Labor & Employment Law

Hall Street: Contract vs. statute

One key feature of arbitration is that an arbitrator's award is "final." Courts do not review arbitration awards to be sure the arbitrator was correct in making fact-findings, or correct in interpreting a contract, or correct in applying the law.

Federal Arbitration Act Section 10 specifies the grounds for vacating an award. It is plain from Section 10 that these grounds are "collateral attacks" on the award, and do not empower a court to inquire into the merits of the case.

In Hall Street Associates v. Mattel the issue before the US Supreme Court is whether the arbitrating parties can convey additional powers on the court to review an award.

Specifically, the issue is whether courts must (or may) enforce the parties' contractual agreement that their award can be vacated by a federal district court "where the arbitrator's conclusions of law are erroneous."

All of this will be the subject of oral argument at the US Supreme Court on November 7, 2007. [All briefs collected here]

The basic arguments are simple: (1) The FAA specifies the grounds for vacating an award, and courts cannot go beyond the statute. (2) Parties have freedom to decide, via contract, the procedural aspects of their arbitration.

In my view the Supreme Court will have little difficulty deciding this case. The Court has previously made it clear that the parties can agree to whatever arbitration procedures they want. So, the parties can - by contract - set the rules of evidence, determine how many arbitrators there will be, and otherwise control exactly how the arbitration proceedings will be carried out.

However, this case involves the powers and duties of a federal court after the arbitration is finished. Those powers and duties are decided by Congress. It is beyond my imagination that the Supreme Court would allow private parties to convey on federal courts a review power that Congress withheld.

Full post as published by Arbitration Blog on October 22, 2007 (boomark / email).