Later that same year, in lawsuits directly involving 15 states, the Supreme Court ruled in Reynolds v.. In June 1992 the Court reversed a federal district court decision in favor of Mass
Trang 1or voters have been defeated, because the exclusion of groups such as illegal aliens, nonvoters, and children could significantly affect some areas of the country, because some states have large populations of these groups
Shifting political power away from an area means fewer legislators to demand a fair share
of government resources for that area
One such effort to exclude these groups occurred during the 1866 debates over the passage of the FOURTEENTH AMENDMENT and ultimately led to a congressional vote to continue basing apportionment on total popu-lation and to count the “whole number of persons in each state.” In contrast, state legislatures have only been required to be based substantially on population since 1964 (Rey-nolds v Sims, 377 U.S 533, 84 S Ct 1362, 12 L
Ed 2d 506) In 1968, the U.S Supreme Court extended this requirement to municipal govern-ments (Avery v Midland County, 390 U.S 474,
88 S Ct 1114, 20 L Ed 2d 45)
Apportionment is related to, but is not the same as, the electoral system and the districting process: Apportionment is the manner in which representation is distributed; the electoral system
is the way an individual representative is elected;
and the districting process establishes the precise electoral boundaries of a representative’s dis-trict Apportionment for the U.S Congress, which consists of the Senate and the House of Representatives, has always been determined by the Constitution Each state is assigned two senators, who were originally elected by state legislatures but since the adoption of the
SEVENTEENTH AMENDMENT in 1913 have been chosen by direct voter election
Membership in the House of Representa-tives is also assigned to the states and is apportioned according to population, with each state being constitutionally guaranteed at least one representative The House of Representa-tives grew proportionally with the population of the United States until 1912, when the House froze its size at 435 members Since 1941 the Census Bureau has used the system of equal proportions to determine how many of the 435 representatives each state is entitled to have
This method, developed in 1920 by Edward V
Huntington of Harvard University, establishes the smallest possible difference between the representation of any two states, because a
state’s fair share of representatives will rarely
be a whole number The 1941 federal statute 2 U.S.C.A §§ 2a and 2b provides that
under the equal proportions method, the priority list of states or counties among which Representatives in excess of one per state or county are to be allocated is obtained
by dividing the population of each state or county by the geometric mean of successive numbers of Representatives
Congress must decide how to treat the fractional components whenever it reapportions congressional seats based on new census data This decision affects the distribution of only a few seats in Congress and theELECTORAL COLLEGE, but in closely contested elections, such as the presidential election of 1876, those seats could mean the difference between victory and defeat (The electoral college is the body of electors of each state chosen to elect the president andVICE PRESIDENT Apportionment affects the electoral college because it influences the number of electoral votes coming from various areas of the country.) Each state legislature is responsible for establishing the district boundaries of the congressional seats apportioned to the state by the federal government
From 1842 to 1911 Congress required that all congressional districts be of compact and connecting territory That stipulation was not continued after 1912, and by the 1960s the districts within some states differed greatly in size These disparities were caused in some cases
by gerrymandering, which is the process of drawing boundaries for election districts so as to give one party a greater political advantage Large disparities led a group of urban Tennessee voters to bring suit against their state’s electoral commission on the ground that the apportion-ment of the legislature was unfair The Supreme Court’s March 1962 decision in favor of the voters in Baker v Carr (369 U.S 186, 82 S Ct
691, 7 L Ed 2d 663) established the rule that a citizen may bring suit against legislative malap-portionment when it deprives that citizen of
EQUAL PROTECTION under the law as guaranteed
by the Fourteenth Amendment Previously, in Colegrove v Green (328 U.S 549, 66 S Ct 1198,
90 L Ed 1432[1946]), the Court had refused to accept jurisdiction in apportionment cases Although the Supreme Court’s decision in Baker was limited, it did rule that if a system other than one based on population is used for
338 APPORTIONMENT
Trang 2apportionment, the resulting districts must not
be arbitrary or irrational in nature In 1964 the
Supreme Court extended Baker by ruling in
Wesberry v Sanders (376 U.S 1, 84 S Ct 526,
11 L Ed 2d 481) that legislative districts for the
House of Representatives must be drawn so as
to provide “equal representation for equal
numbers of people,” a concept often referred
to as the one-person, one-vote standard Later
that same year, in lawsuits directly involving 15
states, the Supreme Court ruled in Reynolds v
Sims (377 U.S 533, 84 S Ct 1362, 12 L Ed 2d
506) that districts for state legislatures must also
be substantially equal in population Further
extending the principle, the Court ruled in
Avery v Midland County (390 U.S 474, 88 S Ct
1114, 20 L Ed 2d 45[1968]) that if county, city,
and town governments elect their
representa-tives from individual districts, the districts must
be substantially equal in population
Other individuals and states have
