Hall Street Associates LLC. v. Mattel Inc.

Hall Street Associates LLC. v. Mattel Inc.

Introduction

In 2000, Hall Street Associates filed suit seeking declaratory relief and damages from Mattel, Inc. for its failure to indemnify Hall Street for the cost of cleaning up water contamination at a toy manufacturing facility Mattel leased from Hall Street. After litigation began, the parties agreed to arbitrate some of the issues in dispute. They signed an agreement allowing either party to appeal the arbitrator's decision in court if it contained errors of law or unsubstantiated findings of fact.

Subsequently, the Ninth Circuit ruled in a separate case that any arbitration provisions giving courts more review power than that granted to them in the Federal Arbitration Act (FAA) were invalid. Since the provisions of the arbitration agreement between Hall Street and Mattel went beyond those in the FAA, the Ninth Circuit invalidated the District Court's decision to review the arbitrator's findings according to the parties' provisions. At issue here is whether the FAA provides the sole grounds for judicial review of arbitration awards. Hall Street maintains that it is consistent with the spirit of the FAA and in the best interests of encouraging arbitration for courts to recognize all grounds for judicial review agreed upon by the parties, whether or not they go beyond those contained in the FAA. Mattel's position is that the best way to preserve the integrity of arbitration proceedings is to limit the review power of courts to the grounds contained in the FAA. Because the Supreme Court's decision in this case will affect the amount of freedom disputing parties have in crafting their arbitration agreements, ultimately it may affect whether parties choose to undergo the arbitration process at all.

Analysis

Mattel's relatively straightforward statutory argument centers on the idea that ordinary rules of interpretation dictate a narrow reading of sections 10 and 11 of the Federal Arbitration Act. Section 9 of the FAA states that if parties apply to the court for an order confirming an arbitration award, "the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title."

Mattel contends that this language clearly indicates that an arbitration award can only be vacated under the narrow grounds listed in sections 10 and 11. It argues that every word in a statute must be construed to have meaning under normal rules of statutory interpretation, and that the reference to sections 10 and 11 would be meaningless if Congress intended a court to use other grounds to change an arbitration award. Mattel also points to Section 2 of the FAA, which refers to agreements to "settle [a controversy] by arbitration." Federal Arbitration Act, 9 U.S.C. 2. According to Mattel, this section is meaningless if a court is permitted to review an arbitration award for legal or factual error, since then "the arbitration 'settles' nothing" and instead becomes "a mere dress rehearsal for litigation." Hall Street Associates ("Hall Street") claims that the statutory ...