Recent Development by Whitney R. Duesman
The noted case began simply enough: Hall Street Associates, L.L.C. (Hall Street) sued its tenant, Mattel, Inc. (Mattel), contesting Mattel's right to terminate the lease and claiming indemnification for the environmental cleanup costs of the site. However, things got more complicated when the parties, during the course of litigation, agreed to submit to arbitration to resolve the indemnification claim. With the blessing of the United States District Court for the District of Oregon, arbitration took place. The arbitrator, interpreting the lease obligation to comply with environmental laws, found for Mattel. Hall Street then filed a district court motion to vacate the award, arguing that the arbitrator's conclusion of law was erroneous. In the arbitration agreement, the parties had agreed that the district court could review the arbitrator's decision under a substantial-evidence or error-of-law standard. Citing LaPine Technology Corp. v. Kyocera Corp., the district court applied the latter standard and vacated the award. On remand, the arbitrator ruled for Hall Street. Both parties sought modification, but the district court largely upheld the award.
The parties each appealed to the United States Court of Appeals for the Ninth Circuit, contesting the enforceability of the judicial review provision in the arbitration agreement. Relying on its decision in Kyocera Corp. v. Prudential-Bache Trade Services, Inc., that federal courts may only review arbitral awards based on the grounds set forth in the Federal Arbitration Act (FAA), the Ninth Circuit reversed in favor of Mattel and remanded with instructions for the district court to confirm the original award unless there were grounds to vacate or modify under the FAA. After the district court held for Hall Street on new grounds and the Ninth Circuit again reversed, the United States Supreme Court granted certiorari to determine whether judicial review of an arbitration agreement could be expanded beyond the grounds set forth in the FAA. In a six-to-three decision, the Supreme Court held that §§ 10 and 11 of the FAA provide the exclusive grounds for vacatur and modification of an arbitration agreement. Hall Street Associates, L.L.C. v. Mattel, Inc., 128 S. Ct. 1396, 1408 (2008).
About the Author
Whitney R. Duesman. J.D. candidate 2010, Tulane University School of Law; B.A. 2005, Tulane University.
Citation
83 Tul. L. Rev. 1497 (2009)