subse-quently challenged the method of
apportion-ment used in the United States when that
method has proved unfavorable for them For
example, in Franklin v Massachusetts (505 U.S
788, 112 S Ct 2767, 120 L Ed 2d 636[1992]),
Massachusetts and two of its registered voters
filed an action against Secretary of Commerce
Barbara B Franklin, alleging, among other
things, that the decision to allocate overseas
employees was inconsistent with the
Constitu-tion In June 1992 the Court reversed a federal
district court decision in favor of Massachusetts,
ruling that the allocation of overseas federal
employees to their designated home states was
consistent with the usual-residence standard
used in early censuses and served the purpose of
making representation in Congress more equal
The state of Montana sued the U.S
COMMERCE DEPARTMENT, following the 1990
census, when it and 11 other states each lost
one House seat In seeking to keep the two seats
it had held since 1910, Montana argued that the
method of equal proportions was
unconstitu-tional because it left the state with a single
congressional district of 803,655 people—a
number almost 40 percent larger than “ideal
district size,” which is a national average of
572,466 people Montana also alleged that the
variance between the single district’s population
and that of an ideal district could not be
justified under the one-person, one-vote
stan-dard developed in Wesberry The Montana case
was appealed to the U.S Supreme Court, which
in March 1992 unanimously upheld the method Congress uses to reallocate congressional seats among the states after a census (United States
DEPARTMENT OF COMMERCE v Montana, 503 U.S
442, 112 S Ct 1415, 118 L Ed 2d 87)
The political impact of the census on congressional apportionment was made appar-ent when the Commerce Departmappar-ent proposed that statistical sampling be used for the 2000 census (Statistical sampling is a method of surveying a subset of a larger population and applying the findings to the larger group.) Republicans in Congress reacted hostilely to this proposal from the Democratic administra-tion of President BILL CLINTON, fearing that the proposed statistical sampling of hard-to-count persons (e.g., racial and ethnic minorities, poor persons, children, illegal aliens, renters) would favor large urban areas that were aligned with the DEMOCRATIC PARTY Members of Congress filed suit to block the use of sampling and the Supreme Court agreed with their position in Commerce Dept v U.S House of Representatives (525 U.S 316, 119 S Ct.765, 142 L.Ed.2d 797 [1999]) The Court held that the Census Act, which was first enacted in 1954 (and amended a number of times), expressly prohibited the use
of sampling to determine populations for congressional apportionment purposes
This ruling did not end the controversy over what constituted sampling Following the 2000 census, the state of Utah filed suit against the Commerce Department, alleging that it should have increased its congressional representation from three seats to four According to the census, the state had achieved a dramatic 30-percent population growth in ten years Despite this growth, the number of representatives in the state did not increase North Carolina, however, did pick up an additional seat through
a statistical method called imputation This method permits the Census Bureau to impute,
or estimate, the number of members in a household after census takers repeatedly try to make direct contact Comparing the numbers of imputed residents of Utah and North Carolina, Utah realized that if it could have these numbers thrown out by a federal court, the North Carolina seat would shift to Utah
A three-judge panel rejected Utah’s argu-ments that imputed numbers amounted to statistical sampling as prohibited by the 1999
APPORTIONMENT 339
Trang 3Supreme Court decision The panel concluded that it was common sense to realize that census takers would not be able to count every person and that reasonable alternatives needed to be employed to fill in the missing numbers The actual enumeration required by the census clause did not mean that the court should reduce the number of persons imputed to households to zero The imputation method was on the whole fair because it was adjusted for local neighborhood demographics and it was employed only after census takers failed on repeated attempts to contact the households in question Therefore, the panel ruled that reducing the number to zero would be
“inconsistent with the constitutional imperative
of actual enumeration,” for actual residents would not be counted
In Utah v Evans (536 U.S 452, 122 S Ct
2191, 153 L.Ed.2d 453 [2002]), the Supreme Court affirmed the lower court ruling The Court, in a 5–4 decision, rejected the idea that actual enumeration under the Census Clause was intended as a description of the only methodol-ogy for counting U.S citizens The Court pointed out that an interest in accuracy was favored by the Census Bureau, which used imputation as a LAST RESORT only after other methods had failed The majority also decided that this method, used as a last resort, was not the same as sampling Justice STEPHEN BREYERnoted that“sampling seeks to extrapolate the features
of a large population from a small one, but the Bureau’s imputation process sought simply to fill
in missing data as part of an effort to count individuals one by one.” Moreover, the imputa-tion method was not the equivalent of statistical sampling because the two methods were viewed
as distinctly different when an amendment to the Census Act was passed in 1958
The Commerce Department announced in
2009 that it would not use statistical sampling for the 2010 census
FURTHER READINGS Bestor, Arthur “‘Advice’ from the Very Beginning,
‘Consent’ When the End Is Achieved.” 1989 American Journal of International Law 83 (October).
