity in terms of both demographics and interests.  Thus we could gain the superior collective decisionmaking of a group with “diffused impartiality.”⁶

The Seventh Amendment, which preserves the right to jury trial in federal civil cases, has forced us to tolerate some efficiency loss and forum manipulation because its Reexamination Clause is an important check on procedural innovations to streamline complex litigation.  Techniques that pluck out particular issues for aggregate resolution (like issue classes under Rule 23(c)(4)) or for separate treatment (like bi-, tri-, or polyfurcation) risk forbidden “reexamination” if future decisionmakers reconsider decided issues while evaluating remaining issues that overlap.⁷

The reexamination problem reflects tension between competing values in complex litigation:  Consolidated cases may lead to unconstitutional reexamination of overlapping issues, yet trying individual cases presents problems of efficiency loss and forum manipulation.  We must therefore choose between the evil of bifurcation and the evil of inefficient relitigation of the same issue, with the concomitant risk of inconsistent results.  A third option—treating a single litigation as a national unit—vests too much power in one local jury to unleash national consequences.

Is there a fourth option?  Empanelling a national jury would mitigate reexamination problems while preserving the efficiency gains of aggregation.  A national jury would also address the concern that a local citizenry should not decide issues of national importance.  And, most importantly, it would vindicate the animating concern of the Seventh Amendment: citizen participation in civil dispute resolution.

Our willingness to work out the logistical details of the national jury proposal and to absorb its inevitable costs is a function of our commitment to citizen participation in large-scale litigation.  One difficulty, of course, will be assembling a national jury pool representative of a country as large and diverse as the United States.  Even in much smaller jury districts, underrepresentation of minorities on jury venires has sparked an enormous amount of scholarly literature and litigation.⁸ Congress would have to consider how to assemble a nationally representative venire.  A starting point might be to draw candidates for the national jury pool from congressional districts, since those boundaries have already withstood constitutional and statutory scrutiny under election laws.⁹ The census process could also be used to draw districts.

The expansion of jury pools from local to national may also require us to rethink the size of the venire and the petit jury, as well as verdict format and voting mechanisms.  Obtaining some semblance of the required representativeness will no doubt require larger juries than the current six or twelve members.  Indeed, in order for a national jury to function, the discussion may well have to shift to how large a group can effectively deliberate without becoming unwieldy.

The grand jury model may prove useful.  One can imagine a national jury as a cross between the grand jury and the special jury:  Jurors could serve for specified lengths of time, perhaps in particular courts hosting multi-district complex litigation.  The learning curve for such jurors would be high.  Having decided, say, causation issues in one products liability case, the national jury would have an informational advantage in understanding procedure and applicable substantive law for other cases.  And this gain can be realized without sacrificing the democratic makeup of the jury—a quality lost in elitist special juries.

The civil jury, though steeped in history, is not frozen in time.  In an era of increasingly complex litigation, the civil jury must adapt structurally to modern disputes while preserving its rich history and constitutional function.  Empanelling national juries in cases of national scope may well be the only way to preserve meaningful citizen participation in large-scale litigation.

Acknowledgments:

Copyright © 2009 New York University Law Review.

Laura G. Dooley is Professor of Law & Michael and Dianne Swygert Research Fellow at Valparaiso University School of Law.

This Legal Workshop Editorial is based on the following Article:   Laura G. Dooley, National Juries for National Cases: Preserving Citizen Participation in Large-Scale Litigation, 83 N.Y.U. L. REV. 410 (2008).

With so much riding on the class certification determination, one would have thought that procedural law would have arrived quickly at a clear and broadly shared understanding of the nature of that determination and the permissible parameters for inquiry by the court.  That, however, has not been so.  For decades after the adoption of the modern Rule 23, procedural law found itself occupied with what one might describe as a “first generation” of questions concerning class certification.  These first-generation questions centered on the meaning of the Supreme Court’s cryptic 1974 statement in Eisen v. Carlisle & Jacquelin that “nothing” in Rule 23 “gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action.”¹

In a series of decisions in recent years, the federal appellate courts largely resolved the first-generation questions about what had come to be known as the Eisen rule.  True enough, Rule 23 does not require plaintiffs seeking to certify a class to satisfy a preliminary injunction-like standard cast in terms of the likelihood of success on the merits.  Still, the court may not accept a bare assertion in the class complaint that class treatment is appropriate.  Class certification is not a matter of mere pleading but, rather, of affirmative proof that the requirements stated in Rule 23 have indeed been satisfied.  The court must make a “definitive assessment” that these requirements have been met, even if that assessment entails the resolution of conflicting proof and happens to overlap with an issue—even a critical one—on the merits.²

These first-generation answers constitute a helpful step forward, but they have yielded still harder and, as yet, underexplored second-generation questions.  The time has come to expose the nature of these second-generation questions surrounding class certification and to offer a normative account of the proper allocation of institutional authority to resolve them.  A deep and increasingly important trend in contemporary class certification disputes concerns the degree to which ostensible battles over conflicting proof on the certification question are the stalking horse for something else:  underlying disputes that often have little to do with the proof or the facts and everything to do with the proper meaning of governing law.  A world in which the class certification determination effectively gauges the on-the-ground impact of the class action device is a world in which institutional questions about who should make that determination, and how that determination should be made, loom large.

All of this may sound new.  There are, however, deeper roots for what has emerged today at the forefront of class certification.  Writing in the gendered language commonplace in 1897, Oliver Wendell Holmes famously ventured that, in legal studies, “the black-letter man may be the man of the present, but the man of the future is the man of statistics and the master of economics.”³  So it is, more than a century later, that the major unanswered questions surrounding class certification center upon its interaction with areas of what one might call “Holmesian law”—bodies of substantive law in which statistical or economic analysis is invoked to play a significant role in legal doctrine.

In keeping with Holmes’s prediction, the flashpoints today over class certification concern the role of aggregate proof of a statistical or economic nature.  By “aggregate proof,” I refer to evidence—characteristically, in the form of expert submissions involving sophisticated statistical or economic analysis—that presumes a view of the proposed class in the aggregate.  From that vantage point, aggregate proof then seeks to trigger the application of substantive doctrine in such a way as to suggest a common, class-wide wrong attributable to the defendant.  The hard question concerns the propriety of this use of aggregate proof to conceptualize all members of the proposed class as a cohesive unit—as the victims of the same wrong under governing law, rather than a series of individualized wrongs ill-suited for class treatment.

Appellate courts faced with motions for class certification in two of the most closely watched, high-stakes class actions in recent decades—one against the tobacco industry under the Racketeer Influenced and Corrupt Organizations Act (RICO),⁴ the other against Wal-Mart, Inc. under Title VII of the Civil Rights Act of 1964⁵—diverged over the treatment of aggregate proof.  The proper role of aggregate proof in class certification determinations is far from a mere technicality.  The desired effect of aggregate proof is considerable—indeed, well-nigh decisive—on the class certification question.  If everyone in the proposed class is, in some sense, the victim of the same wrong (though, perhaps, to varying degrees), then it would seem straightforward for the court to recognize that commonality by way of class certification.  The impulse is for the scope of the lawsuit to conform to the scope of the aggregate proof—for the proposed RICO class to encompass all smokers of light cigarettes across the country and for the proposed class against Wal-Mart to encompass the company’s entire U.S. operations.

