Arbitrators' Adherence to the Law: A Comprehensive Analysis

Strategic Insights -

The Consumer Finance Monitor podcast recently released an episode centered around a thought-provoking article by David Horton, a professor of law at the University of California, Davis. Horton's article, "Do Arbitrators Follow the Law? Evidence from Clause Construction," delves into the question of whether arbitrators render decisions that align with judicial rulings. The podcast episode explores the implications of Horton's findings, which suggest that a significant minority of arbitrators may be motivated by financial considerations in allowing class arbitration to proceed, despite the Supreme Court's 2019 decision in Lamps Plus, Inc. v. Varela (2019). Mark Levin, Senior Counsel at Ballard Spahr, joins the program to offer a different interpretation of the data, emphasizing that arbitration is not lawless, as an overwhelming majority of arbitrators (73%) followed Lamps Plus.

Key Takeaways:

  • David Horton, a professor of law at the University of California, Davis, found that in approximately 27% of the arbitrations studied, arbitrators did not follow the Supreme Court's decision in Lamps Plus, Inc. v. Varela (2019), which prohibited class-wide arbitration when an arbitration clause is silent or ambiguous.
  • Mark Levin, Senior Counsel at Ballard Spahr, disagreed with Horton's interpretation, emphasizing that the data actually supports the conclusion that arbitration is not lawless, as 73% of arbitrators followed Lamps Plus.
  • Horton suggested that some arbitrators' rulings may be swayed by financial considerations, as allowing class arbitration can be more lucrative than individual arbitration. However, Levin dismissed this suggestion as speculation and pointed out that the issue of clause construction has a complex history and has been distinguished by prominent courts.
  • The podcast episode highlights the importance of understanding the implications of arbitrators' decisions on consumer finance.
  • Mark Levin emphasizes that while some inconsistencies in arbitrators' rulings may exist, they do not necessarily indicate lawlessness, but rather a complex and nuanced understanding of the law.
  • Alan Kaplinsky, host of the Consumer Finance Monitor podcast, stresses the need for listeners to stay up-to-date with the latest developments in consumer finance through the podcast.

Statistics:

  • 27% of arbitrations studied did not follow the Supreme Court's decision in Lamps Plus, Inc. v. Varela (2019).
  • 73% of arbitrators followed Lamps Plus in their decision-making.
  • The Supreme Court's 2019 decision in Lamps Plus, Inc. v. Varela has significant implications for consumer finance, as it affects the treatment of arbitration clauses in consumer contracts.

Sources:

  • "Do Arbitrators Follow the Law? Evidence from Clause Construction" by David Horton
  • Lamps Plus, Inc. v. Varela (2019)
  • Ballard Spahr LLP
  • Consumer Finance Monitor podcast
  • University of California, Davis