Academic journal article The Review of Litigation

Hall Street, Judicial Review of Arbitral Awards, and Federal Preemption

Academic journal article The Review of Litigation

Hall Street, Judicial Review of Arbitral Awards, and Federal Preemption

Article excerpt


The United States Supreme Court's 2008 decision in Hall Street Associates, L.L.C, v. Mattel, Inc., in resolving a direct conflict amongst the circuits, holds that where the judicial review provisions of the Federal Arbitration Act ("FAA") apply, they provide the "exclusive" grounds for vacation or modification of an award.1 These provisions limit the bases for refusal to confirm awards to gross abuses of process,2 and the bases for modification of awards to essentially mechanical errors apparent on the face of the award.3 They do not provide for review on the merits.4 The parties in Hall Street, however, had attempted to provide for a reasoned arbitral award to be reviewed judicially for errors of law and for factfindings which were not supported by substantial evidence.5

In Hall Street, the Supreme Court was faced with entrenched policy considerations which were impossible to reconcile in dealing with the issue at hand. Pointing in favor of permitting parties to opt for broadened review was that, under the FAA, arbitration, as a creature of contract, is to be conducted in keeping with the provisions of the arbitration agreement.6 Pointing against giving the parties such latitude was that expedited judicial review of awards is important if arbitration is to provide the desired economies without undue interference from the courts.7 When policies such as these collide, confusion may result, and that is what happened here.

In a 7-2 decision, the Hall Street majority would read as mandatory8 the provision in section 9 of the FAA that an award "must" be confirmed absent the highly limited statutory bases to refuse found in sections 10 and ll.9 Perhaps this strict statutory construction approach was designed to avoid the conceptual trap created by the competing arbitral policies just identified. However, in dissent, Justice Stevens, joined by Justice Kennedy, contended with considerable force that the "must" imperative was only designed to prevent a judiciary traditionally hostile to arbitration from being overly intrusive at the review stage absent party invitation to look at the merits of the award.10

The Hall Street majority acknowledged that the FAA left the parties free to fashion their own arbitral procedures, but then drew a distinction between the contractual shaping of arbitral matters left unspecified by statute (choice of arbitrators, discovery, arbitral forum) and party attempts to abrogate statutory directives in section 9.11 Furthermore, when faced with the predictable argument that the FAA bases for review could not be "exclusive" because of its prior recognition of "manifest disregard" as grounds to refuse confirmation,12 the Court distinguished between that highly restrictive exception as fashioned by the courts and the broadscale review on the merits sought to be arranged by the parties in the case before it.13 The Court added that "manifest disregard" could well be nothing more than a subspecies of the "abuse" of arbitral power actually specified by section 10 of the FAA as grounds to refuse confirmation.14 Finally, the Court acknowledged that frustrating arbitral parties desiring broadened judicial review, perhaps to assuage lingering distrust of arbitration, might not be universally viewed as a good thing.15 The majority referred to the possibility of arbitral parties arranging for what might be broader review available under state arbitral statutes or in common law arbitration.16 Just how parties might arrange this was left unsaid. The specter raised, however, appeared to be that of an arbitral claim governed by the FAA for some purposes, such as compelling arbitration, but not for purposes of judicial review.17

Hall Street has thus left parties and courts with a number of uncertainties. One is whether "manifest disregard" really remains viable as a basis to refuse confirmation under the FAA, and, if so, how it is to be applied once conceptualized as a form of abuse of arbitral power. …

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