Cast in their strongest terms, arguments for class certification premised on aggregate proof seek to tap into the core justification for the class action as the crucial procedural tool to forge into a viable unit claims that would not be viable individually.  The implication invited by class counsel is that only by taking an aggregate, class-wide perspective does the wrong allegedly committed by the defendant come into focus.  The ultimate factfinder would be entitled to disbelieve the plaintiffs’ aggregate proof, just as it might disbelieve any other form of evidence.  But that recognition—so certification proponents contend—is all the more reason for a court not to abort consideration from a class-wide perspective by withholding class treatment in the first place.  In the parlance of Rule 23, aggregate proof inherently frames “questions” that are “common” across the posited aggregate unit, because such proof takes that unit as its starting point and then seeks to trigger substantive doctrine that characterizes all class members as the victims of a common wrong.

At the same time, arguments for class certification premised on aggregate proof exhibit a deeply troubling circularity.  On a more skeptical view, such arguments amount to the justification of aggregation by reference to evidence that—at least, as a matter of economic or statistical methodology—presupposes the aggregate unit whose legitimacy the court is to determine.  If a cohesive class can be created through such savvy crafting of the evidence, then there would seem to be little limit to class certification in our modern world of increasingly sophisticated aggregate proof.  The law would run a considerable risk of unleashing the settlement-inducing capacity of class certification based simply upon the say-so of one side.  Yet the status of class treatment as the exception, not the norm, for civil litigation suggests strongly that one side’s procedural preference alone cannot be determinative.

At this early second-generation stage, then, the law of class certification finds itself seemingly confronted with an all-or-nothing choice:  Either the scope of aggregate procedure must follow more or less automatically from the framing of admissible proof along the lines of the proposed aggregate unit or class certification must fail routinely on account of the circularity problem.  I resist this choice by explaining how the seemingly stark alternatives posited for class certification today stem from an understandable but mistaken premise.

The hard questions surrounding class certification today are—contrary to conventional wisdom—only superficially questions of fact, conflicting evidence, and dueling expert witnesses.  Properly understood, aggregate proof frequently offers not so much a contested account of the facts that bear on class certification but, more fundamentally, an implicit demand for a new and often controversial conception of the substantive law that governs the litigation at hand.  The real concern about aggregate proof in class certification lies in its threat “to conform the law to the proof.”⁶  The leap from aggregate proof to legal doctrine is precisely the point on which courts should focus today in the posture of class certification.

Three related points emerge from this fresh conceptualization of class certification:

1. Courts should be more transparent about the precise nature of the dispute in contested class certifications. A major part of the problem today is that, oftentimes, courts seemingly do not even realize that contested class certifications center upon contested accounts of governing law—accounts that only superficially take the form of dueling expert submissions;

 

2. Recognition of the interplay between aggregate proof and governing law informs the standard of review for class certification rulings. The analysis here highlights considerable room for appellate oversight of class certification determinations, with the appellate courts cast in their familiar role of de novo review to ascertain the proper account of governing law, and not in a deferential role to review discretionary, trial-level determinations as to factual or evidentiary matters; and

 

3. This perspective reorients the class certification determination in institutional terms. This third point is the logical corollary of the first, which clarifies the legal character of many class certification disputes today. The institutional relationship that usually matters in contested class certifications, I argue, is not so much the one between court and jury but, rather, that between court and legislature. When aggregate proof offers not merely a contested account of the facts but, at bottom, a contested account of governing law, the court should be concerned not with intrusion upon the jury’s role in the event of trial but, instead, with the degree of lawmaking power that the court properly may wield relative to the legislature in the particular area of law at issue. This is not to suggest that class actions—any more or less than conventional, individual lawsuits—cannot serve as vehicles for change in legal doctrine. It is simply to say that the proposed class-wide nature of the litigation should exert no independent weight in arguments for such change. As in constitutional adjudication, one might say that it is “emphatically the province and duty” of the court “to say what the law is”⁷ when the answer to that question will determine whether the proposed class is cohesive.

Recognition of the law-declaring dimension of the certification inquiry does not point uniformly for or against class certification when aggregate proof is in play.  Rather, class certification appropriately admits of differences informed by the proper conceptualization of applicable law in a given case.  When social science has assumed the mantle of legal doctrine—in, say, antitrust or securities law—the resolution of competing expert submissions cast in social science terms will tend, quite properly, to gravitate in the direction of judge over jury and of law over fact.  Areas of law already infused with social science, however, are not the only terrain for class actions.  What the courts are now seeing in such contexts as RICO and employment discrimination amounts to an effort to invite a similar kind of infusion, one sometimes reliant not on economics alone but also on statistical analysis informed by such disciplines as sociology.  Here, courts are likely to encounter more difficulty in discerning when dueling expert submissions on class certification are really dueling over the meaning of governing law, precisely because the integration of legal doctrine and social science is still a tentative, contested enterprise in these areas.

The approach offered here does not authorize courts to reach out to decide legal questions unrelated to the application of Rule 23 requirements.  A question concerning the proper meaning of governing law matters in the class certification context only insofar as the answer has the potential to reveal fatal dissimilarities within the proposed class.  When the concern about the proposed class is not that it exhibits some fatal dissimilarity but, rather, a fatal similarity—a failure of proof as to an element of the plaintiffs’ cause of action—courts should engage that question as a matter of summary judgment, not class certification.  Here, too, second-generation case law exhibits confusion, with some courts overreaching in the class certification inquiry to the displacement of the domain for summary judgment—the motion that rightly polices the institutional relationship between the court and the factfinder at trial.

Law in a given area, moreover, is certainly not stuck forever with its present-day content.  But, as law reform efforts proceed apace, spurred by new insights from social science, courts in the posture of class certification must remain attentive to matters of institutional role—to the line between judicial interpretation and doctrinal changes appropriately left for legislative determination.  Interpretation of governing law should not occur in a manner oblivious to its implications for aggregate procedure.  But it should occur both transparently and self-consciously.

Looking back in procedural history, one might say that this analysis of aggregate proof in class certification offers a cautionary rejoinder to aspirations for the creation of a genuinely transsubstantive body of procedural rules.  What we are witnessing today, not merely in class certification but across the spectrum of major pretrial procedural rulings, is an emerging effort to bring the system of notice pleading embraced in the 1938 overhaul of the Federal Rules into line with the on-the-ground reality of civil litigation today:  a world dominated by settlement, in which the pre-trial phase effectively is the trial.  This reality underscores all the more the practical desirability of law clarification—and, if necessary, law correction via de novo appeal—before class certification precipitates settlement.  Before that occurs, it is incumbent on the courts to pinpoint and to resolve forthrightly open questions of law that bear upon the cohesiveness of the proposed class.