Corpus Juris Secundum United States, vol 91, secs 11–12.
Cox, Gary W., and Jonathan N Katz 2002 Elbridge Gerry’s Salamander: The Electoral Consequences of the Reappor-tionment Revolution New York: Cambridge Univ Press.
“Fair Representation: Meeting the Ideal of One Man, One Vote ” 1984 Michigan Law Review 82 (February).
The Federalist Nos 37, 38, 52, 54, 56, 57, 58, 62, and 63.
1787 –88.
“Lies, Damn Lies and Statistics: Dispelling Some Myths Surrounding the United States Census ” 1990 Detroit College of Law Review (spring).
“Montana’s Lost Seats Begs Issue.” 1992 National Law Journal (March 2).
“Politics and Purpose: Hide and Seek in the Gerrymander-ing Thicket after Davis v Bandmer.” 1987 University of Pennsylvania Law Review 136 (November).
“Reapportionment: The Supreme Court Searches for Standards ” 1989 Urban Law 21 (fall).
Scher, Richard K 1996 Voting Rights and Democracy: The Law and Politics of Districting San Francisco: Wads-worth.
“The Thickest Thicket: Partisan Gerrymandering and Judicial Regulation of Politics ” 1987 Columbia Law Review 87 (November).
“Understanding Dworkin.” 1993 George Mason Independent Law Review 1 (spring).
Yates, Christopher St John “A House of Our Own or a House We ’ve Outgrown? An Argument for Increasing the Size of the House of Representatives ” 1992 Columbia Journal of Law and Social Problems 25 Yarbrough, Tinsley E 2002 Race and Redistricting: The Shaw-Cromartie Cases Lawrence: Univ Press of Kansas.
CROSS REFERENCES Congress of the United States; Voting
APPRAISAL
A valuation or an approximation of value by impartial, properly qualified persons; the process
of determining the value of an asset or liability, which entails expert opinion rather than express commercial transactions
APPRAISER
A person selected or appointed by a competent authority or an interested party to evaluate the financial worth of property
Appraisers are frequently appointed in probate and condemnation proceedings and are also used by banks andREAL ESTATEconcerns
to determine theMARKET VALUEof real property
APPRECIATION The fair and reasonable estimation of the value of an item The increase in the financial worth of an asset
as compared to its value at a particular earlier date
as a result of inflation or greater market demand
APPREHENSION
A reasonable belief of the possibility of imminent injury or death at the hands of another that
340 APPRAISAL
Trang 4justifies a person acting in self-defense against the
potential attack
An apprehension of attack is an element of
the defense ofSELF-DEFENSEthat can be used in a
criminal prosecution for ASSAULT AND BATTERY,
MANSLAUGHTER, or MURDER An individual who
acts under apprehension of attack does not have
to fear injury It is sufficient that there is a
likelihood of actual injury to justify the person’s
taking steps to protect himself or herself
APPRENTICE
A person who agrees to work for a specified time in
order to learn a trade, craft, or profession in which
the employer, traditionally called the master,
assents to instruct him or her
Both minors and adults can be legally
obligated under the terms of an apprenticeship
contract, and any person who has the capacity to
manage his or her own affairs may engage an
apprentice In some states, a minor may void a
contract of apprenticeship, but in cases where the
contract is beneficial to the minor, other
jurisdictions do not permit the minor to void it
There must be strict compliance with statutes
that govern a minor’s actions concerning an
apprenticeship
An apprenticeship must arise from an
agreement, sometimes labeled an indenture,
which possesses all the requisites of a valid
contract If the contract cannot be performed
within a year, it must be in writing, in order to
satisfy theSTATUTE OF FRAUDS, an oldENGLISH LAW
adopted in the United States, which requires
certain agreements to be in writing The
apprentice, the employer, and, if the apprentice
is a minor, his or her parents or guardians must
sign the apprenticeship agreement Some
jur-isdictions require explicit consensual language
in addition to the signature or signatures of
one or both parents, depending upon the
applicable statute The contract must include
the provisions required by law and drafted for
the benefit of the minor such as those relating to
his or her education and training A breach of
apprenticeship contract might justify an award
of damages, and, unless authorized by statute,
there can be no assignment, or transfer, of the
contract of apprenticeship to another that
would bind the apprentice to a new service
A person who lures an apprentice from his
or her employer may be sued by the employer,
but the employer cannot recover unless the
DEFENDANT knew of the apprentice relationship
The apprenticeship may be concluded by either party for GOOD CAUSE, where no definite term of service is specified, by mutual consent, or
by a dismissal of the apprentice Automatic termination ensues from the expiration of the term of service, involuntary removal of the apprentice from the jurisdiction where he or she was bound, or service in the armed forces even though voluntary and without the consent
of the employer The death of either party terminates the relationship, as does the attain-ment of theAGE OF MAJORITYby the apprentice, in most instances Courts may terminate such contracts when they violate statutes The master’s cruelty, immorality, interference with the apprentice’s religious beliefs or duties, or other misconduct and the misbehavior of the appren-tice also constitute grounds for termination
APPROPRIATION The designation by the government or an individual of the use to which a fund of money
is to be applied The selection and setting apart
of privately owned land by the government for public use, such as a military reservation or public building The diversion of water flowing on public domain from its natural course by means of a canal or ditch for a private beneficial use of the appropriator
An appropriation bill is a proposal placed before the legislative branch of the government
by one or a group of its members to earmark a particular portion of general revenue or treasury funds for use for a governmental objective
