Hall Street Associates, LLC v. Mattel, Inc.

Justice Souter wrote the Court's opinion in this case on the finality of arbitration awards, ruling that the grounds explicitly enumerated in the Federal Arbitration Act are the exclusive grounds for vacating, modifying, or correcting an arbitration award and cannot be expanded upon, even by agreement of the parties.

After three years of litigation, the parties in Hall Street agreed to arbitrate their remaining claim. The district court approved the parties’ agreement, which provided for entry of judgment on any arbitration award, but required the court to vacate, modify, or correct the award if the arbitrator’s findings of fact were not supported by substantial evidence, or if the arbitrator’s conclusions of law were erroneous.

When the arbitrator ruled against the plaintiff based on an apparent error of law, the plaintiff moved the district court to vacate the award.

The Supreme Court ruled that vacatur was not available in this case. The Court held that the narrow grounds set forth in sections 10 and 11 of the FAA were the exclusive grounds for vacatur, modification, and correction and that the parties’ agreement improperly tried to expand upon those grounds.

The Court opined that the FAA should be seen as “substantiating a national policy favoring arbitration with just the limited review needed to maintain arbitration’s essential virtue of resolving disputes straightaway.”

“Any other reading opens the door to the full-bore legal and evidentiary appeals that can render informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process,” the Court reasoned.

“The decision recognizes that the sine qua non of arbitration is speed, efficiency, and cost-savings,” says Neal M. Eiseman, New York, cochair of the Arbitration Subcommittee of the Section of Litigation Alternative Dispute Resolution Committee. “The business decision whether to litigate or arbitrate is an either-or proposition; arbitration should not be an opportunity to combine the two,” Eisman says. “To be blunt, parties who arbitrate have agreed to abide by the arbitrator’s legal decision, thereby assuming the competence (or incompetence) of their arbitrators.”