Acknowledgments:

 
Copyright © 2009 by New York University Law Review

Richard A. Nagareda is Professor of Law and Director of the Cecil D. Branstetter Litigation & Dispute Resolution Program at Vanderbilt University Law School. 

This Editorial is based on the following full-length Article: Richard A. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. REV. 97 (2009).

Although the Duke Law Journal’s article, Milberg’s Monopoly: Restoring Honesty and Competition to the Plaintiffs’ Bar,¹ reflects a lot of effort by student author James McDonald, it is a very disappointing article in terms of analysis and reliability of information. Mr. McDonald and the Duke Law Journal are entitled to express their opinions on the important issues raised by class actions, but the article misapprehends many of the realities of class action law and practice, and repeats highly pejorative rumors and speculation about class actions as though they were fact.

By way of introduction and disclaimer, I was a partner in the Milberg Weiss firm for several years, and was an editor of the Duke Law Journal many years before that. I now practice and teach law.

The following are my principal concerns with the article:

1. Milberg Weiss did not suffer an “Enron-like collapse,” (p. 506), and is alive and well.

2. The federal prosecutors never charged, nor could they ever prove, that class members were harmed by the wrongdoing (p. 506). The best they could do when the trial judge asked them whether this was a “victimless crime” was to suggest that competing class action firms might have lost business to Milberg Weiss. The underlying cases were real fraud cases, prosecuted to judgments or court-approved settlements, yielding court-awarded attorneys fees. No client or defendant was disadvantaged by the wrongdoing, which affected only internal issues among class counsel as to leadership of the cases.

3. For the reasons stated in the prior paragraph, it is a gross overstatement to say that the tactics at Milberg Weiss were “as fraudulent and unethical as any action taken at Enron, WorldCom or Tyco.” (p. 507). Stockholders lost billions in those frauds, and the wrongdoing was central to the issuers’ businesses and was widespread. The vast majority of Milberg Weiss’s lawyers were uninvolved in the wrongdoing, and continue to represent investors and others, with court approval. Indeed, the Coughlin Stoia Robbins Geller & Rudman firm, partial successor to Milberg, was appointed to represent the investors in Enron despite ad hominem attacks like those in this article made by competing class action firms seeking competitive advantage from the indictment.

4. The term “strike suit,” (p. 507), is both pejorative and highly ambiguous in meaning. Contrary to the Note’s suggestion, it is most often used to refer to cases that have little merit but are filed to obtain a quick “cost of defense” settlement. That does not seem to be what the author means because few (if any) of the cases the author refers to were settled at that low level. It does not advance understanding of class actions to use such undefined (but highly charged) terms.

5. At page 508, Mr. McDonald says that Milberg Weiss breached its fiduciary duty to clients, but again, the Note provides no backup for that statement, and the prosecutors declined to state a theory for proving it.

6. Securities fraud cases do not pit stockholders against their own company. (p. 511). Rather, they pit stock purchasers during a period of alleged fraud (often far less than all stockholders, and including many ex-stockholders) against those who made false statements (officers, directors, accounting firms, investment bankers, et cetera, plus the company). The fact that business interests attack class actions by misdescribing them this way is not a good reason for the author to parrot this language. (Derivative cases do meet the author’s description, but derivative cases and class actions are different, and a serious legal journal should be able to keep them straight.)

7. To say that “many suits settled quickly for only a fraction of their potential worth” (p. 512) is the kind of vague attack we often hear on Capitol Hill. Nearly every civil case settles for a “fraction of its worth,” the only question being whether the fraction is three-fourths, or one-hundredth. Again, the author is repeating pejorative and empty phraseology employed by those unhappy with the fact that investors can band together and try to recover their fraud losses. Professor Janet Cooper Alexander’s article suggesting that all cases settle for the same fraction of their worth reached that conclusion by extrapolating from a grand total of three cases! It is rebutted in a piece I coauthored in the San Diego Law Review. Possibly the author’s research did not find it.

8. Mr. McDonald says that Mr. Lerach and his colleagues in California (I guess that would include me) “dreamed up” new types of claims and defendants, and went so far as to sue accountants, lawyers and bankers! There is nothing exotic about suing accountants for securities fraud, and lawyers (White & Case) were defendants in the first securities case I ever worked on, years before I joined Milberg Weiss. Bankers paid most of the billions recovered in Enron, so if we dreamed it up, it was a good thing.

9. The Note says that unidentified sources with whom the author has not spoken call Mr. Lerach a “Godfather-like . . . ruthless don” who demanded “tribute” from other law firms. (p. 514 n.60). This seems like a rather reckless statement to make without sources, and seems more appropriate to the pages of People Magazine than of the Duke Law Journal.

10. As the author points out, the 1995 Private Securities Litigation Reform Act (written by people who didn’t like class actions) placed large investors in a favored position as class action plaintiffs on the theory that large investors would know whom to sue, whom to hire as counsel, and when to settle. Thereafter, Milberg Weiss was retained by many large investors—public and union pension funds. Unable to accept a positive point that does not fit into his thesis, the author adds that “rumor suggests that Milberg Weiss paid a share of its attorneys’ fees to labor pension funds it represented.” (p. 532). I do not believe this to be true, nor have I ever read it anywhere else, and in any event, this type of rumor-mongering is really quite outrageous for an academic publication.

11. Mr. McDonald concludes, based on who knows what, that even after the 1995 Act, and separate and apart from the Milberg Weiss wrongdoing, “law firms continue to be chosen [for class actions] using suboptimal criteria such as personal relationships, as opposed to quality of representation.” (p. 533). How did he conclude this? Institutional plaintiffs choose law firms the same way corporate defendants do—location, reputation, prior relationships, price, et cetera. If institutional plaintiffs are choosing the largest, best funded, best staffed plaintiffs’ firms, and often using the same firm more than once, (p. 535) what exactly is wrong with that?

12. Even when the author trips over useful information, he misapprehends it. The reason securities lawyers were puzzled over the Milberg Weiss investigation and dubious about serious charges resulting therefrom (p. 533 n.188) is that they understood that what was being investigated was basically beside the point to securities litigators focused on the merits of their cases. (See next point.)

13. More generally, defense lawyers and other sophisticated players in this field (including judges) understand that the individual plaintiff does not run a class action, his lawyer does (with court oversight), and class action law recognizes this in many ways, for example, permitting counsel to settle a case even if the class representative does not support the settlement. Picayune disputes over who the plaintiff is, and whether he will “supervise” counsel bore serious litigators to death, because they are phony issues entirely collateral to the merits.

14. The author bemoans the lack of small firms obtaining lead counsel status (p. 535), but small firms do not get the defense side of class actions either, probably because these are not small cases.

15. Why should a pension fund that litigates one class action successfully be presumed less qualified to litigate another one (p. 541)? The author believes that constantly changing plaintiffs and constantly changing plaintiffs’ counsel somehow provides a public benefit, but it would appear more of a detriment to investors. Experience counts, and certainly is not a negative.

