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 In the Daily Deal, Arthur D. Felsenfeld, a litigation partner at Andrews Kurth LLP,
examines arbitration award under The Federal Arbitration Act in relation to the Supreme Court's ruling on the Hall Street Associates LLC v. Mattel Inc case.May parties to an arbitration agreement governed by the Federal Arbitration Act, or FAA, provide by contract for an expanded scope of review of an arbitration award? Most of the Circuit Courts of Appeal that have been presented with this issue, consistent with the concept that the entire arbitration proceeding itself is a product of the parties' contract, have held that parties may so agree and their agreement will be enforced. On March 25, however, the United States Supreme Court in Hall Street Associates LLC v. Mattel Inc. squarely ruled to the contrary. The Supreme Court held that the grounds stated in the FAA are the exclusive grounds for vacating or modifying an arbitration award.
The statutory grounds for vacating an award under the FAA are limited to situations where (a) "the award was procured by corruption, fraud, or undue means," (b) "there was evident partiality or corruption of the arbitrators," (c) the arbitrators were guilty of "misconduct" or "misbehavior by which the rights of any party have been prejudiced" or (d) the arbitrators exceeded or improperly executed their powers. The grounds for modification of an award, on the other hand, generally go to errors in form not affecting the merits or to evident material miscalculations or misdescriptions.
Bad as they may be, findings of fact unsupported by substantial evidence or erroneous conclusions of law -- the grounds for vacatur agreed to by the parties in Hall Street -- are far cries from the statutory grounds of fraud, misconduct and the like under the FAA and are far more readily assertable by a losing party seeking to prolong the proceedings or to extract a settlement. Following Hall Street, such agreed-upon grounds are no longer available to a party seeking to overturn an arbitration award. As one who, as counsel, has represented parties in commercial and securities arbitrations and also has sat on arbitration panels, I am relieved that the Supreme Court came out as it did. By limiting the grounds for review of an arbitration award to those enumerated in the FAA, the Supreme Court prevents parties, perhaps unwittingly, from turning an arbitration into merely a prelude or "dress rehearsal" (to borrow a phrase by the Respondent in Hall Street) to a lengthy litigation, including appeals, which would subvert the very purpose of arbitration. Not only did the court hold unenforceable contractual provisions for expanded review of arbitration awards, but its analysis went a step further. The court appeared to strike down, albeit in dicta, the widely recognized standard of "manifest disregard of the law" as a ground for vacating arbitration awards. By implication, other judicially supplemented grounds such as where the award "violates public policy," is "arbitrary and capricious" or is "completely irrational" are of questionable validity, as well. It is a safe bet that there will be substantial controversy over the Supreme Court's statement on this point, and it remains to be seen how the courts will interpret it. Another interesting aspect of the Supreme Court's ruling was its observation that parties can tailor by contract some aspects of the arbitration process but distinguished the parties' right to agree upon grounds for post-arbitration judicial review. The two are interrelated, however. I submit that the scope of review of arbitration awards could substantially impact on the conduct of arbitrators during the arbitration proceeding itself. Arguably, this decision gives arbitrators greater latitude in departing from the law in fashioning an award. And there is no question that a contrary ruling by the Supreme Court would have significantly impacted the arbitration process in situations in which the parties contracted for expanded judicial review. For example, where parties agreed that the arbitration award could be overturned for an error of law, such an agreement, if enforceable, would have effectively compelled the appointment of one or more attorneys to the panel. It would likely also have increased the expense of the arbitration by requiring, among other things, more extensive briefing by the parties on points of law, perhaps independent research by the arbitrators, additional time spent on preparing an award and the ordering of transcripts of the proceedings. What does this all mean for parties drafting arbitration agreements? To the extent such agreements are governed by the FAA -- and any agreement which involves interstate commerce is -- clauses providing for expanded judicial review of arbitration awards (beyond the narrow grounds set out in the FAA) will no longer be enforced. For litigants, it should be clear that once parties commit to arbitration of controversies covered by the FAA, they can generally fashion the arbitration proceeding as they see fit, but the grounds for subsequent judicial review will be limited to the statutory grounds. Arthur D. Felsenfeld is a litigation partner in the New York office of Andrews Kurth LLP. He also serves as an arbitrator in commercial and securities arbitrations before the American Arbitration Association and the Financial Industry Regulatory Authority. CategoriesComments
From: Joe,
AAA Arbitration trashes America How is it possible that AAA Arbitration can stop anm American from the protection of the constitution without FRAUD, CORRUPTION, CONSPERICY. Investigate and charge Martha Stewart while All America losses what many have died to protect. Ones Constitutional Rights. I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God
Posted on:
September 16, 2008 2:01 AM
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AAA Promotes, Awards and protects the criminal while trashing and destroying America. Non - profit, Honor, Respect, Rule, Ethics, Oaths, Truth, Justice, are just a perception made with smoke and mirrors. Facts Look for your self. The FBI Investigate and charge Martha Stewart while AAA boldly shows overwhelming evidence of corruption, against all America. AAA money from profits has paid off and sold America down river.
AAA trashes your constitutional rights.
Fact Oath of Office
I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God
AAA uses money, power, and greed. Fact Just ask AAA if they have ever in there history charged anyone with perjury. The Answer Is [NO] Why? I ask and I quote From AAA " everyone lies". Facts AAA has Rule, Ethics and there are Laws you say. Smoke and Mirrors. You must abide by the Rules, Ethics and Laws not AAA. AAA has immunity without accountability they can and have literally created false statement on awards with false dates not even on a contract[smoke] to point guilt at the victims [ mirrors]. AAA then can award nominal damages to the criminal. The award then can be used to protect the criminal by pointing blame in another direction. Fact Home Repair fraud sky rockets with mandatory AAA Arbitration. At the same time AAA sky rockets to #1, AAA clients more bolder to commit fraud cause more consumers to be forced in AAA Mandatory arbitration. Fact No Buts AND OR about it. No matter what the facts or evidence against AAA they can just laugh at America. AAA then boldly uses immunity and unjust laws to trash our constitution. Facts with 2 small children I am more non-profit. Just look and you to will be amazed. I will fight AAA any time eye to eye. Law to Law but when I win they will cry like rich spoiled brats immunity without accountability. The Boldly #1 in America AAA awards criminal found guilty by indictment of criminal fraud Illinois Case# 2007 CF 1469 causing victims single father, and 2 small children to pay $5,000.00 nominal damages and worse AAA trashes victims family name to to give false perception for award. Come kick my ass AAA and you will find Honor And Respect has no fear. God is my witness