Hall Street Associates sued Mattel over a property that Hall had leased from Mattel in Oregon. After an initial phase of the law suit, the parties agreed to arbitrate the dispute and signed an arbitration agreement that provided for "expanded" review of the arbitral award. Under the agreement, the district court would have been able to review the arbitrator's factual findings and conclusions of law, and the district court's decision would have been appealable to the Ninth Circuit Court of Appeals. Under section 10 of the Federal Arbitration Act (FAA), a district court has only limited powers to vacate an arbitral award. The FAA provides that an award can be vacated for reasons such as the arbitrator's fraud or corruption, but not for faulty legal conclusions.
After arbitrating part of the disputed lease, both parties sought a review of the award in the district court, which amended the arbitral award. On appeal, the Ninth Circuit vacated the decision of the district court, holding that its decision in Kyocera v. Prudential-Bache Trade Services (a decision handed down while the parties were arbitrating their dispute) voided expanded arbitral review agreements. There is a split among the federal circuit courts of appeal about whether the FAA permits or precludes expanded review of arbitral awards..
Did the Ninth Circuit Court of Appeals err when it held, in conflict with several other federal Courts of Appeals, that the Federal Arbitration Act (“FAA”) precludes a federal court from enforcing the parties’ clearly expressed agreement providing for more expansive judicial review of an arbitration award than the narrow standard of review otherwise provided for in the FAA?