Federal appropriation bills can originate only in the House of Representatives as mandated by Article I, Section 7 of the Constitution Once an appropriation law is enacted, a definite amount
of money is set aside so that public officials can pay incurred or anticipated expenditures When
a law authorizes funds to be used for a particular purpose, it is known as a specific appropriation
The appropriation of money by an individ-ual occurs within the context of a debtor-creditor relationship If a debtor-creditor is owed two separate debts by the same debtor who makes a payment without specifying the debt to which it
is to be applied, the creditor can appropriate the payment to either debt
APPROPRIATION 341
Trang 5Appropriation also refers to the physical taking and occupation of property by the government or its actual, substantial interfer-ence with the owner’s right to use the land according to personal wishes by virtue of the government’s power ofEMINENT DOMAIN This right of an individual to use water that belongs to the public is embodied in the prior appropriation doctrine applied in arid western states where water supplies are not available in sufficient quantity to all who might need them
An individual landowner who first diverts water for personal benefit is entitled to its continued use as long as there is a reasonable need and the water is actually used
CROSS REFERENCES Federal Budget; Water Rights.
APPROVAL The present confirmation, ratification, or assent to some action or thing done by another, which is submitted to an individual, group, or governmen-tal body for judgment The acceptance by a judge
of a bond, security, or other document that is required by law to meet with the judge’s satisfaction before it becomes legally effective
APPURTENANCE
An accessory or adjunct that is attached and incidental to something that has greater impor-tance or value As applied to real property, an object attached to or a right to be used with land
as an incidental benefit but which is necessary to the complete use and enjoyment of the property
When a landowner has been given an easement for the passage of light and air over an adjoining lot, the easement is an appurtenance to the land Other common appurtenances to land include barns, outhouses, fences, drainage and irrigation ditches, and rights of way
ARBITER [Latin, One who attends something to view it as
a spectator or witness.] Any person who is given
an absolute power to judge and rule on a matter
in dispute
An arbiter is usually chosen or appointed by parties or by a court on their behalf The decision of an arbiter is made according to the rules of law and equity The arbiter is distin-guished from the arbitrator, who proceeds at his
or her own discretion, so that the decision is made according to the judgment of aREASONABLE PERSON
An arbiter may perform the same function
as an umpire, a person who decides a controversy when arbitrators cannot agree CROSS REFERENCES
Alternative Dispute Resolution; Arbitration.
ARBITRAGE The simultaneous purchase in one market and sale in another of a security or commodity in hope
of making a profit on price differences in the different markets
In its simplest form, arbitrage is“buying low and selling high.” In this sense, any trader who buys something in one market—whether it is a commodity like grain, financial SECURITIES such
as stock in a company, or a currency such as the Japanese yen—and sells it in another market at
a higher price is engaged in arbitrage That trader is called an arbitrageur In economic theory, arbitrage is a necessary activity in any market, helping to reduce price disparities between different markets and to increase a market’s liquidity (ability to buy and sell) Arbitrage can be divided into the categories
of riskless and risk As an example of riskless arbitrage, imagine that the price of Microsoft CorporationCOMMON STOCKon the Pacific Coast Stock Exchange is less than the price of the same stock on the New York Stock Exchange A trader who buys Microsoft stock at the lower price on the Pacific Coast exchange and simultaneously sells it for a higher price on the New York exchange is engaging in an essentially riskless transaction Aided by the speed of modern communications, the buying and selling occur at virtually the same time This type of exchange occurs daily in the currency market, where a trader may buy French francs
at a lower price in London and sell them at a higher price in Singapore
Much arbitrage falls into the risk category This type of arbitrage is not always completed with a sale at a higher price; it involves a risk that the price of the item being traded will fall before the trader can sell it.RISK ARBITRAGEcame into prominence during the 1980s, when investors began to take advantage of a business atmosphere encompassing a large number of companyMERGERS AND ACQUISITIONS In a merger
342 APPROVAL
Trang 6or acquisition, one company buys or takes over
another company When the management of
the targeted company does not want to be
acquired by a particular investor or group of
investors, the merger is called a hostile takeover
Quite often, the aggressors in such takeovers are
smaller in terms of assets than their targets A
hostile takeover is usually initiated when
someone believes that the stock of a particular
company is lower than its potential value,
whether because of poor management or
because of a lack of information about the true
value of that company
One way that hostile takeovers are initiated
is through a device called the cashTENDER OFFER
The party attempting to initiate the takeover
announces that it will pay cash for the target
company’s stock at a price well above the
current MARKET VALUE At this point, risk
arbitrageurs become involved in the game They
buy stock from shareholders in the target
company, then attempt to sell that stock at
the higher price to the party attempting the
takeover If the takeover succeeds and the
arbitrageurs receive a higher price for their
stock, they profit; if the takeover fails or the
arbitrageurs receive a lower price for their stock,
