March 2, 2012

The Commodification of Legal Decisionmaking

By Paul Kirgis

The Delaware Chancery Court arbitration scheme is on one side of a gold coin, with the “federal policy favoring arbitration” on the other.

The story starts with the slow strangulation of the judiciary caused by Congress’s failure over the last forty years to add enough judges to keep up with the draconian penal laws that it, Congress, kept passing. Federal courts could barely keep their heads above the deluge of drug cases they increasingly had to deal with. They had precious little time to devote to civil claims that tended to be complicated, because of either the financial complexity, the personal and emotional ties, or the sheer number of people involved.

First under Justice Burger and then under Justice Rehnquist, the Supreme Court let arbitration become a vehicle for clearing judicial dockets. Fifty years ago it would have been unthinkable that a private individual calling himself an arbitrator could render nonreviewable decisions on the application of the federal securities laws, much less the civil rights laws and the consumer protection laws. Today that happens all the time. An understaffed judiciary simply contracted out its adjudicative authority. Rather than pay its contractors directly, the judiciary allows the contractors to charge whatever the market will bear for their services as legal decisionmakers. As it turns out, the market will bear a lot when the prize is insulation from both punitive damages and liability for any widely-felt but individually small injuries inflicted on society.

Understandably, some judges look at that system and wonder. They wonder why the contractors should be allowed to rake in all that money. Congress has awarded only paltry raises in judicial pay, after all. The situation is even worse at the state level, where an explosion in both criminal and civil litigation has met with state budget woes to produce a decided loss in quality of life for lower court judges. Judges have plenty of financial incentive to seek out new sources of revenue. Besides, we are all entrepreneurs now, aren’t we?

The Delaware Chancery Court was just taking the next logical step when its judges decided to hire themselves out as public/private arbitrators. Now the court gets a nice share of the money that otherwise would have gone into private hands.

Of course, the judges won’t be able to turn that money directly into salary–at least not now. That would be gauche. But they also don’t have the power to spend it on new judges, since the legislature controls that. They will probably spend it on themselves in indirect ways–sprucing up the building, hiring more administrative assistance, that kind of thing. But the precedent of sitting judges earning private fees to arbitrate will be set. And the temptation for legislatures to see this as a new way to save money that would have been spent on the judiciary will be strong.

A cycle of commodification thus started will prove difficult to stop. It will skew the delivery of justice in fundamental ways. The judges who sell their services as arbitrators will have incentives to please the more powerful parties appearing before them, because those parties are able to dictate which processes they will use. The judge/arbitrators will not want cases eligible for arbitration to go to court, because then they would have to decide the same case, but without the nice fees. They don’t want those cases to go to private arbitration because then they lose out entirely. So a rational judge/arbitrator will make sure that the parties who, as a practical matter, get to decide which forum to use, decide that they really like court arbitration.

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