Hall Street Associates, L.L.C. v. Mattel, Inc.
| Hall Street Associates, L.L.C. v. Mattel, Inc. | |||||||
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| Argued November 7, 2007 Decided March 25, 2008 | |||||||
| Full case name | Hall Street Associates, L.L.C., Petitioner v. Mattel, Inc. | ||||||
| Docket nos. | 06-989 | ||||||
| Citations |
128 S. Ct. 1396; 170 L. Ed. 2d 254; 2008 U.S. LEXIS 2911; 76 U.S.L.W. 4168; 2008 AMC 1058; 21 Fla. L. Weekly Fed. S 121 | ||||||
| Prior history | On writ of certiorari to the United States Court of Appeals for the Ninth Circuit | ||||||
| Holding | |||||||
| State and federal courts cannot, on a motion to vacate or modify an arbitration award, apply standards agreed to by the parties that expand the scope of judicial review under the Federal Arbitration Act. | |||||||
| Court membership | |||||||
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| Case opinions | |||||||
| Majority | Souter, joined by Roberts, Thomas, Ginsburg, Alito; Scalia (all but footnote 7) | ||||||
| Dissent | Stevens, joined by Kennedy | ||||||
| Dissent | Breyer | ||||||
| Laws applied | |||||||
| Federal Arbitration Act | |||||||
Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008), was a United States Supreme Court case which held that state and federal courts cannot, on a motion to vacate or modify an arbitration award, expand the limited scope of judicial review specified in 9 U.S.C. §§ 10 and 11, including terms agreed upon by the parties.
Facts of the Case
Toy manufacturer Mattel was sued by its landlord Hall Street Associates in a dispute over a property lease, the property being a former View-Master factory in Beaverton, Oregon. After the litigation went to federal court both parties agreed to resolve the case by arbitration according to the procedures outlined in the Federal Arbitration Act (FAA). Atypically, the parties' arbitration agreement stipulated that the District Court could override the arbitrator's decision if "the arbitrator's conclusions of law are erroneous." This provision of the agreement granted the federal courts a much broader role in supervising the arbitration than is specifically granted in the FAA. The Act explicitly mentions only a narrow set of circumstances under which courts can override an arbitration award, such as corruption, partiality, or misbehavior on the part of the arbitrator.
The arbitrator heard the parties' arguments and handed down a decision in favor of Mattel. Hall sought review from the District Court, and that court found that the arbitrator's decision contained legally erroneous conclusions. Accordingly, the arbitrator ruled for Hall Street, and the District Court affirmed.
On appeal, the U.S. Court of Appeals for the Ninth Circuit ruled that the original arbitration award favoring Mattel must stand. Even if the arbitrator did make legal errors, it was not the place of the courts to review the soundness of the arbitrator's decision. The Ninth Circuit viewed the FAA's list of circumstances meriting judicial review as an exclusive list. As far as the original arbitration agreement expanded the scope of judicial review of the arbitration, the agreement could not be enforced.[1]
Decision
In a 6-3 decision, the Supreme Court not only rejected the argument that parties to a contract could expand the limited scope of judicial review, but stated that even the courts cannot expand it, even for extraordinary circumstances.
"Even assuming §§10 and 11 could be supplemented to some extent... But §9 makes evident that expanding §10’s and §11’s detailed categories at all would rub too much against the grain."
Aftermath
Because the Supreme Court rejected any sort of expansion whatsoever to the limited scope of judicial review stated in 9 U.S.C. §§ 10 and 11, other courts, such as the United States Court of Appeals for the Eighth Circuit, have also rejected other, judicially created exceptions, such as "manifest disregard for the law." Previously, the Eighth Circuit had recognized "manifest disregard" as a grounds to vacate an arbitration award, defining manifest disregard as when "the arbitrators were fully aware of the existence of a clearly defined governing legal principle, but refused to apply it, in effect, ignoring it."[2] However, after the Supreme Court passed its ruling in Hall Street, the Eighth Circuit changed its holding and held that even manifest disregard is not a sufficient grounds to vacate an arbitration award.[3]