Reference no: EM131272736
Hall Street Associates, L.L.C. v. Mattel, Inc.
Supreme Court of the United States 552 U.S. 576 (2008)
Mattel was leasing a property to Hall Street Associates. Hall Street sued Mattel on the ground that Mattel illegally terminated the lease. Hall Street additionally demanded compensation for what it said were necessary "environmental cleanup costs." Although the court decided in favor of Mattel on the termination issue, the parties made an agreement to arbitrate the environmental cleanup issue. Both parties determined that the court could modify the arbitration award as it saw fit. In other words, the court would be granted expanded judicial review of the arbitration award. After the arbitrator decided in favor of Hall Street, the court dismissed the arbitration award on the ground that the decision was based on errors of law.
Subsequently, the arbitrator instead decided in favor of Mattel. This time, the court let the second decision of the arbitrator stand. However, a second court reversed the decision, stating that the scope of judicial review permitted by the Federal Arbitration Act (FAA) did not encompass the actions of the earlier court. In other words, the earlier court should not have had the power to dismiss or modify the arbitration award. The case was appealed to the Supreme Court.
Justice Souter
". . . Congress enacted the FAA to replace judicial indisposition to arbitration with a national policy favoring [it] and plac[ing] arbitration agreements on equal footing with all other contracts." As for jurisdiction over controversies touching arbitration, the Act does nothing, being "something of an anomaly in the field of federal-court jurisdiction" in bestowing no federal jurisdiction but rather requiring an independent jurisdictional basis (providing for action by a federal district court "which, save for such [arbitration] agreement, would have jurisdiction under title 28"). But in cases falling within a court's jurisdiction, the Act makes contracts to arbitrate "valid, irrevocable, and enforceable," so long as their subject involves "commerce." And this is so whether an agreement has a broad reach or goes just to one dispute, and whether enforcement be sought in state court or federal. . . .
The Act also supplies mechanisms for enforcing arbitration awards: a judicial decree confirming an award, an order vacating it, or an order modifying or correcting it. An application for any of these orders will get streamlined treatment as a motion, obviating the separate contract action that would usually be necessary to enforce or tinker with an arbitral award in court. Under the terms of § 9, a court "must" confirm an arbitration award "unless" it is vacated, modified, or corrected "as prescribed" in §§ 10 and 11. Section 10 lists grounds for vacating an award, while § 11 names those for modifying or correcting one. . . .
The Courts of Appeals have split over the exclusiveness of these statutory grounds when parties take the FAA shortcut to confirm, vacate, or modify an award, with some saying the recitations are exclusive, and others regarding them as mere threshold provisions open to expansion by agreement. As mentioned already, when this litigation started, the Ninth Circuit was on the threshold side of the split, from which it later departed en banc in favor of the exclusivity view, which it followed in this case. We now hold that §§ 10 and 11 respectively provide the FAA's exclusive grounds for expedited vacatur and modification. . .
[I]t makes more sense to see the three provisions, §§ 9-11, as substantiating a national policy favoring arbitration with just the limited review needed to maintain arbitration's essential virtue of resolving disputes straightaway. Any other reading opens the door to the full-bore legal and evidentiary appeals that can "rende[r] informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process,"and bring arbitration theory to grief in postarbitration process. . . .
We do not know who, if anyone, is right, and so cannot say whether the exclusivity reading of the statute is more of a threat to the popularity of arbitrators or to that of courts. But whatever the consequences of our holding, the statutory text gives us no business to expand the statutory grounds. . . .
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. . . .
Although we agree with the Ninth Circuit that the FAA confines its expedited judicial review to the grounds listed in 9 U.S.C. §§ 10 and 11, we vacate the judgment and remand the case for proceedings consistent with this opinion. It is so ordered.
Judgment vacated and case remanded.
Case Questions
1. What does it mean for a court to be able to vacate or modify an arbitration award, rather than the two parties being limited to an arbitrator's decision?
Clue: What would be the effect on cooperation of the parties in an arbitration case if they both knew that courts are eager to vacate or modify an arbitration decision?
2. Why would the FAA want to limit a court's power over an arbitration award?
Clue: Look at the various advantages of arbitration when compared to court resolution of disputes.