Wednesday, March 26, 2008

The Supreme Court has decided the case of Hall Street Associates, L.L.C. v. Mattel, Inc., No. 06-989, a case pertaining to the role of the judiciary in reviewing arbitration awards under the Federal Arbitration Act. Here is an excerpt from the Syllabus of the case:

The Federal Arbitration Act (FAA), 9 U. S. C. §§9–11, provides expedited judicial review to confirm, vacate, or modify arbitration awards. Under §9, a court “must” confirm an award “unless” it is vacated, modified, or corrected “as prescribed” in §§10 and 11. Section 10 lists grounds for vacating an award, including where the award was procured by “corruption,” “fraud,” or “undue means,” and where the arbitrators were “guilty of misconduct,” or “exceeded their powers.” Under §11, the grounds for modifying or correcting an award include “evident material miscalculation,” “evident material mistake,” and “imperfect[ions] in [a] matter of form not affecting the merits.”

After a bench trial sustained respondent tenant’s (Mattel) right to terminate its lease with petitioner landlord (Hall Street), the parties proposed to arbitrate Hall Street’s claim for indemnification of the costs of cleaning up the lease site. The District Court approved, and entered as an order, the parties’ arbitration agreement, which, inter alia, required the court to vacate, modify, or correct any award if the arbitrator’s conclusions of law were erroneous. The arbitrator decided for Mattel, but the District Court vacated the award for legal error, expressly invoking the agreement’s legal-error review standard and citing the Ninth Circuit’s LaPine decision for the proposition that the FAA allows parties to draft a contract dictating an alternative review standard. On remand, the arbitrator ruled for Hall Street, and the District Court largely upheld the award, again applying the parties’ stipulated review standard. The Ninth Circuit reversed, holding the case controlled by its Kyocera decision, which had overruled LaPine on the ground that arbitration-agreement terms fixing the mode of judicial review are unenforceable, given the exclusive grounds for vacatur and modification provided by FAA §§10 and 11.


1. The FAA’s grounds for prompt vacatur and modification of awards are exclusive for parties seeking expedited review under the FAA. The Court rejects Hall Street’s two arguments to the contrary. . . .

2. In holding the §10 and §11 grounds exclusive with regard to enforcement under the FAA’s expedited judicial review mechanisms, this Court decides nothing about other possible avenues for judicial enforcement of awards. Accordingly, this case must be remanded for consideration of independent issues.

196 Fed. Appx. 476, vacated and remanded.

Souter, J., delivered the opinion of the Court, in which Roberts, C. J., and Thomas, Ginsburg, and Alito, JJ., joined, and in which Scalia, J., joined as to all but footnote 7. Stevens, J., filed a dissenting opinion, in which Kennedy, J., joined. Breyer, J., filed a dissenting opinion.


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