16. The author suggests that the class action market is dominated by “a few large firms seeking fast settlements.” There is no support cited for the latter half of this assertion, and it is simply wrong. The largest and best firms in this business settle some cases fast, settle some cases on the courthouse steps, and take some cases to trial. It is the smaller firms, and the neophytes, the very firms the author wishes to elevate, who often settle fast before they bankrupt their small law firms with a case that is more challenging than they suspected when they read breezy articles about the riches of class action lawyers.

I am sorry to sound so harsh toward a student piece, but Mr. McDonald chose a controversial topic, and having waded into deep water, he should have known how to swim better than this. I have spent thirty-five years in this field defending, prosecuting, and teaching class actions, and it is sad to read some of these misunderstood points, inaccurate allegations, and outlandish rumors in a publication I once served on, which is published at an institution I care about very much.

Acknowledgments:

Copyright © 2009 Duke Law Journal.

Len Simon is a former Partner at Milberg Weiss and a former Editor of the Duke Law Journal.

This Editorial is a response to the following full-length Note:  James McDonald, Milberg’s Monopoly: Restoring Honesty and Competition to the Plaintiffs’ Bar, 58 DUKE L. J. 505 (2008). Click here for the full version.

This Article dissents from the consensus in favor of proportionality rules, but not for the same reasons as those criticizing proportionality as too strong or too weak a limitation on discovery cost. Many who criticize proportionality rules as ineffective place the blame on bad rulemaking or judicial decisionmaking;² even if those critiques are correct, this Article diagnoses the problem as a more fundamental one that better rules and decisions cannot fully fix. This Article sees proportionality limits as impossible to implement effectively: sometimes they fail to curb discovery excess or allow costly discovery on meritless claims; other times they disallow discovery that meritorious cases need.

The problem with proportionality rules is that they ask the impossible: judges must decide when discovery cost is proportional to some measure of “value” that includes both evidence value to jury deliberation and case value to the parties and society. This yields a fundamental information-timing problem: discovery disputes occur before parties marshal all the evidence, so how can courts measure the value of particular evidence, much less case merits? Further, discovery has more probative value in close-call cases than in the strongest and weakest cases (in which more evidence is less likely to affect case outcome)—an observation paralleling Professor Robert Cover’s classic 1975 argument that litigation-procedure rulings cannot truly be independent of case merits, contrary to the conventionally assumed “transsubstantive” nature of the federal rules. Case merits, though critical to discovery decisions, typically remain hidden in a cloud of uncertainty during discovery because the court is not yet able to sift fully through the evidence and arguments.

Due to the information costs (including time) of assessing case merit during discovery, courts often cannot tell which litigants’ braggadocio is cheap talk and which reflects real case merit. As a result, courts must ignore parties’ merits arguments and adjudicate discovery disputes as if all cases of a similar type in the pool (that is, cases arising under the same statute that are neither facially frivolous nor obvious winners) warrant similar discovery. Courts’ discovery rulings should be based on the merit of the claims, but merit cannot be communicated effectively; as a result, those rulings must be based on the average value of all cases in the pool. In this pooling equilibrium, the best available strategy for courts is to rule the same on all cases in a pool regardless of case merit—even though these rulings are suboptimal in the sense of yielding too much discovery in low-merit cases and too little discovery in high-merit cases. Other scholars and commentators have noted that discovery featuring pooling equilibria requires making rulings based on rough averages; this Article depicts the problem as pervasive and intractable because the rules require proportionality inquiries that demand of judges an unrealistic level of knowledge not only of the disputed evidence, but also of the case merits.

Under this analysis, the quest for better discovery limits has disappointed not because of bad decisionmaking or bad rulemaking, but because courts and parties are stuck in a pooling equilibrium. This is a fundamental information-timing problem inherent in the discovery stage of litigation: optimal evidence-gathering decisions require more merits analysis, but merits analyses require more evidence gathering.

Deferring close decisions on potentially useful but costly evidence until case merit is clearer—until meritorious cases distinguish themselves, turning a pooling equilibrium into a separating equilibrium—is one possible solution to the pooling equilibrium. Fortunately, litigation reaches just such a point—after summary judgment. In deciding summary judgment, courts allow to proceed to trial only claims a reasonable jury could decide in favor of either party, weeding out both claims with the lowest probability of merit (summary judgment grants to defendants) and claims with the highest probability (grants to plaintiffs). A case reaching trial, having survived summary judgment, has a reasonable probability of merit. Even without adopting the old theory that cases reaching trial likely have fifty-fifty odds, cases reaching trial are more likely than others to be close calls, and they certainly have higher average merit than the pool of all filed complaints. More evidence, like costly electronic data, has more value to the jury in close-call cases than in very weak or strong cases.  

Accordingly, much of the scholarly debate on discovery misses the mark by focusing on how much to limit costly discovery, such as with proportionality rules and numerical caps. Rather, the debate should focus on when in litigation to allow costly discovery. Specifically, decisions regarding costly discovery should be postponed until after summary judgment to ensure that costly discovery is imposed only in cases with a greater probability of merit. Although this proposal might enable judges to deny or postpone more discovery, any discovery denied or postponed under this proposal would probably already be denied based on judges’ proportionality discretion. Thus, the main utility of this proposal would be to explain how courts could allow more discovery—only after summary judgment—of helpful but costly evidence that courts often disallow and declare nondiscoverable. 

Nobody previously has suggested solving the dilemma of costly discovery with post–summary judgment discovery, which might seem to be a counterintuitive idea; under Federal Rule 56(f) and the case law applying that rule, summary judgment typically comes only after all discovery is completed. But there is no requirement that all discovery must precede summary judgment, which is why courts sometimes allow summary judgment motions limited to threshold questions (like a defendant’s immunity from suit Unusually costly evidence should be another exception to the rule of summary judgment coming after all discovery. Surviving summary judgment means a case is likely the sort of close call warranting more fact gathering, so courts should allow truly costly discovery, like the heavy e-discovery that they commonly disallow, only once a case survives summary judgment. No rule change is required to implement this Article’s proposal that courts revisit denials of burdensome discovery if a case survives summary judgment: existing rules give courts broad case management authority, including authority over the timing of discovery (Rule 16(c)(2)(F)), the timing of summary judgment motions (Rule 16(c)(2)(E)), and the sequencing of discovery (as the Rule 16 Advisory Committee’s note elaborates). Thus, this proposal could not only improve litigation discovery, but it could also provide a welcome answer to courts’ riddle of how to rule on proportionality without circular, premature case-merit evaluations. A new rule would be advisable, though, to minimize the risk of courts misusing the proposal to deny discovery excessively.

This Article’s analysis and proposal illustrate a broader point about economic analysis. Fitting into a line of scholarship analyzing litigation as a series of points in time when information emerges,³ this Article indicates that for economic analysis of litigation to provide accurate diagnoses and useful recommendations, it must do more than just prescribe cost-benefit comparisons; it must consider the timing-and-stages nature of litigation, such as by delving into the details of discovery, prelitigation settlement, and other events short of trials and dispositive motions.

Acknowledgments:

Copyright © 2009 Duke Law Journal.

Scott A. Moss is Associate Professor, University of Colorado Law School.

