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"The Case of the Century": U.S. Supreme Court Decides (almost) the Extent of Judicial Review of Arbitration Awards

March 25, 2008

Today, the United States Supreme Court issued its opinion in a case which had the potential to drastically change the commercial-arbitration landscape.  The key question in Hall Street Associates, L.L.C. v. Mattel, Inc. (Docket No. 06-989) was whether parties in arbitration had the right to request judicial review when both parties agreed that the arbitrator’s conclusions of law had been erroneous and when this option had been clearly documented in the language of the arbitration agreement.  

Legal commentators believed that the Supreme Court’s decision in Mattel would have a major impact on how business disputes were resolved.  During oral arguments, Justice Stephen Breyer noted, the issue at hand “…makes this case the case of the century.” 

While the Supreme Court remanded the case for the lower courts to determine whether the arbitration agreement at issue, submitted to the lower court in the course of district court litigation, could be enforced pursuant to the District Court's litigation management authority, it made clear that under the Federal Arbitration Act ("FAA"), "§§ 10 and 11 [of the FAA] provide exclusive regimes for the review provided by the statute."

FAA §§ 10 and 11 address "egregious" departures from the parties' agreed-upon arbitration:  "corruption," "fraud," "evident partiality," "misconduct," "misbehavior," "exceed[ing]…powers," "evident material miscalculation," "evident material mistake," "award[s] upon a matter not submitted;" the only ground with any softer focus is "imperfect[ions]," and a court may correct those only if they go to "[a] matter of form not affecting the merits." 

On application for an order confirming the arbitration award, the court "must grant" the order "unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title."

While making clear that judicial review under the FAA was limited under the statute, the Court's following conclusion indicate that this issue is far from settled: 

In holding that §§ 10 and 11 provide exclusive regimes for the review provided by the statute, we do not purport to say that they exclude more searching review based on authority outside the statute as well.  The FAA is not the only way into court for parties wanting review of arbitration awards:  they may contemplate enforcement under state statutory or common law, for example, where judicial review of different scope is arguable.  But here we speak only to the scope of the expeditious judicial review under §§ 9, 10, and 11, deciding nothing about other possible avenues for judicial enforcement of arbitration awards.