U.S. Supreme Court Takes Up Expanded Judicial Review
As you may recall, a few days ago I posted a piece about the arbitration of disputes involving foreign patents. I suggested that in some cases the parties might want to agree to a procedure that includes appellate review by a tribunal of three arbitrators on limited grounds.
One of my reasons for recommending appellate review by an arbitral panel rather than the district court is the Ninth Circuit's opinion that an agreement to appeal an arbitral award to the district court would constitute an unlawful extension of the judicial review permitted under the vacatur grounds of the FAA. Kyocera Corp. v. Prudential-Bache Trade Servs., Inc. (9th Cir. 2003) (en banc) 341 F.3d 987, 1000.
The Circuits are divided about this issue, with the Ninth and Tenth Circuit clearly ruling against appellate review and the Seventh and Eighth Circuits agreeing with the Ninth and Tenth, albeit in dicta. On the other hand, the Fourth and Fifth Circuits, as well as lower courts in the First and Second Circuits favor contractual provisions enabling arbitral appeal. On May 29, 2007, the Supreme Court granted certiorari to decide the issue whether parties can validly enter into an agreement that provides for the possibility of appellate review of an arbitral award by the district court having jurisdiction over the parties. Hall Street Associates, LLC v. Mattel, Inc., --- S.Ct. ----, 2007 WL 142533 (U.S.), 75 USLW 3633, 75 USLW 3636, 75 USLW 3398; see the Ninth Circuit Hall Street Associates Memorandum Opinion here.
Appeal of Arbitration Awards Should Be Permissible
Back in 2003 and 2004, I wrote extensively about this subject, contending that such an agreement is clearly legal and that courts and scholars alike ought to be capable of distinguishing between vacatur on the one hand and appeal on the other. See “Reframing The Dilemma of Contractually Expanded Judicial Review: Arbitral Appeal vs. Vacatur, 3 Pepp. Disp. Res. J. 157 - 220 (2003)” ; and ‘Expanded’ Judicial Review Revisited: Kyocera Overturns LaPine, 4 Pepp. Disp. Res. J. 47 - 60 (2004) .
The English Arbitration Act of 1996 clearly distinguishes between the two: Section 68 deals with vacatur and enumerates the grounds for annulment of the award. It is mandatory and the parties cannot modify or exclude it. On the other hand, Section 69 deals with limited appeal from an award, and describes the conditions and grounds upon which a party can seek leave from the court to appeal the award. It is not mandatory, and the parties can agree to exclude it in their arbitration agreement.
The Supreme Court should take this opportunity to end the confusion between vacatur and appellate review, and favor the strong public policy of enforcing the arbitration agreement over the flawed arguments that grounds for judicial review cannot be expanded beyond the vacatur grounds of Section 10(a) FAA.
