The Tyranny of Contract

The Supreme Court today issued another opinion (American Express v. Italian Colors Restaurant) making it harder to sue in federal court after you've "agreed" to arbitration and "agreed" to waive any authority to pursue a class action. This kind of case—strengthening arbitration clauses and weakening class action privileges—is what people point to as exemplifying the "pro-business" bias of the Roberts Court. I've pushed back on that argument before, but today I want to push back a little the other way.

Specifically, I want to push back on the idea that these decisions are admirable as vindicating the "liberty of contract." A good example of that argument is made by graysilverback-blawger Walter Olson, who hails today's decision as "a victory for freedom of contract."

I do not think today's decision and the others like it are a victory for any kind of freedom or liberty of contract. I think they are better understood as furthering a pernicious tyranny of contract. No one—and I mean no one—negotiates a credit card or cell phone or cable television contract. This is true for consumers and it is true for small businesspeople. These are take-it-or-leave it arrangements, so the only option is to vote with your feet and sign on with a competitor. But it is no surprise that all the options impose these same onerous terms and waivers because in the final analysis no consumer or small businessperson will ever choose a credit card or cell phone based on finely printed dispute-resolution procedures. We choose on price and features, full stop. Anyone sophisticated enough to understand the effect of these provisions is sophisticated enough to know there is no choice but to accept them.

That is not to say that the Supreme Court's decisions in these cases are necessarily wrong to enforce these provisions. I am suspicious of the "effective vindication" doctrine that was at issue in today's case because it is a judicially crafted exception to rather clear federal legislation. And the objectives the plaintiffs' bar seek to vindicate can be achieved the old fashioned way: through legislation.*

So these decisions can be defended in terms of judicial modesty, and as consistent applications of basic interpretative principles. But it goes way too far, I think, to celebrate them as a triumph for freedom. The existence of these contracts is best understood as a market failure. They have the effect—undisputed in today's opinion—of making it cost prohibitive for people to prove violations of their statutory rights. It may well be wise of the Supreme Court to say, "this is not our problem." (Or, as Justice Kagan put it, "too darn bad.") But let's not pretend that individual freedom was actually increased as a result.

UPDATE: Walter Olson points out on Twitter that "grayback" is apparently an obscure insult, which was not my intent. I meant "silverback," which is to say that Mr. Olson is like a gorilla and that is not at all offensive. In seriousness, I was ineffectively just referencing the fact that he's been blogging about the law longer than just about anyone.


*FOOTNOTE: The chances of such legislation getting passed are undeniable small, for much the same reason that the companies are able to impose these terms in the first place. The companies each have billions on the line, and the consumers have literally pocket change at stake. So there are public choice problems. But another way of looking at this is just that Congress is "pro-business" too.

Bryan Garner is not rude.

The ABA's website has the transcript of an interview that Bryan Garner did with Justice Kagan. I was pleased to learn that—like all good Americans—Justice Kagan majored in history in college and that she continues to read a lot of American history. Sean Wilentz, Richard Hofstadter, and Edmund S. Morgan are among her favorites. I have not read anything by Mr. Hofstadter but Mr. Morgan is a fantastic historian as is Mr. Wilentz. 

Reader(s)™ might recall that Mr. Torvik and I recently discussed Mr. Garner's claim that Justice Scalia is the "Most Principled Justice."  Mr. Garner made this claim in the course of marketing a book that he wrote with Justice Scalia.  To recap, I think that the whole idea of a Most Principled Justice is ridiculous, Mr. Torvik disagrees and also thinks that the choice of Justice Scalia as Most Principled Justice is not a "ridiculous choice." 

Williams v. Illinois

The other day, Mr. Gillette and I had a little back-and-forth in the comments regarding Bryan Garner's opinion that Justice Scalia is the court's "most principled" justice. Garner's claim seems to be that Scalia is the most likely to reach a decision that is at odds with his policy preferences.

Today the Supreme Court handed down a decision, Williams v. Illinois, that fits into the Garner / Scalia narrative. Eugune Volokh has a nice summary of the case:

In Williams, a woman was raped and robbed, and the defendant was caught with the help of a DNA test conducted on the semen left over after the attack, though there was other evidence, too: Once the DNA test pointed at the defendant (who hadn’t earlier been under suspicion), “the police conducted a lineup at which [the victim] identified petitioner as her assailant.” But the DNA evidence was important. 