they lose Gauging the risk of a takeover’s failure
is therefore crucial to an arbitrageur’s success
An arbitrageur who purchases securities on
the basis of inside information—that is,
infor-mation about a pending takeover that is not
available to the general public—violates the
Securities Exchange Act of 1934 (§ 10[b], as
amended, 15 U.S.C.A § 78j[b]) However,
purchasing securities on the basis of rumors
about an imminent takeover is not illegal
Ivan F Boesky was one example of a risk
arbitrageur who was found guilty of engaging in
INSIDER TRADING Boesky profited enormously
from the many corporate takeovers of the
mid-1980s By 1985 he had become famous in
financial circles and had published a book,
Merger Mania: Arbitrage: Wall Street’s Best Kept
Money-Making Secret, that extolled the
oppor-tunities in risk arbitrage and the benefits the
practice gave to the market In 1986 only one
year later, Boesky admitted that he had illegally
traded on insider information obtained from
Drexel Burnham Lambert, the securities firm
that arranged the financing of many of the
takeovers of the era In return for a reduced
sentence of three years in prison, Boesky agreed
to pay a $100 million penalty and to cooperate with the government’s continuing investigation
Boesky named Drexel employee Michael R
Milken as a member of the insider trading network In 1990 Boesky was released from prison after serving two years
FURTHER READINGS Boesky, Ivan 1985 Merger Mania New York: Holt, Rinehart and Winston.
“Complex Plan of Finance Successfully Navigates Arbitrage Rules ” 2003 Tax Management Memorandum 44 (February 10).
Steuerle, C Eugene 2002 “Defining Tax Shelters and Tax Arbitrage ” Tax Analysts (May 20).
Stokeld, Fred 2001 “IRS on the Prowl for Illegal Arbitrage.”
Tax Notes 92 (September 10).
CROSS REFERENCES Corporations; Securities; Securities and Exchange Commission.
ARBITRARY Irrational; capricious
The term arbitrary describes a course of action or a decision that is not based on reason
or judgment but on personal will or discretion without regard to rules or standards
An arbitrary decision is one made without regard for the facts and circumstances pre-sented, and it connotes a disregard of the evidence
In many instances, the term implies an element of BAD FAITH, and it may be used synonymously with tyrannical or despotic
The term arbitrary refers to the standard of review used by courts when reviewing a variety
of decisions on appeal For example, the arbitrary and capricious standard of review is the principle standard of review used by judicial courts hearing appeals that challenge decisions issued by administrative bodies
At the federal level and in most states, administrative law is a body of law made by executive branch agencies that have been dele-gated power to promulgate rules, regulations, and orders, render decisions, and otherwise decide miscellaneous disputes Non-elected offi-cials in administrative agencies are delegated this authority in order to streamline the often lengthy and more deliberative process of legislative lawmaking that frequently grinds to a halt amid partisan gridlock Although administrative agen-cies are generally designed to make lawmaking
ARBITRARY 343
Trang 7and regulation simpler, more direct, and less formal, they still must provide due process to affected parties They must also comply with administrative procedures created by popularly elected state and federal legislatures
One important right recognized in most administrative proceedings is the right of
JUDICIAL REVIEW Citizens aggrieved by the actions
of an administrative body may typically ask a judicial court to review those actions for error
In establishing the standard by which judicial courts will review the actions of an administra-tive body, state and federal legislatures seek to provide agencies with enough freedom to do their work effectively and efficiently, while ensuring that individual rights are protected
Congress tried to maintain this delicate balance in the Administrative Procedures Act (APA) The APA limits the scope of a reviewing court’s authority to determining whether the agency acted arbitrarily and capriciously in exercising its discretion 5 USCA § 701 In making this determination, the reviewing court will not find that the administrative body acted arbitrarily unless the agency failed to follow proper procedures or rendered a decision that is
so clearly erroneous that it must be set aside to avoid doing an injustice to the parties
Specifically, a reviewing court must deter-mine whether the agency articulated a rational connection between the factual findings it made and the decision it rendered The reviewing court must also examine the record to ensure that the agency decision was founded on a reasoned evaluation of the relevant factors
Although agencies are given wide latitude, reviewing courts must be careful not to rubber-stamp administrative decisions that they deem inconsistent with a statutory mandate or that frustrate the congressional policy underly-ing a statute
Typically, reviewing courts look at the whole record in making this determination, take into account the agency’s expertise on any particular matters, and accept any factual findings made
by the agency However, the reviewing court is free to determine how the law should apply to those facts If the reviewing court concludes that the agency’s actions were so arbitrary as to be outside any reasonable interpretation of the law, the court may overturn the agency’s decision or remand the case back to the agency for further
proceedings in accordance with the court’s decision
A reviewing court’s determination that an agency acted in an arbitrary manner will often depend on the technical requirements of the governing law For example, courts are often asked to determine whether a federal agency has acted arbitrarily under the National Environ-mental Policy Act (NEPA) Pub.L 91-190, § 2, Jan 1, 1970, 83 Stat 852, as amended, 42 U.S.C
