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U.S. Supreme Court Clarifies Scope of Judicial Review Under the Federal Arbitration Act

April 30, 2008

James E. Berger and Joseph R. Profaizer

On March 25, 2008, the U.S. Supreme Court issued its decision in Hall Street Associates, L.L.C. v. Mattel, Inc, in which the Court ruled, by a six-to-three vote,  that the scope of judicial review of arbitral awards is exclusively determined by the Federal Arbitration Act (the FAA).  The Courts decision in Hall Street resolved an issue that had resulted in a long-standing disagreement among the U.S. Courts of Appeals, namely whether parties could, through their arbitration agreement, customize the scope of judicial review applicable to an award rendered pursuant to that agreement. The Courts decision although leaving open the issue of other possible avenues for judicial enforcement of arbitral awards, including the manifest disregard of the law standard  affords parties to arbitration agreements an increased degree of certainty regarding the scope and nature of post-arbitral award judicial review under the FAA. However, Hall Street also eliminates a significant measure of contractual flexibility that the majority of federal appellate courts had previously recognized and many parties have adopted in their arbitration agreements. Consequently, parties that have included an expanded or narrowed provision for judicial review of arbitral awards in their agreements that are subject to the FAA should be aware that those provisions are likely to be null and void.

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