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Supreme Court takes FAA case
May 30, 2007 by Ross Runkel at LawMemo

The Federal Arbitration Act allows only very narrow judicial review of arbitrator awards. What if the parties agree to expand the scope of judicial review?

Hall Street Associates v. Mattel (certiorari granted May 29, 2007) brings this issue to the US Supreme Court.

After a lawsuit got going in federal court, the two parties agreed to arbitrate the case rather than litigate. The agreement provided that the federal district court shall vacate, modify, or correct the arbitrator's award "where the arbitrator's conclusions of law are erroneous."

The 9th Circuit refused to enforce this provision because the Federal Arbitration Act specifies that arbitration awards can be vacated only in limited cases involving such things as fraud, corruption, partiality, or when the arbitrators exceed their powers. Therefore, the arbitrator's award was upheld even though it contained possible errors of law.

The issue, then, is whether the parties to an arbitration agreement can agree to expand the grounds for vacating an award beyond the grounds listed in the Federal Arbitration Act.

The basic arguments are simple: (1) The FAA specifies the grounds for vacating an award, and courts cannot go beyond the statute. (2) Parties have freedom to decide, via contract, the procedural aspects of their arbitration.

We expect this case to briefed and argued in the Fall of 2007, with a decision some time in 2008.

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