A §§ 4321 et seq In one case the Ninth Circuit ruled that theTRANSPORTATION DEPARTMENTacted arbitrarily under NEPA, when it failed to prepare an environmental impact statement, failed to consider whether its regulations would have violated air quality limits, and failed to perform localized analyses for areas most likely
to be affected by increased truck traffic Public Citizen v Department of Transportation, 316 F 3d 1002 (9th Cir 2003)
CROSS REFERENCES Administrative Procedure Act of 1946; Bad Faith; Due Process of Law; Judicial Review; Relevancy.
ARBITRATION Arbitration is the submission of a dispute to an unbiased third person or persons designated by the parties to resolve the controversy; the arbitration award is the decision issued after a hearing at which both parties have an opportunity to be heard
The two general types of arbitration are binding arbitration and non-binding arbitra-tion In binding arbitration, the arbitration award is usually final, and courts rarely reexamine it In non-binding arbitration, the arbitration award is a recommendation, and the parties may choose whether to accept it In either type of arbitration, the award is a decision issued after a hearing at which both parties have
an opportunity to be heard
Arbitration is a well-established and widely used means to end disputes It is one of several kinds of ALTERNATIVE DISPUTE RESOLUTION, which provide parties to a controversy with a choice other thanLITIGATION Unlike litigation, arbitra-tion takes place outside the court system, generally allowing less formal adherence to the rules of evidence and procedure and leading to a faster, less expensive resolution of a
controver-sy In the arbitration, the two sides select an impartial THIRD PARTY or parties, known as an
344 ARBITRATION
Trang 8arbitrator or an arbitration panel; they
partici-pate in a hearing at which both sides can present
evidence and TESTIMONY; and they agree in
advance whether they will be bound by the
arbitration award If the parties to a
non-binding arbitration decline to adopt the award,
they remain free to pursue their claims within
the court system or to submit the dispute to
another type of alternative dispute resolution
Traditionally, labor and commerce were the
two largest areas of arbitration However, since
the mid-1970s the technique has seen great
expansion Some states have mandated
arbitra-tion for certain disputes such as auto insurance
claims, and court decisions have broadened into
areas such as SECURITIES, antitrust, and even
employment discrimination International
busi-ness issues are also frequently resolved using
arbitration
Arbitration in the United States dates back
to the eighteenth century Courts frowned on it,
though, until attitudes started to change in 1920
with the passage of the first state arbitration law,
in New York This statute served as a model for
other state and federal laws, including, in 1925,
the U.S Arbitration Act, later known as the
Federal Arbitration Act (FAA) (9 U.S.C.A § 1 et
seq.) The FAA was intended to give arbitration
equal status with litigation and, in effect, created
a body of federal law After WORLD WAR II,
arbitration grew increasingly important to
labor-management relations Congress helped
this growth with passage of theTAFT-HARTLEY ACT
(29 U.S.C.A § 141 et seq.) in 1947, and over the
next decade the U.S Supreme Court cemented
arbitration as the favored means for resolving
labor issues, by limiting the judiciary’s role In
the 1970s arbitration began expanding into a
wide range of issues that eventually included
prisoners’ rights, MEDICAL MALPRACTICE, and
consumer rights By 2003 all 50 states had modern arbitration statutes
Arbitration can be voluntary or required
The traditional model is voluntary and closely linked to contract law: Parties often stipulate in contracts that they will arbitrate, rather than litigate, when disputes arise For example, unions and employers almost always put an arbitration clause in their formal negotiations, known asCOLLECTIVE BARGAININGagreements By doing so, they agree to arbitrate any future employee grievances over wages, hours, working conditions, or job security; in essence, they agree not to sue if disagreements occur
Similarly, a purchaser and a provider of services who disagree over the result of a business deal may submit the problem to an arbitrator instead
of a court Mandatory arbitration was a later phenomenon States such as Minnesota, New York, and New Jersey enacted statutes that force disputes over automobile insurance claims into this forum In addition, courts sometimes order disputants into arbitration
In theory, arbitration has many advantages over litigation Efficiency is perhaps the greatest
Proponents say arbitration is easier, cheaper, and faster Proponents also point to the greater flexibility with which parties in arbitration can fashion the terms and rules of the process
Furthermore, although arbitrators can be law-yers, they do not need to be They are often selected for their expertise in a particular area of business and may be drawn from private practice or from organizations such as the American Arbitration Association (AAA), a national nonprofit group founded in 1926
Significantly, arbitrators are freer than judges
to make decisions, because they do not have to abide by the principle of stare decisis (the policy
of courts to follow principles established by
Contractual Arbitration Clause Standard Business
ARBITRATION The Parties agree that any claim or dispute between them or against any agent, employee, successor, or assign of the
other, whether related to this agreement or otherwise, and any claim or dispute related to this agreement or the relationship or duties
contemplated under this contract, including the validity of this arbitration clause, shall be resolved by binding arbitration by the American
Arbitration Association (or name other firm providing arbitration services, e.g., National Arbitration Forum), under the Arbitration Rules
then in effect Any award of the arbitrator(s) may be entered as a judgment in any court of competent jurisdiction
Arbitration Clause
A sample arbitration clause
ILLUSTRATION BY GGS CREATIVE RESOURCES REPRODUCED BY PERMISSION OF GALE,
A PART OF CENGAGE LEARNING.