Scott A. Moss can be reached by e-mail at scott.moss@colorado.edu

This Editorial is based on the following full-length Article:  Scott A. Moss, Litigation Discovery Cannot be Optimal but Could be Better, 58 DUKE L.J. 889 (2009). Click Here for the Full Article

Effective courts are central to sustained economic development.  An obvious implication is that countries with underperforming courts should reform them.  Yet experience has shown reform to be both difficult and slow, especially where the independence and integrity of the judiciary are in question.

There is, however, an alternative approach to dealing with a dysfunctional court system—one that can go hand in hand with domestic judicial reform.  The law can enable litigants from countries with ineffective judicial systems to have their cases adjudicated in the courts of other nations that have better-functioning judicial systems.  We argue that the case for facilitating this type of extraterritorial litigation is strong.  Extraterritorial litigation, though presently small in volume, could offer considerable benefits if it were more widely available.  And, from a practical standpoint, that availability is increasingly at hand.  A revolution in communications technology, including continuing improvements in the quality and cost of videoconferencing, make it increasingly effective to conduct litigation in remote courts—including courts located across international borders—without requiring that parties, witnesses, or lawyers appear physically before a judge.  Just as New York City residents often use the telephone to obtain assistance with computer software or utility bills from service personnel in Bangalore, India, merchants in Bangalore should soon be able to have their local commercial disputes decided in New York courts via the Internet while they remain at home in Bangalore.

Private arbitration is another alternative to ineffective local courts, and its important role in resolving commercial disputes will surely continue to expand.  Yet, for the foreseeable future, public courts seem destined to play an important role in contract adjudication that arbitration cannot assume—a conclusion strongly supported by recent empirical evidence of the relative rarity of arbitration clauses in important contracts between public corporations in the U.S.  The advantage of well-functioning public courts over private arbitration in contract enforcement seems to derive from the courts’ more principled approach to adjudication.  Broadly speaking, arbitration serves primarily as a means of ex post dispute resolution, seeking to offer an acceptable settlement of a conflict once it has arisen—an approach that tends toward compromised judgments.  Adjudication in (well-functioning) public courts, in contrast, is more focused on holding parties to the contractual commitments they made ex ante, before a conflict arose.  And it is to those commitments that the parties must be able to bond themselves if commercial transactions—and hence economic activity in general—are to develop effectively and efficiently.  Consequently, access to effective public courts is important in commercial contracting, and there are strong advantages to allowing merchants to use foreign courts if their domestic courts are weak.

For extraterritorial litigation to become a feasible alternative in more than just a narrow range of cases, however, it is essential that states be given strong incentives to attract foreign litigants.  At present, the main incentive is to create business for the local bar and other local service providers.  But this approach has obvious drawbacks.  In particular, it drives jurisdictions to force foreign litigants to make extensive use of local lawyers and other local service providers, thereby rendering extraterritorial litigation unattractive for all but very high-stakes cases.  A superior approach is to enable jurisdictions to charge higher court fees for hearing purely foreign cases.  This requires altering norms in many jurisdictions that seem to bar the imposition of higher court fees on foreign litigants than on domestic litigants—norms that effectively force some nations’ litigants to rely on weak courts and thus have the ironic consequence of frustrating rather than furthering true international equality in access to judicial services.

 
I.
Potential Benefits

What are the potential benefits of extraterritorial litigation of commercial contracts, assuming it can be made broadly accessible? The first and most direct benefit is familiar and is frequently mentioned as an argument for allowing choice of forum clauses: litigants from jurisdictions with low-quality courts will be given access to better courts to resolve their disputes.  Important as this is, however, it is not the most important benefit; the advantages of access to better courts extend well beyond those gained by the persons who actually go to court.

The more fundamental advantage of access to better courts is that more effective contract enforcement makes all contractual relationships more dependable, including the overwhelming majority that will never go to court.  Consequently, rapid and principled contract enforcement can transform commercial relationships in general, with broad benefits for the efficiency of economic activity.  Admittedly, countries with poorly functioning court systems will also often do poorly when it comes to enforcing judgments, whether they are domestic or foreign.  Giving litigants access to foreign courts does not solve the problem of inadequate enforcement institutions.  However, a combination of good courts and poor enforcement seems strongly preferable to a combination of bad courts and poor enforcement.

Beyond giving global access to the world’s most effective judicial systems, extensive extraterritorial litigation should improve both judicial systems themselves and the law they administer.  In effect, we are proposing a global market for judicial services in contract litigation.  The resulting competition should—as competition generally does—provide a stimulus to improve the quality of judicial services offered. 

The advantage of freer choice of forum for commercial litigation lies not just in a stimulus for improvement in quality and efficiency generally, but also in the opportunity for more effective comparison between different approaches to adjudication.  For example, it is not completely clear to what extent jury-based systems are superior to non-jury-based systems.  The success in corporate law of the Delaware Chancery Court, which is a court of equity and therefore sits without a jury, suggests one answer.  A large sample of commercial contracts studied by Professors Eisenberg and Miller, in which only 20 percent of litigants waive the right to a jury trial, suggests something different.¹  If litigants have broad choice among courts in differing legal systems, it will become far easier to make comparisons between differing approaches to these issues and others and to discover which work best in given circumstances.  That information can then be used not just by litigants in their choice of courts, but also by lawmakers in reforming their judicial systems.

 
II.
Potential Problems

The creation of a global market for judicial services is not without problems.  However, we believe that these are not sufficiently serious to stand in the way of creating a global market.

To begin with, the risk that the parties’ choice of forum will reduce their own combined gains from contracting seems small.  We suggest a global market for judicial services only in those cases where the forum is chosen by mutual agreement between merchants.  The requirement that the choice of forum should be bilateral precludes the plaintiff from choosing a forum that will benefit him at the expense of the defendant.  Moreover, by limiting our approach to merchants, we hope to avoid or at least minimize problems arising from informational asymmetries between the parties.

The more challenging question is whether increased access to foreign courts might produce substantial negative externalities for those who continue to use a country’s domestic courts or—what is effectively the same thing—reduce positive externalities.  Litigation can yield positive externalities of two types.  First, it can improve substantive law through the refinement of precedent.  Second, litigation can benefit the court system by permitting judges to hone their skills.  Extraterritorial litigation shifts those external benefits—at least to begin with—from origin states to host states, threatening to further weaken the legal systems of the origin states.  Will the external benefits conferred on host jurisdictions and their potential litigants be greater than any loss of such external benefits that’s suffered by origin states—and will the overall gains to origin states be substantially positive?  Although a priori analysis cannot be definitive, there are good reasons to believe that the answer to both questions is yes.  The problem of precedent provides an illustration.

Consider first a case for which clear precedent is lacking both in the origin state and in the (potential) foreign host state.  In this situation, beneficial externalities should frequently be greater if the case is tried in the host state.  First, the host state will often be chosen because its courts are particularly competent.  Consequently, the quality of the resulting case law will be particularly high.  Second, the parties will typically choose not just the courts but also the substantive law of the host state.  Given that litigants from many jurisdictions will end up choosing the same law—namely that of the most popular host state—the resulting case law will benefit a particularly large number of economic actors.  Third, a precedent produced within the host state’s law is also available to serve as a guide to origin state courts in addressing similar issues under the origin state’s own law—just as courts from other U.S. states often follow the lead of Delaware’s judiciary when faced with issues of corporate law.

