National News

AAA Files Amicus Curiae Brief Opposing Expansion of Judicial Review of Arbitral Awards

Sept. 17, 2007 -- The American Arbitration Association recently filed an amicus curiae brief urging the United States Supreme Court to affirm the decision of the Ninth Circuit Court of Appeals in Hall Street Associates LLC v. Mattel Inc. , which held that the Federal Arbitration Act (FAA) does not permit parties to agree to expansive judicial review of arbitral awards.

The case stemmed from a post-dispute arbitration agreement between Hall Street, a property owner, and Mattel, its lessee. The arbitration agreement provided that a reviewing court must vacate the arbitration award where the arbitrator's findings of facts were not supported by substantial evidence, or where the arbitrator's conclusions of law were erroneous.

However, the Ninth Circuit Court of Appeals held that the provisions of the parties' agreement, which expanded the standards of judicial review beyond those provided for in the FAA, were unenforceable. Hall Street then petitioned for review by the U.S. Supreme Court, citing the split on Federal Circuit Courts of Appeals on the issue.

The AAA's brief, filed with the Supreme Court on Sept. 14, takes the position that enforcement of agreements that allow expanded judicial review of arbitration awards would result in serious repercussions, namely: (1) erosion of the benefits of the arbitral process; (2) defeat of Congress's intent to limit judicial interference with arbitration awards; and (3) violation of the plain terms of the FAA.

The AAA cited previous Supreme Court decisions, such as the 1984 ruling in Southland Corp. v. Keating (465 U.S. 1, 7), which recognize the independence of the arbitral process by preserving the integrity of arbitration awards against judicial reference.

"One of the cornerstone principles of arbitration endorsed by Congress is that awards rendered by arbitrators are final and binding. If parties are allowed to contract for expanded judicial review of arbitration awards, arbitration will become a prelude to litigation, instead of a substitute for it," said the AAA in its filing.

Section 10 of the FAA specifies four grounds for vacating an arbitral award, according to the AAA. "Each of the grounds for vacatur of arbitration awards set forth in Section 10(a) protects the integrity of the arbitration process; none permits review of the substance of an arbitrator's decision," the AAA added.

The AAA, the world's largest provider of ADR services, said it is not aware of any country that permits parties to create their own standards of judicial review of arbitration awards. To the contrary, international instruments like the New York Convention explicitly discourage the involvement of courts by emphasizing the final and binding nature of arbitral awards and by limiting grounds for judicial review to serious procedural deficiencies.

"By permitting expanded judicial review of arbitral awards, the United States would be at odds with the international arbitration community," said the AAA.