ARBITRATION 345
Trang 9legal precedent) and do not have to give reasons
to support their awards (although they are expected to adhere to the Code of Ethics for Arbitrators in Commercial Disputes, established
in 1977 by the AAA and the AMERICAN BAR ASSOCIATION)
These theoretical advantages do not always hold up in practice Even when efficiency is achieved, some critics argue, the price is a lower quality of justice, and it can be made worse by the difficulty of appealing an award The charge
is frequently made that arbitration only results
in“splitting the baby”—dividing awards evenly among the parties The AAA roundly rejects this claim Yet even arbitrators agree that as arbitration has become increasingly formal, it sometimes resembles litigation in its
complexi-ty This may not be an inherent problem with the process as much as a result of flawed use of
it Parties may undermine arbitration by acting
as lawyers do in a lawsuit: excessively demand-ing discovery (evidence from the other side), callingWITNESSES, and filing motions
Ultimately, the decision to use arbitration cannot be made lightly Most frequently, arbitration is binding, and courts in most jurisdictions enforce awards Moreover, binding arbitration allows little or no option for appeal, expecting parties who arbitrate to assume the risks of the process In addition, arbitration is subject to the legal doctrines ofRES JUDICATAand
COLLATERAL ESTOPPEL, which together strictly curtail the option of bringing suits based on issues that were or could have been raised initially
Res judicata means that a final judgment on the merits is conclusive as to the rights of the parties and their privies, and, as to them, operates
as an absolute bar to a subsequent action involving the same claim, demand, orCAUSE OF ACTION Collateral estoppel means that when an issue of ultimate fact has been determined by a valid judgment, that issue cannot be relitigated between the same parties in future litigation
Thus, often the end is truly in sight at the conclusion of a binding arbitration hearing and the granting of an award
The FAA gives only four grounds on which
a court may vacate, or overturn, a binding arbitration award: (1) where the award is the result of corruption,FRAUD, or undue means; (2) where the arbitrators were evidently partial or corrupt; (3) where the arbitrators were guilty of
misconduct in refusing to postpone the hearing
or hear pertinent evidence, or where their misbehavior prejudiced the rights of any party; and (4) where the arbitrators exceeded their powers or imperfectly executed them so that a mutual, final, and definite award was not made
In the 1953 case Wilko v Swan, 346 U.S 427, 74
S Ct 182, 98 L Ed 168, the U.S Supreme Court suggested, in passing, that an otherwise-binding award may be set aside if it is in
“manifest disregard of the law,” and federal courts have sometimes followed this principle
PUBLIC POLICYcan also be grounds for vacating a binding arbitration award, but this recourse is severely limited to well-defined policy based on legal precedent, a rule emphasized by the Supreme Court in the 1987 case United Paperworkers International Union v Misco (484 U.S 29, 108 S Ct 364, 98 L Ed 2d 286) The growth of arbitration is taken as a healthy sign by many legal commentators It eases the load on a constantly overworked judicial system, while providing disputants with
a relatively informal, inexpensive means to solve their problems One major boost to arbitration came from the U.S Supreme Court, which held
in 1991 that AGE DISCRIMINATION claims in employment are arbitrable (Gilmer v Inter-state/Johnson Lane Corp., 500 U.S 20, 111 S Ct
1647, 114 L Ed 2d 26) Writing for the majority, JusticeBYRON R.WHITEconcluded that arbitration is as effective as a trial for resolving employment disputes Gilmer led several major employers to treat all employment claims through binding arbitration, sometimes as a condition of employment
Arbitration clauses have become a standard feature of many employment contracts This factor has led to conflicts concerning the applicability of these clauses when an employee seeks to sue an employer for a CIVIL RIGHTS
violation under Title VII of the Civil Rights Act
of 1964, as amended by the Civil Rights Act of
1991 A provision of this law addressed, for the first time, the arbitration of Title VII claims Section 118 of the act states that the parties could, “where appropriate and to the extent authorized by law,” choose to pursue alternative dispute resolution, including arbitration, to resolve their Title VII disputes Since its enactment, the federal courts have been re-quired to determine what this clause means in practice For example, in the securities industry,
346 ARBITRATION
