Supreme Court Limits Judicial Review of Arbitration Awards

The U.S. Supreme Court has ruled that parties to an arbitration agreement may not agree to broader court review than allowed by federal law, SCOTUSblog reports.

The case involved a lease dispute between toymaker Mattel Inc. and the owner of a polluted factory site. The two parties had provided in their arbitration agreement that courts could review an arbitration decision for errors of law, the Associated Press reports.

Justice David H. Souter wrote in the opinion for the majority (PDF posted by SCOTUSblog) that the Federal Arbitration Act "confines its expedited judicial review" to narrow circumstances that are the exclusive means for vacating or modifying an arbitration finding.

Souter noted that the factory and amici had contended that parties will flee from arbitration if expanded review is not an option. On the other side, Mattel and amici argued the decision could result in flight from the courts.

“We do not know who, if anyone, is right, and so cannot say whether the exclusivity reading of the statute is more of a threat to the popularity of arbitrators or to that of courts,” Souter wrote. “But whatever the consequences of our holding, the statutory text gives us no business to expand the statutory grounds.”

Souter added that the parties may be able to obtain expanded court review using avenues outside the FAA, such as state statutes or common law.

The case is Hall Street Associates v. Mattel.