Arbitration is a creature of a contract. E.g., Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 53-54 (1995); Volt Info. Scis., Inc. v. Board of Trustees, 489 U.S. 468, 479 (1989). It is thus hardly surprising that parties have regularly sought to prescribe by contract the standard of judicial review that will apply if an award is later challenged in court. Some have sought to narrow the grounds for vacatur and modification set forth in sections 10 and 11 of the Federal Arbitration Act (the “FAA”), 9 U.S.C. §§ 10 & 11 (2007), while others have provided for a more expansive review than is available by statute. These efforts to displace the FAA’s standards for judicial review have had mixed results. Compare Roadway Pkg. Sys., Inc. v. Kayser, 257 F.3d 287 (3d Cir.), cert. denied, 534 U.S. 1020 (2001) with Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987 (9th Cir. 2003) (en banc), cert. dismissed, 540 U.S. 1098 (2004).
In Roadway Package, the Third Circuit wrote: “We now join with the great weight of authority and hold that parties may opt out of the FAA’s off-the-rack vacatur standards and fashion their own [by contract].” 257 F.3d at 293; accord Puerto Rico Tel. Co. v. U.S. Phone Mfg. Corp., 427 F.3d 21, 31 (1st Cir. 2005), cert. denied, 547 U.S. 1071 (2006); Jacada (Eur.), Ltd. v. International Mktg. Strategies, Inc., 401 F.3d 701, 711- 12 (6th Cir.), cert. denied, 546 U.S. 1031 (2005). The Ninth Circuit reached the opposite result in Kyocera, concluding that “private parties have no power to determine the rules by which federal courts proceed, especially when Congress has explicitly prescribed those standards.” 341 F.3d at 1000. The Ninth Circuit was emphatic, reinforcing its ruling, stating “private parties lack the power to dictate how the federal courts conduct the business of resolving disputes” brought before them. Id. (emphasis in original); accord Hoeft v. MVL Grp. Inc., 343 F.3d 57, 62-63 (2d Cir. 2003), rejecting the parties’ efforts to apply less stringent review standards than those in the FAA. See also Bowen v. Amoco Pipeline Co., 254 F.3d 925, 933-34 (10th Cir. 2001); Chicago Typographical Union No. 16 v. Chicago Sun- Times, Inc., 935 F.2d 1501, 1504-05 (7th Cir. 1991).
In Hall Street Associates, LLC v. Mattel, Inc., 127 S. Ct. 2875 (2007), the United States Supreme Court granted certiorari in a case in which the question presented (as set forth in the Petition for a Writ of Certiorari) was:
Did the Ninth Circuit Court of Appeals err when it held, in conflict with several other federal Courts of Appeals, that [the FAA] precludes a federal court from enforcing the parties’ clearly expressed agreement providing for more expansive judicial review of an arbitration award than the narrow standard of review otherwise provided for in the FAA?
See 2007 WL 128611, at *i (Jan. 12, 2007). Stay tuned. We will report again on this potentially significant and instructive matter once the Court has ruled.