Trang 10disputes arose over whether employers could
require their employees to WAIVEtheir right to
bring a Title VII claim in court The circuit
courts of appeal have uniformly ruled that
Congress did not mean to preclude compulsory
arbitration of Title VII claims
The EQUAL EMPLOYMENT OPPORTUNITY
COMMIS-SION (EEOC) has contended that employment
arbitration clauses do not prohibit the EEOC
from filing an action against an employer for a
civil rights violation The Supreme Court agreed
in Equal Employment Opportunity Commission
v Waffle House, Inc., 534 U.S 279, 122 S Ct
754, 151 L Ed 2d 755 (2002), holding that the
EEOC could seek damages on behalf of an
employee The commission could also seek
injunctive relief to change a company’s
discrim-inatory methods In so ruling, the Court
resolved an issue that had divided the circuit
courts of appeal
The employee in question was fired from his
job at the Waffle House after he suffered aSEIZURE
He filed a claim with the EEOC, arguing that his
rights under Title I of the Americans with
Disabilities Act (ADA) had been violated Under
this act, the EEOC has the authority to bring its
own enforcement actions against employers and
to seek reinstatement, back pay, and
compensa-tory and PUNITIVE DAMAGES on behalf of an
employee Moreover, the ADA makes no
excep-tion for arbitraexcep-tion agreements, nor does it
even mention arbitration Therefore the EEOC,
which had not signed an arbitration agreement
with the employer, was free to pursue its claims in
court The Court also concluded that the general
policies surrounding the ADA, and the EEOC
enforcement arm, justified the pursuit by the
EEOC of victim-specific relief It stated that
punitive damages “may often have a greater
impact on the behavior of other employers than
the threat of an injunction.”
The Supreme Court also has validated the
enforceability of arbitration awards relating to
collective bargaining agreements In Eastern
Associated Coal Corporation v United Mine
Workers of American, District 17, 531 U.S 57,
121 S Ct 462, 148 L Ed 2d 354 (2000), the
issue involved a labor arbitrator who ordered an
employer to reinstate an employee who had
twice tested positive for marijuana use The
employer filed a lawsuit in federal court seeking
to have the arbitrator’s decision vacated,
argu-ing that the award contradicted a public policy
against the operation of dangerous machinery
by workers who test positive for drugs
The Court unanimously agreed that the employee should be reinstated The Court made
it clear that the question was not whether the employee’s drug use itself violated public policy, but whether the agreement to reinstate him did
so However, the Court also pointed out that the public policy exception is a narrow one Based
on these principles, the Court ruled that the reinstatement did not violate public policy, as the award did not condone drug use or its impact on public safety In addition, the arbitrator placed conditions on the employee’s reinstatement, which included suspension of work for three months without pay, participa-tion in a substance abuse program, and continued random drug testing The fact that the employee was a recidivist did not tip the balance in favor of discharge
In 2009 the Arbitration Fairness Act was introduced in Congress, limiting the scope of the FAA and declaring that no predispute arbitration agreement shall be valid or enforce-able if it requires the arbitration of certain disputes Such disputes include an employment, consumer, or franchise dispute, or a dispute arising under any statute intended to protect civil rights The act, which would amend Chapter 1 of Title 9 of the United States Code with respect to arbitration, further requires that the validity or enforceability of an arbitration agreement shall be determined by a court under federal law Arbitration provisions in collective bargaining agreements, however, are exempt under the act Although early criticism of the Arbitration Fairness Act opines that it is anti-business, other assessments point out that it does not cover traditional disputes between sophisticated commercial parties; hence, its impact in the business realm may be minimal
An April 3, 2009, decision from the Alaska Supreme Court supported a limitation on employment disputes, echoing the sentiment behind the Arbitration Fairness Act that perhaps the arbitration of such disputes gives employers
an unfair advantage In Gibson v NYE Frontier Ford, Slip Op No 6355 (Ala S Ct Apr 3, 2009),
an employee ordered to arbitrate his wage and hour claim arising under state law consistent with the terms of an agreement governed by the FAA sought a declaration that the agreement was unconscionable Among other factors, the
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