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The Federal Arbitration Act
The U.S. Supreme Court's recent decision in Hall Street Associates, L. L. C. v. Mattel, Inc. (Slip Opinion, No. 06-989) had long been anticipated by the litigation and arbitration communities and has been the subject of extensive commentary and debate in the brief period since it was rendered. The issue (which had created a sharp conflict in the Circuits) was whether the standards for judicial review of arbitration awards, as set forth in Sections 9-11 of the Federal Arbitration Act (FAA), could be contractually expanded by the arbitrating parties. More particularly, the question was whether parties could contract to inject traditional grounds for appeal into FAA arbitrations or whether they were limited to what was specifically set forth in Sections 9-11 of the FAA, e.g., 'evident partiality,' 'fraud,' 'corruption,' refusing to hear 'pertinent and material' evidence, and acts exceeding the powers of the arbitrator.
The Hall Street Court held that parties could not contractually expand the standards for judicial review in Sections 9-11 of the FAA. A likely, practical outgrowth of this ruling is that arbitrating parties will also be unable to contractually expand standards for judicial review under most if not all state arbitration statutes. This will make it more difficult for courts to overturn arbitration awards, and raises serious doubts about the continuing vitality of generally accepted decisions which hold that 'manifest disregard of the law' is a separate and distinct ground for challenging an arbitration award under the FAA.
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