Hall Street v. Mattel and “Public Policy”

In one of her blog entries following the Supreme Court’s Hall Street v Mattel decision, Sarah Cole wondered whether the restrictive reading of FAA s10 and s11 left any space for “manifest disregard” and any other judicially-created grounds for arbitral review. Sarah concluded, I think correctly, that manifest disregard appears safe. And as she points out, its continued viability stems not from any apparent compatibility with the Hall Street majority’s articulated framework, but rather from the simple fact that the majority said it was not disrupting the manifest disregard standard. But Sarah then suggested that other judicially-created standards, outside of the FAA, represent less secure ground. And she went so far as to say:

I believe the decision raises questions about the viability of other judicially-created standards of review such as “completely irrational”, “public policy” and “arbitrary and capricious.” It is difficult to argue that those standards are contained within section 10. So, are they no longer viable standards of review? Because the Court does not address this question, I would advise clients not to rely on anything but section 10 and manifest disregard as standards of review.

I think Sarah’s reading is correct as to “completely irrational” and “arbitrary and capricious.”

My instinct, however, is that “public policy” bases for vacating an arbitral award may yet have legs. My tentative thinking is this: Unlike the other articulations, “public policy” is also a common law standard applicable for voiding any contract–not just a standard applied when reviewing arbitral awards. I haven’t played out the logic entirely in my head yet, but as I juxtapose Justice Souter’s Hall Street decision with Justice Breyer’s decision in Eastern Associated Coal, I wonder… Breyer tells us, essentially, that the Court must review the contract in question as though it were written however the arbitrator’s ruling would have us believe it is written. (Recall that there’s no space for saying that the arbitrator misinterpreted the contract.) Assuming that logic still holds (and I don’t see how it wouldn’t) what might the Court do with a case in which the arbitrator’s interpretation of the contract would render the contract unenforceable on public policy grounds? None of the choices is pristine, but I’d be surprised if the Court stripped itself of the ability to vacate on public policy grounds–even if it would be willing to forego examinations that go more to the merits, like “irrationality” or “capriciousness.”

Michael Moffitt

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.