Originally uploaded at SSRN.

Abstract

Arbitration is an efficient dispute-resolution system that respects parties’ right to an accurate award. But because arbitration is designed to be efficient, accuracy is not guaranteed. This presents a challenge when courts are asked to confirm or vacate arbitrators’ decisions. Judges dislike approving inaccurate awards, especially in cases where parties have unequal bargaining power. Yet, judges also recognize arbitration’s limited-review principle. So they are forced to balance their desire for accuracy against arbitration’s efficiency policy. Efficiency typically wins at the expense of accurate outcomes.

This Article contends that courts place too much emphasis on the efficiency policy in mandatory arbitration. Consider the narrow manifest disregard standard that most courts apply. It is virtually impossible to vacate an award under this standard because the court must have proof that the arbitrator consciously disregarded known, applicable law. Consequently, parties subjected to mandatory arbitration have little chance of overturning inaccurate awards, which is problematic from a procedural justice standpoint because parties like decision control. This Article proposes giving parties greater decision control by allowing them to appeal arbitrators’ awards for legal error. This expanded standard creates a procedural mechanism for correcting arbitrators’ mistakes, thereby enhancing mandatory arbitration’s procedural justice.