The evidence, though, was presented by an expert who was working from a DNA profile of the semen, and the private forensic lab analyst who actually produced the profile did not testify in court. The legal question in the case was whether the Confrontation Clause barred the introduction of such evidence, given that the person who had personal knowledge of how the profile was produced was not present in court to be cross-examined. This is a complicated and [con]tested question of Confrontation Clause law, on which the Court split 5-4 as to the bottom line (which was that the state wins) and 4-1-4 on the rationale.

Scalia joined Justice Kagan's dissent on the Confrontation Clause issue, creating an unusual 5-4 lineup with Kagan, Ginsberg, Sotomayor, and Scalia together in dissent. The dissent would have found a broader right to confront the expert witness, would have required that the case be retried, and would generally have made obtaining convictions in these cases more expensive and therefore more difficult. Not exactly a "law and order" conservative's dream.

Justice Kagan on the Mets

Today, the Supreme Court decided Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S. Justice Kagan authored the opinion for a unanimous Court. The case is Supreme Court red meat—although in the abstract it deals with a complicated statutory regime governing the approval of generic drugs for non-patented uses, the case ultimately boils down to statutory interpretation, specifically of the word "an." Seriously:

Truth be told, the answer to the general question “What does ‘not an’ mean?” is “It depends”: The meaning of the phrase turns on its context.  “Not an” sometimes means “not any,” in the way Novo claims.  If your spouse tells you he is late because he “did not take a cab,” you will infer that he took no cab at all (but took the bus instead).  If your child admits that she “did not read a book all summer,” you will surmise that she did not read any book (but went to the movies a lot).  And if a sports-fan friend bemoans that “the New York Mets do not have a chance of winning the World Series,” you will gather that the team has no chance whatsoever (because they have no hitting). But now stop a moment.  Suppose your spouse tells you that he got lost because he “did not make a turn.”  You would understand that he failed to make a particular turn, not that he drove from the outset in a straight line.  Suppose your child explains her mediocre grade on a college exam by saying that she “did not read an assigned text.” You would infer that she failed to read a specific book, not that she read nothing at all on the syllabus. And suppose a lawyer friend laments that in her last trial, she “did not prove an element of the offense.”  You would grasp that she is speaking not of all the elements, but of a particular one. The examples could go on and on, but the point is simple enough: When it comes to the meaning of “not an,” context matters.

As interesting as this general discussion of "not an" is, what caught my eye was the sports talk. Justice Kagan is, famously, a Mets fan. I do not take her use of the Mets example—"the New York Mets do not have a chance a winning the World Series"—to be an empty hypothetical example. I take her to be opining that, in fact, the Mets do not have a chance of winning the World Series. She even slips in the reason—"because they have no hitting."

This is a unanimous opinion remember, so I take it the entire Court is on board with this prognostication. Come October, we'll find out if the Court can maintain its famed legitimacy in matters related to baseball.

Scalia stands up for the little guy

Today the Supreme Court decided a statutory interpretation case involving bankruptcy law that turns more or less on the meaning of the word "applicable."  Sexy, sexy stuff.  At the risk of boring our reader(s), let me briefly explain the issue: whether an individual in bankruptcy can deduct from his disposable income—that is, the amount he's presumed to have available to pay creditors -- an amount for the ownership costs of his car, even if he owns his car outright and has no car payments.

In Justice Kagen's first published opinion, the pro-business Roberts Court predictably sided with the creditor—a big, bad credit card company—by interpreting the Bankruptcy Code to more or less incorporate an IRS regulation that makes clear that taxpayers may not take a deduction for ownership costs unless they have car payments to make. 

Only one Justice had the courage to stand up and dissent on behalf of the poor debtor:  Justice Scalia.  He interpreted "applicable" so that simply owning a car would qualify the debtor to deduct the specified amount from his or her disposable income.  To the charge that his interpretation rendered the word "applicable" superfluous, Scalia responded, "The canon against superfluity is not a canon against verbosity."  Just another example of a judge using the canons of statutory interpretation to get his preferred result.

Of course I'm being facetious.  I don't think this is evidence that Scalia cares about the little guy, particularly, or that either he or Kagen were perverting the canons to get their "preferred result. " But just remember this case the next time you read a story about how the Supreme Court always decides "business cases" in favor of businesses.  I posit that most of them are just like this one—statutory interpretation cases that come down to judicial idiosyncrasy—not judicial ideology.