Arbitrators Gone Wild

Binding Mandatory Arbitration, bma, has gotten rave reviews and acidic condemnations. What you think depends on which side of the argument you are on. But one thing is for sure, it's going to be tougher to get around now with Hall St. Assocs. LLC v Mattell Inc (2008), 128 S. Ct. 1396 (Mar. 25, 2008), a case that hasn't garnered as much tought as it probably deserves.

Before Hall St, there was some argument that an attorney could make that if an arbitrator ignored the law in making their decision, then the decision itself was flawed and could be attacked in court. Not so, now. You think it was bad before? It could get much worse.

Now, the Supreme Court has basically held that ignoring the law is not an appealable ground to attack an arbitrator's decision in court.

Before Hall St, Wilco v Swan (1953), 346 US 427, left some room for doubt and some attorneys successfully argued (though it was not often) that if an arbitrator ignored the law and their decision was actually contrary to applicable law, then the decision was flawed to the point that a court could set it aside. Now? Simple: you're stuck.

What the Supreme Court seems to have concluded, in its "supreme" wisdom, is that no matter what the arbitrator does or says about the law, their decision is "right" even if they get it all wrong.

Now it seems more likely than ever that no matter how badly the arbitrator miscontrues or misapplies the law, even to the point of being totally opposite to what the law says, that's tough. It seems like an extraordinarily harsh result, even for a Court that seems to love arbitration as a mechanism that is little more, in reality, than a private system for "justice."

Still, some courts have said that ignoring the law may actually be "where the arbitrators exceeded their powers" and can justify vacating a bad arbitration result. Comedy Club Inc. v Improv W Assocs. (9th Cir 2009), 553 F.3d 1277, 1290, in spite of Hall St.

The result? Arbitration decisions are likely to be upheld even if the arbitrator was mentally "out to lunch on the law" when the decision was made, unless you're in the 9th Circuit. For the rest of the US? It's still anybody's guess.

For now, with a little help from the Hall St., it looks like it's time for arbitrators gone wild --- and so long as the courts are enthralled with the notion that a secret private form of justice can somehow still be justice, then there's little we can do about it.

The moral of the story? Make sure you trust your arbitrator because unless they are totally drunk or schizoid, whatever they decide is probably what you'll be stuck with.

Ron Burdge
Helping Lawyers Help Their Clients Since 1978.