Supremes Hold That Under The FAA Parties May Not Alter The Standard Of Judicial Review; But What About Labor Arbitration??

On March 25, 2008, the Supreme Court handed down Hall Street Associates v. Mattel, 552 U.S. ___(2008). The Court held that parties to an arbitration agreement governed under the FAA may not contractually alter the standard of judicial review. Why? The Court reads the provisions for vacatur and modification in Section 10 and 11 of the FAA as exclusive. It is hard to argue with the Court's reasoning on this issue, which divided the circuits, because Section 9 of the FAA provides that the court "must" confirm an award unless it is vacated or modified "as prescribed" in Section 10 and 11.

The Court holding is simply enough to understand, but the ramifications for labor law are uncertain and quite interesting. On page 13 of Justice Souter's slip opinion for the Court, he specifically stated that the holding may be different under different statutory schemes. As the Court stated:

The FAA is not the only way into court for parties wanting review of arbitration awards: they may contemplate enforcement under state statutory or common law, for example, where judicial review of different scope is arguable. But here we speak only to the scope of the expeditious judicial review under Section 9, 10 and 11, deciding nothing about other possible avenues for judicial enforcement of arbitration awards.

In labor law, the "avenue" under which arbitration awards are vacated or confirmed is not the FAA. Rather, jurisdiction stems from Section 301, 29 U.S.C. Sec. 1985. Unlike the FAA, Section 301 does not contain any specific criteria for judicial enforcement or vacatur of arbitration. Rather, the standards of judicial review are governed by federal common law. Support for this stems from the Steelworkers Trilogy and Lincoln Mills cases. Therefore, a strong argument can be made that Mattel is irrelevant to whether judicial review can be contractually altered under Section 301.

With respect to the merits, I believe that parties to a collective bargaining agreement can alter the standard of judicial review. This is because of the lack of mandatory language, as in the FAA, because of freedom of contract principles and most importantly, because collective bargaining agreements are different from ordinary contracts. Collective bargaining agreements concern parties who are involved in a continuing relationship. Economic pressure (such as strike or lockouts) is part and parcel of the collective bargaining process. The Supreme Court has recognized the importance of the "law of the shop" and of "past practices." Therefore, if parties to that collective agreement want to contractual alter the standard of judicial review, I believe they can.

Want to read more on this. I wrote a law review article in 2006 about this. Altering Judicial Review of Labor Arbitration Awards, 2006 Mich. St. L. Rev.  235.

Mitchell H. Rubinstein