Now consider a case for which clear precedent exists in the (potential) host state but not in the origin state.  If the case is governed by host-state law, it will likely be settled rather than litigated.  If instead the case is governed by origin state law, the resulting uncertainty may result in litigation.  That will involve extra expense for the parties immediately involved, but may also produce precedent valuable to those litigants forced to use origin-state rather than host-state law and courts (for example, because they are not merchants).  To the extent that host-state precedents can serve as a guide to origin-state courts, the tradeoff favors having the case governed by host-state law and courts.  But host-state case law may not always be suited to serve a strong precedent-like function in the origin-state legal system because of differences in the two states’ legal cultures.  And even if they might serve that function well, host-state precedents may, by virtue of their foreignness, have too little salience for judges, lawyers, and individual economic actors in the origin state to guide their actions as clearly as origin-state precedents.  But even in this case, one must set off against such negative externalities the benefits of extraterritorial litigation to those origin state parties who can make use of it.

In sum, though the issue is ultimately an empirical one, good reasons support our belief that the positive externalities of adjudication, much less the effectiveness of the law in general, will be greater with freer access to extraterritorial litigation.

 
III.
Necessary Reforms

For extraterritorial litigation to become widely available, the jurisdiction conferred by contractual choice-of-forum clauses must be respected by the courts in both the host state and the origin state.  Further, host-state judgments must be recognized and enforced in states of origin without substantial delay or cost.  To some extent, this can be accomplished through unilateral action by individual states.  More broadly, nations could pursue these objectives by widely adopting the 2005 Hague Convention on Choice of Court Agreements, and further by amending that Convention to remove its limitation to international cases so that its provisions clearly extend as well to cases that are, except for choice of forum, purely domestic.  At present, however, even the first of these steps—let alone the second—seems politically remote.  Consequently, the more practical route may be for potential host states to negotiate bilateral treaties with potential origin states that provide for mutual recognition of choice-of-forum clauses in commercial contracts and for expeditious enforcement of judgments concerning such contracts that issue from each other’s courts.

Even if the principal legal obstacles to jurisdiction and enforcement are removed, potential host states are unlikely to encourage use of their courts by foreign litigants unless they can render that litigation remunerative.  Since many leading commercial jurisdictions subsidize their courts, this requires that host states be free to charge foreign litigants higher court fees than they charge domestic litigants.  Such a dual fee structure is unusual and runs contrary to the general legal culture in prominent federations of states such as the United States and the European Union.  Yet the alternative to charging higher court fees to foreign litigants is, in practical terms, simply to exclude them from the courts altogether—a result that is as unjust as it is inefficient.

 
IV.
Conclusion

Good courts are central to sustained economic development.  Yet in many jurisdictions around the world, courts are slow, inept, or corrupt.  A promising way of mitigating this problem is to let parties from countries with weak courts litigate commercial disputes in jurisdictions where the courts are much stronger.  Important technological developments, including rapid advances in telecommunications, are creating an environment in which such a global market for judicial services seems entirely feasible.  And there are compelling reasons to believe that the benefits of facilitating the emergence of that market would far outweigh the costs.

Acknowledgments:

Copyright © 2009 Cornell Law Review.

Jens Dammann is Assistant Professor, University of Texas School of Law.

Henry Hansmann is Augustus E. Lines Professor of Law, Yale Law School.

This Editorial is based on the following full-length Article: Jens Dammann & Henry Hansmann, Globalizing Commercial Litigation, 94 CORNELL L. REV. 1 (2008).
Click Here for the Full Article

My Article exploring the unconscionability game aims to make three contributions.  To begin with, it can help us understand arbitration law better.  I define arbitration law as the set of rules governing when arbitration agreements are enforceable, as well as the rules allocating decisional authority between courts and arbitrators, federal courts and state courts, and federal law and state law.  In particular, the strategic framework can help us make sense of some otherwise puzzling recent trends in the evolution of allocation rules.  As I will explain, these allocation rules can be understood as tools employed by pro-arbitration courts for indirectly combating what they perceive as overly aggressive use of state-law contract defenses such as unconscionability.

Somewhat more broadly, a second objective of the Article is to increase the visibility of the FAA among those who study federal courts law.  The conflict over the FAA implicates some of the recurring themes in the field, in particular the debates over judicial federalism and parity.  Traditionally, these clashes have been most conspicuous in politically charged domains like habeas corpus and civil rights litigation.²  Certainly these old debates retain vitality there, but today the real frontline may be civil litigation that pits consumers, tort claimants, employees, and other individuals against business interests.  Dissatisfaction in some quarters with how state courts and state law handle these cases has manifested itself through federal legislation such as the Class Action Fairness Act, judicial endorsements of broad readings of federal jurisdiction, Supreme Court review of state courts’ punitive damages awards, and, as we explore here, tensions over the scope of the FAA.  Indeed, the FAA provides a particularly fertile ground for the study of judicial federalism because, as explained further below, it imposes on all courts a federal duty of fidelity to general state contract law, a complex rule of decision that almost invites trouble.

Finally, the Article aims to provide a concrete illustration of certain strategic approaches to judicial decisionmaking.  Increasingly, sophisticated models of judicial behavior are moving beyond claims that judicial ideology and preferences matter.  Those claims may be true, yet doctrine is still relevant.  In fact, doctrine can itself be a strategic tool.  Lower courts can make doctrinal choices that accomplish their policy aims while simultaneously shielding their decisions from review.  In response, higher courts can fashion a new, less pliable doctrine in order to improve monitoring and reduce the opportunity for evasion.  The system is not static but reactive—a game.

With those goals in mind, let us see how the unconscionability game has developed and how it is played.

 
I.
Resistance to the Supreme Court’s Program

The Supreme Court has interpreted the FAA expansively, such that it applies to almost all economic transactions and almost every kind of claim, from common law fraud to employment discrimination.  Its principal provisions apply in both federal and state courts to the exclusion of conflicting state law.³ Regardless of whether the Court’s interpretations were correct, they have served to transform the FAA’s reach.

The Court’s fairly rapid embrace of arbitration was a shock to the legal system, or at least portions of it.  All courts and jurisdictions were suddenly required to enforce predispute arbitration clauses in almost every kind of contract, notwithstanding any state common law or statutory law to the contrary.  But while the Supreme Court can change the law, it cannot necessarily change other courts’ preferences.  Some courts, especially certain state courts, continue to view arbitration with skepticism, most often when it comes to cases involving consumers or employees who have signed nonnegotiated arbitration agreements embedded in standard form contracts.  (Their concerns may or may not be justified, but my aims here are simply explanatory and positive.  I do not here engage with the large literature debating whether arbitration is beneficial for consumers and employees.)

