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U.S. Supreme Court Ruling: HALL STREET ASSOCIATES, L. L. C. v. MATTEL, INC. 

Original document prepared by former Worldwide ERC® General Counsel, Richard H. Mansfield III
Mansfield & Mansfield

Updated by Worldwide ERC® Government Affairs Adviser, Tristan North
Current as of January, 2017

Many contracts, purchase agreements, and leases involved in the relocation industry contain arbitration clauses, as it is generally thought that arbitration and other non-judicial settlement (often lumped together as “alternative dispute resolution”, or “ADR”)of contract disputes is faster and often cheaper than litigation. Where there is federal jurisdiction for the dispute, parties often submit to arbitration under the Federal Arbitration Act (FAA). One of the provisions of that act allows for expedited judicial review of the arbitrator’s decision and to confirm, vacate, or modify it under tight standards. Under §9, a court "must" confirm an award "unless" it is vacated, modified, or corrected "as prescribed" in §§10 and 11. Section 10 lists grounds for vacating an award, including where the award was procured by "corruption," "fraud," or "undue means," and where the arbitrators were "guilty of misconduct," or "exceeded their powers."

Under §11, the grounds for modifying or correcting an award include "evident material miscalculation," "evident material mistake," and "imperfect[ions] in [a] matter of form not affecting the merits." An unresolved issue facing litigants in the past has been how much leeway the court has in reviewing the arbitration award; it is not uncommon that the parties stipulate in the arbitration agreement that the court can modify, or vacate the agreement under other circumstances, such as where the arbitrator makes a mistake of law in his findings.

The U. S. Supreme Court ruled on that issue in HALL STREET ASSOCIATES, L. L. C. v. MATTEL, INC. (No. 06-989, March 25, 2008) on certiorari from the ninth circuit.) The Court held that §10 and 11 were the only standards for expedited judicial review, but it expressly did not rule on the broader issue of whether the litigants have alternative judicial means of attacking or defending the arbitration award, especially in fact situations such as this one where the parties arbitration agreement may be in conflict with the FAA.

Thus, the Court left open the ability of unsuccessful litigants to attempt to challenge unfavorable arbitration awards.

The foregoing is intended as general information only. Regarding your specific situation, Worldwide ERC® suggests that you consult with your own tax or legal advisor as appropriate.

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