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The U.S. Supreme Court justices on Wednesday considered a case concerning whether the Federal Arbitration Act precludes federal courts from reviewing arbitration awards for factual or legal error if parties have specified in an arbitration agreement more expansive judicial review than that provided for in the statute. Justice Stephen Breyer jokingly called it “the case of the century,” saying that, because of the many potential issues for remand, the case might “take a hundred years to finish.” In an environmental cleanup dispute between Mattel Inc. and its Oregon landlord, Hall Street Associates LLC, an arbitration agreement between the parties provided that the arbitrator’s findings of fact and conclusions of law could be reviewed by the district court at the request of either party, and that the court could vacate, modify or correct an award if the findings of fact were not supported by substantial evidence or the conclusions of law were erroneous. Carter G. Phillips, counsel for petitioner Hall Street, conceded that “there is a limit to party autonomy” under the FAA, but argued that parties in arbitration agreements are “perfectly free to decide whether they want . . . issues to be decided conclusively by the arbitrator or to have them adjudicated at the end of the day by the federal court.” “But you have to give us a standard,” Justice Anthony Kennedy told Phillips. “I don’t know the standard you’re proposing that will allow us to draw the line and to put cases on one side of the line or the other.” Attorney Beth S. Brinkmann argued on behalf of Mattel that provisions in the FAA “provide the exclusive grounds on which a court can vacate, modify, correct an arbitration award. Those grounds do not include legal error.” The petitioner, she said, is seeking to “graft on” to the statute “any other ground that the parties agree to.” The parties’ dispute involved an indemnification clause in a lease agreement. After well water on the property leased by Mattel tested with levels of thrichloroethylene higher than federal limits, Mattel sought to terminate the lease and Hall Street sued for indemnification for environmental cleanup costs. The district court resolved one issue in the case and the parties proposed arbitrating the remaining issues. Hall Street sought district court review of the arbitrator’s finding that Mattel was protected by a contractual exception to the lease’s indemnification requirements. The court vacated the award, saying that the arbitrator’s decision “defies logic.” On appeal, the 9th U.S. Circuit Court of Appeals held that the FAA precluded the district court from reviewing the arbitration award for legal error. Hall Street subsequently appealed to the high court. The case is Hall Street Associates LLC v. Mattel Inc. Breyer asked Phillips what source of law would authorize the federal judge to enforce the arbitration agreement at issue. One source might be state law, and an alternative might be the federal judge’s case management authority, Breyer said. “My temptation is to say they’re open questions and they’d have to be argued on remand, which makes this case the case of the century, I guess, in a certain respect. It’s quite a difficult case,” he told Phillips. “I was just looking for the case of the day, your honor, actually,” Phillips quipped. Mattel was the only case argued on Wednesday. During Brinkmann’s argument time, Breyer expressed concern about the many instances in which some issues in a case are decided by judges and others are sent to special masters or arbitrators. The justice asked Brinkmann whether the court will have to rule on “the inherent authority, not statutory, of a federal district judge to peel off bits of cases and decide them in different ways.” “That’s why I say . . . the case of the century, because it’s going to take a hundred years to finish,” Breyer said. This article originally appeared on Law.com, a Web site owned by ALM.

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