Because Supreme Court doctrine has moved so much faster and further to embrace arbitration than have some other parts of the judicial system, there is a sort of hydraulic pressure in the system that will seek release through whatever channels still exist for invalidating, or at least limiting, arbitration agreements.  The main channel that remains open to courts wary of the increasingly pervasive use of arbitration is the proviso in section 2 of the FAA stating that arbitration agreements must be enforced except “upon such grounds as exist at law or in equity for the revocation of any contract.”⁴  A state or federal court can invalidate an arbitration agreement under generally applicable state contract principles, such as unconscionability, but only if it uses those principles evenhandedly, treating arbitration agreements like any other contract; discrimination against arbitration is prohibited.⁵

Demonstrating the potential of the section 2 proviso, the last several years have witnessed a surprising burst of rulings invalidating arbitration clauses as unconscionable, especially in state courts.⁶  These rulings are surprising because unconscionability is usually regarded as an improbable defense that, despite some venerable precedents that appear in casebooks, rarely succeeds.⁷ These rulings typically do not attack arbitration per se—after all, arbitration is now favored as a matter of federal policy—but rather focus on details of contract formation or particular aspects of an arbitration clause, such as restrictions on relief, disadvantageous arbitral procedures, or bans on class-wide proceedings.  California was in the vanguard in employing unconscionability and related doctrines to invalidate arbitration clauses, but one can now find such cases in many places.

The newfound popularity of unconscionability is in part explainable by the simple fact that it is one of the few tools still available to courts that wish to limit the impact of arbitration.  But there is more to it than that.  Another of unconscionability’s virtues is that it provides at least the opportunity for furtive manipulation.  After all, unconscionability is a slippery doctrine; it is extremely difficult to tell if a decision invalidating an arbitration agreement on unconscionability grounds obeys the FAA’s rule of impartial treatment.  This difficulty creates room for courts to misapply, or perhaps even manipulate, state contract doctrines so as to nullify arbitration agreements while simultaneously insulating their decisions from effective scrutiny.

To express matters in somewhat more formal terms, a court wishing to strike down an arbitration agreement has a choice of various instruments.  The chosen basis for the decision can affect the likelihood of review and reversal by a higher court, even when holding the decision’s bottom line constant.  Lower court judges realize this, and so they can manipulate their grounds of decision both to advance their preferred outcomes and to make review of their decisions more costly.  This is the essence of the “strategic instruments” approach to judicial behavior.⁸

In the FAA/unconscionability context, we can posit two competing “decision instruments” for invalidating arbitration agreements.  The first instrument, which is really a collection of slightly different possible rationales, would be a decision of a broad or categorical nature.  Examples include rulings that arbitration agreements abridge the state constitutional right to jury trial, are per se (or presumptively) unconscionable in certain contexts (such as employment), or are inapplicable to certain types of statutory actions (such as consumer protection claims).  The second instrument would be a more contextual ruling to the effect that the particular arbitration agreement at hand is unconscionable (or is adhesive or contravened the nondrafting party’s reasonable expectations, etc.) and so need not be enforced as a matter of generally applicable state contract law.

Although a decision that holds an arbitration clause unconscionable based on a particularized examination of the contract and the circumstances of its formation will have somewhat less precedential impact than would a categorical rule, it has countervailing advantages.  For one, its fact-intensive character makes it opaque to a reviewing court.  When the reviewing court is a federal court, there is the additional difficulty that scrutinizing the ruling may require intimate knowledge of state law.⁹

Beyond opacity, there is another problem that complicates review, one that springs from the substantive law of the FAA.  Recall that the FAA allows courts to invalidate arbitration agreements on the basis of unconscionability, but only if they use unconscionability evenhandedly rather than discriminating against arbitration.  We are accustomed to seeing federal courts conclude that a state court has erred on some matter of federal law; but suppose a state court quotes the proper federal standards and claims to generate an evenhanded application of unconscionability law that strikes down an arbitration clause.  Rejecting the state court’s holding is tantamount to impugning the state court’s honesty, an act that contravenes the etiquette of judicial federalism.  Thus, review of an unconscionability ruling, particularly one from state court, is expressively difficult in addition to technically difficult.

The fact that unconscionability rulings are relatively insulated from review creates an incentive to use them to evade the FAA’s strictures, but are courts taking advantage of that opportunity?  There is reason to think that some are.  To begin with what we might call circumstantial evidence, there is motive.  As discussed above, some courts are not nearly as enthralled with arbitration as is the Supreme Court.  Whether because they seek to honor state statutes, to follow their constituents’ wishes, or simply because they believe arbitration is bad policy, these courts have cause to oppose it.  Further, some judges have basically admitted that they try to circumvent the FAA, and other judges have accused their colleagues of the same.¹⁰  While opportunity, motive, and anecdote might not add up to a conviction, there is also some more systematic evidence that, while limited in several ways, is highly suggestive.  At least two researchers have found that unconscionability challenges to arbitration agreements succeed at abnormally high rates, and they conclude that the reason is that courts apply unconscionability analysis differently in this context.¹¹

In the end, though, producing empirical proof of discrimination, which is extremely difficult, is almost beside the point.  Pro-arbitration courts will evolve doctrine in response to what they believe they are seeing, so the suspicion of manipulation is enough.  And there are at least reasonable grounds for suspicion.

 
II.
Responsive Strategies

I am certainly not the first person to notice the rise of unconscionability challenges to arbitration agreements.  The new popularity of unconscionability and allied doctrines has been aptly described as an attempt, using one of the few tools remaining, to put the brakes on the pro-arbitration trend and to restore some sort of balance.¹² There is much truth in that view, but I believe it is incomplete.  Any balance or equilibrium may be only temporary, for pro-arbitration courts will respond to the new tools being used to limit arbitration.  Sophisticated resistance to arbitration is just one side of the story—one move, but not the last.

What responsive moves are available to pro-arbitration courts like the United States Supreme Court?  There is, of course, the direct approach.  The Supreme Court could grant one of the many petitions for certiorari charging discrimination against arbitration and deem the decision below a manipulation of state law that violates the FAA.  No doubt the Supreme Court has the power to do so:  Although it ordinarily does not review questions of state law, here federal law mandates a duty of evenhandedness in applying state law.  But that is why review of such cases is so expressively taxing, for it is tantamount to impugning the lower court’s integrity.  Indeed, to a significant degree the target courts themselves control whether the reviewing court can assume the pose of the polite corrector of good-faith error.  A sophisticated state court—one that sets forth the governing law correctly, expresses the appropriate pro-arbitration sentiments, and the like—can make things very uncomfortable.

