Abstract

Employment, brokerage, and other contracts routinely include "predispute" arbitration clauses-provisions requiring the parties to submit any and all future disputes to arbitrators rather than courts. In recent years, courts have come to enforce these clauses in the vast run of cases, requiring parties to arbitrate even when the underlying dispute implicates employment discrimination, antitrust, or other "public law" rights. In response to this trend, interest has grown in the extent of courts' authority to overturn arbitral awards that do not give effect to such rights. At first blush, the Federal Arbitration Act (FAA) does not appear to authorize any such review, but federal and many state courts have come to recognize an additional, judge-made ground for overturning awards in cases in which arbitrators have "manifestly disregarded" governing law. This Article concludes that the "manifest disregard" doctrine as it stands is legally baseless and should be abandoned. In its place, the Article urges courts to recognize a distinct but related ground for overturning arbitral awards-a ground rooted in the arbitration contract itself. Traditional contract law doctrines encourage courts to choose contract readings or imply contract terms needed to make an agreement valid and enforceable. The Article contends that in many cases predispute arbitration clauses would be invalid absent an arbitral duty to apply the law in good faith because, without this duty, such clauses would interfere with the law's deterrent function. Society has a powerful interest in the role many legal rights play in deterring misconduct, and studies show that deterrence depends critically on a legal regime's accuracy. A duty to take the law seriously and make good faith efforts to apply it correctly should be a bare minimum required for effective deterrence within any system of adjudication, and it is this duty that courts therefore must find in agreements to arbitrate future disputes. Having recognized this duty, the Article concludes that the FAA itself gives courts the power to review awards to ensure that arbitrators are living up to it in rendering awards.

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