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U.S. Supreme Court Invalidates Custom Standards of Judicial Review Under FAA

Posted in Opinions & Judgments, Standards of Review

In Hall Street Associates, L.L.C. v. Mattel, Inc. (06-989) (previously discussed here), the U.S. Supreme Court has held that a contract purporting to allow judicial review of an arbitration award for evidentiary and legal errors cannot be enforced under the Federal Arbitration Act.

Although this decision shutters the notion that parties can contract for expanded judicial review under the FAA, it does not preclude enforcement of such agreements under state law.  The key is whether the underlying agreement "involves commerce"—something the Hall Street parties did not litigate—and thereby triggers the federal statute.  Thus, in an effort to preserve existing agreements for enhanced review, parties will contend that state arbitration law applies.  Going forward, contracting parties will more likely turn to "arbitration appellate panels," building a level of review into the arbitration process before reaching any potential judicial remedies.

In vehemently defending the narrow statutory bases for vacating arbitration awards, Hall Street muddies the water with respect to whether judicially created vacatur grounds such as "manifest disregard of the law" and "violation of public policy" remain valid.  Those grounds were not squarely at issue—manifest disregard is mentioned in the majority opinion, but public policy is not—yet the Court describes the FAA bases for vacatur and modification as "exclusive."  Federal and state courts applying the FAA will face these issues in the near future.

  • http://www.calblogofappeal.com/2008/03/26/federal-question-jurisdiction-and-the-federal-arbitration-act/ The California Blog of Appeal

    Federal Question Jurisdiction and the Federal Arbitration Act

    Anyone who reads this blog regularly knows I am a jurisdiction geek, so a post about Federal Question Jurisdiction and the Federal Arbitration Act at Civil Procedure Prof Blog caught my eye. The post links to an article on the topic at Social Science …

  • http://www.texasappellatelawblog.com/2008/03/articles/final-judgments/the-buzz-on-hall-street-v-mattel/index.html Texas Appellate Law Blog

    The Buzz on Hall Street v. Mattel

    The blogosphere has been a little slow catching on to yesterday’s SCOTUS decision in Hall Street Associates, L.L.C. v. Mattel, Inc. (06-989). Aside from my own post, here are the blog entries I have found discussing the case: Adjunct Law…