Hall Street, Judicial Review of Arbitral Awards, and Federal Preemption

Abstract

The United States Supreme Court's decision in Hall Street Associates L.L.C. v. Mattel, Inc. resolved an important conflict amongst the Circuits as to whether parties could contractually expand the scope of judicial review of awards set forth in the Federal Arbitration Act (FAA). While the Court held that such attempts were impermissible because the FAA's bases to vacate or modify awards, however narrow, were exclusive, its opinion nonetheless raised more questions than it answered. One such issue was what was to become of manifest disregard, a judicially created ground to refuse confirmation intended to cover those unusual situations where arbitrators reached wholly bizarre results based on seemingly purposeful departures from basic rules of law. Manifest disregard is not referenced as such by the FAA, but, perhaps said the Court, it was nothing more than a reference to the sort of abuse of arbitral power which was specified in the FAA as a basis to refuse confirmation. This was to provoke a split commentary as to whether manifest disregard was still with us. The second such issue was raised by the Court's reference to the latitude parties might have to circumvent the FAA's review restrictions by arranging for review pursuant to state statute or even common law. Would review really be broader under these rubrics, and how would parties to an FAA case escape its post-award provisions, particularly given principles of preemption. Could a case be an FAA case for some purposes, but not for purposes of confirmation. This article deals with the issues just identified, and also traces early attempts by lower federal and state courts to intuit the Supreme Court's intentions in raising, but not answering them.