Hall Street Associates, L.L.C. v. Mattel, Inc.

(United States Supreme Court)

• Supporting Parties' Freedom to Contract for Judicial Review of the Merits of Arbitral Decisions

In its decision in this case, rendered on March 25, the United States Supreme Court addressed the scope of judicial review of arbitral awards under the Federal Arbitration Act, 9 U.S.C. §§ 9 – 11, (“FAA”).  The case involved interpretation of Section 10(a) of the FAA, which provides only narrow bases on which a federal court may vacate an arbitration award, all having to do with flaws in the arbitral process rather than the merits of the arbitral decision.  The question presented was whether Section 10(a) is an exclusive standard of judicial review or, as NELF argued, a minimum default standard that parties are free to supplement in their arbitration agreements.  As the Court noted in its opinion, NELF presented for the Court’s consideration studies indicating that many businesses, concerned about irrational and excessive arbitral awards, “will flee from arbitration if expanded review is not open to them.”  NELF further argued, for itself and co-amicus National Federation of Independent Business Legal Foundation, that an interpretation of Section 10(a) as a minimum default standard is more consistent with the intention behind the FAA, which was to uphold parties’ arbitration agreements in the face of judicial hostility.  While Justice Stevens, in a dissenting opinion joined by Justice Kennedy, agreed with NELF’s position, the majority of the Court decided that Section 10(a) is an exclusive standard for judicial review under the FAA.  However, Justice Souter, writing for the majority, carefully limited the Court’s holding to cases where parties have invoked what he characterized as the “expedited” review process, or “shortcut,” available under the FAA for confirmation, vacatur, or modification of arbitration awards.  The Court suggested that there may be alternative means, under court rules, state statutes, and/or the common law, to obtain more expansive federal judicial review of arbitration decisions apart from the FAA.