Admittedly, such an attack on a state court’s integrity would not be completely unprecedented.  Although we treat state courts as supreme and unreviewable on matters of state law, we also understand that a misapplication or distortion of state law can in some cases defeat federal rights.  So the federal courts can in certain cases test the bona fides of a state law ruling.  But this is the exception, the rare exception, and it has tended to occur during periods—such as the civil rights era—when there was much reason to suspect the integrity of certain courts.  Thus, when Chief Justice Rehnquist cited some of those extraordinary cases in his Bush v. Gore concurrence—in which he concluded that the Florida Supreme Court’s interpretation of its state election laws “distorted them beyond what a fair reading required”¹³—Justice Ginsburg pointed out the expressive stakes involved:

THE CHIEF JUSTICE’s casual citation of these cases might lead one to believe they are part of a larger collection of cases in which we said that the Constitution impelled us to train a skeptical eye on a state court’s portrayal of state law. . . . [T]his case involves nothing close to the kind of recalcitrance by a state high court that warrants extraordinary action by this Court.  The Florida Supreme Court . . . surely should not be bracketed with state high courts of the Jim Crow South.¹⁴

Given the historical connotations, one can see that a Supreme Court decision rejecting a state unconscionability holding as a discriminatory manipulation of state law would find itself in a rather remarkable category.  Issuing such a ruling would arguably reveal something about the Court’s values, and it would not be flattering:  namely, that it thinks state discrimination against arbitration merits the same extraordinary response, in terms of judicial federalism, as discrimination in the Jim Crow South.

The technical and expressive difficulty of attacking perceived manipulation of unconscionability head-on may explain why the Supreme Court—never shy about enforcing its pro-arbitration preferences—has been surprisingly hesitant to take such a case, letting dozens of petitions for certiorari go by, despite the pleas of prominent Supreme Court litigators and pro-business amici demanding action.  The direct approach to policing compliance with the FAA is not the only approach, however.  Another course is to develop new rules about the allocation of decisional authority between various courts or between courts and arbitrators.  Here I will describe just one allocation strategy.

Consider the question of who—court or arbitrator—decides certain types of challenges to arbitration agreements.  There have long been rules about this subject, including the so-called “separability doctrine” associated with the Prima Paint case.¹⁵  In that case, one party to a contract dispute claimed that the contract had been formed through fraudulent inducement and thus that the entire contract, including its arbitration clause, was unenforceable.  The Supreme Court decided that the challenge to the contract should be resolved by the arbitrator.  This has come to be known as the separability doctrine because an arbitration clause is regarded as separate from, and not necessarily infected by defects in, the container contract.

For a pro-arbitration court suspecting that judicial manipulation of contract defenses is afoot, one could see why aggressive use of separability and other rules shifting authority to arbitrators would be attractive.  There is no need to question hard-to-scrutinize state-law rulings if one takes away, as a matter of federal law, the authority to issue them in the first place.  The allocation rule is relatively easy to monitor.

There are signs that pro-arbitration courts are following just this strategy.  The Supreme Court has not decided an unconscionability case, but a few of its recent decisions have shifted more decisionmaking authority to arbitrators.  A 2006 case, Buckeye Check Cashing, Inc. v. Cardegna, involved a dispute arising from a payday loan agreement that was allegedly void and even criminally usurious under state law.¹⁶  The Florida high court refused to enforce the arbitration clause in the parties’ contract, concluding that the entire contract was a nullity, but the United States Supreme Court reversed and sent the dispute to arbitration.  The Court concluded that it was of no moment that the contract was deemed, as a matter of state law, void ab initio.  The Court’s decision to send the matter to arbitration is quite strange to many people, inasmuch as the decision finds a valid agreement to arbitrate disputes in a null and criminal contract.  But regardless of what one thinks of the outcome, the important point for our purposes is that the Buckeye rule makes these types of cases easy for a federal court to decide in the sense that they only require the application of the federal rule of separability.  No foray into slippery state-law distinctions between voidness, voidability, and other categories is required, for such distinctions are henceforth irrelevant.

The lower federal courts, which lack the luxury of simply denying certiorari, have been forced to deal with unconscionability more directly.  Although the case law on who decides unconscionability challenges is conflicting and continues to develop, there are signs of a trend toward shifting more authority to arbitrators.  The basic point of such cases is simple but powerful:  It is irrelevant that state law deems some limitation on arbitral relief unconscionable if, as a matter of federal law, the arbitrator is supposed to rule on that argument.  Such doctrinal changes are bizarre in some ways, but they do make sense as a way for pro-arbitration courts to ease monitoring of compliance with federal law.

 
III.
A Role for Congress?

My analysis would not be complete without mentioning the potential role of one other player:  Congress.  Congress has the power to rewrite the rules.  Legislation exempting consumer and employment disputes from arbitration would largely eliminate the tensions that generate the unconscionability game, as there is little opposition today to arbitration between sophisticated commercial parties.  Such legislation has been proposed but, in the face of strong opposition from business interests, has not yet progressed far.¹⁷

It is unclear whether Congress will ever come off the sidelines, but even if it does not do so, it can still exert an influence.  Just as inferior courts shape their behavior with an eye toward the anticipated responses of superior courts, the Supreme Court might shape its behavior with an eye toward the anticipated responses of its superior.  Sophisticated Justices would want to avoid provoking Congress into amending the FAA in a way that would harm the Court’s long-term pro-arbitration program.  Unconscionability might operate as a sort of safety valve that makes arbitration politically sustainable.  It permits courts, on a case by case basis, to respond to the most compelling inequities.  At the same time, the mere risk of an unconscionability challenge may prevent drafters of arbitration clauses from overreaching too much.  A sophisticated Supreme Court would tend to be careful about closing off this safety valve.

 
IV.
Conclusion

I have attempted to explain recent and ongoing developments in FAA case law as the result of a strategic interaction between various players with divergent preferences regarding arbitration.  As the Supreme Court has shut off most means of resisting arbitration, courts skeptical of arbitration have increasingly turned to unconscionability doctrine.  The flexibility of unconscionability analysis creates the potential for courts that disfavor arbitration to manipulate state law to limit the FAA’s reach.  This potential noncompliance then drives further responses by pro-arbitration courts like the Supreme Court, including development of new doctrines and allocation rules that ease monitoring by shifting authority from state courts to federal courts and from courts to arbitrators.

Although I believe that arbitration law is an increasingly important topic—and, in particular, that it provides a fertile field for the study of many of the problems that have long interested federal courts scholars—my aims in the Article go beyond the FAA in particular.  Few people today deny that judges’ policy preferences affect at least some of their decisions, but doctrine is not irrelevant.  Indeed, preferences and doctrine need not be forces that pull in opposite directions.  Some of the most interesting recent work in the political science of the courts attempts to accommodate sophisticated understandings of doctrine, casting it as not merely a potential constraint on preferences but also a tool for implementing them.  I have hoped to provide a concrete illustration and contextualized elaboration of such a model of judicial behavior, in which emerging doctrinal changes do not reflect only legal considerations, nor just preferences, but rather respond to the ongoing problem of monitoring lower courts.  Further work at this intersection of legal and political analysis should prove fruitful.

Acknowledgments:

Copyright © 2009 New York University Law Review.

Aaron-Andrew P. Bruhl is Assistant Professor, University of Houston Law Center.

This Editorial is based on the following full-length Article:  Aaron-Andrew P. Bruhl, The Unconscionability Game: Strategic Judging and the Evolution of Federal Arbitration Law, 83 N.Y.U. L. REV. 1420 (2008).
Click Here for the Full Article

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