On Wednesday, November 7, 2007, the United States Supreme Court heard oral arguments in Hall Street Associates, LLC v. Mattel, Inc., No. 06-989, in which the court is examining whether parties can contract for arbitration agreements that allow for judicial review of an arbitrator's decision beyond that which is already provided for in the Federal Arbitration Act ("FAA").
The case involves a dispute between a property owner, Hall Street Associates, and the toymaker, Mattel, over a lease agreement. The two companies decided to arbitrate their dispute and drafted an arbitration agreement that provided that the arbitrator's award could be vacated by a court if it contained errors of law or fact. Notably, while Section 10 and 11 of the FAA and case law provide grounds upon which an arbitrator's award can be vacated or modified--such as fraud, corruption, evident partiality and manifest disregard of the law--an arbitrator's decision cannot be vacated based upon purely legal or factual errors.
After an arbitrator decided in favor of Mattel, both parties sought to have the award reviewed by the United States District Court for the District of Oregon, which vacated the award on the basis that it was founded upon errors of law. Mattel appealed to the United States Court of Appeals for the Ninth Circuit, which reversed the district court's decision, finding that the district court lacked the authority to vacate the arbitrator's award on the basis of errors of law, since the plain language of the FAA does not provide for such relief. A copy of the Ninth Circuit's decision can be found here.
The Supreme Court is not expected to render a decision in this case until early 2008. Stay tuned. In the meantime, click here to review a copy of Hall Street Associates' brief to the Supreme Court and here to review a copy of Mattel's brief.