DocketNumber: 06-989
Judges: Souter, Stevens, Breyer
Filed Date: 3/25/2008
Status: Precedential
Modified Date: 10/19/2024
delivered the opinion of the Court,
The Federal Arbitration Act (FAA or Act), 9 U. S. C. § 1 et seq., provides for expedited judicial review to confirm, vacate, or modify arbitration awards. §§ 9-11 (2006 ed.).
This case began as a lease dispute between landlord, petitioner Hall Street Associates, L. L. C., and tenant, respondent Mattel, Inc. The property was used for many years as a manufacturing site, and the leases provided that the tenant would indemnify the landlord for any costs resulting from the failure of the tenant or its predecessor lessees to follow environmental laws while using the premises. App. 88-89.
Tests of the property’s well water in 1998 showed high levels of trichloroethylene (TCE), the apparent residue of manufacturing discharges by Mattel’s predecessors between 1951 and 1980. After the Oregon Department of Environmental Quality (DEQ) discovered even more pollutants, Mattel stopped drawing from the well and, along with one of its predecessors, signed a consent order with the DEQ providing for cleanup of the site.
After Mattel gave notice of intent to terminate the lease in 2001, Hall Street filed this suit, contesting Mattel’s right to vacate on the date it gave, and claiming that the lease obliged Mattel to indemnify Hall Street for costs of cleaning up the TCE, among other things. Following a bench trial before the United States District Court for the District of Oregon, Mattel won on the termination issue, and after an unsuccessful try at mediating the indemnification claim, the parties proposed to submit to arbitration. The District Court was amenable, and the parties drew up an arbitration agreement, which the court approved and entered as an order. One paragraph of the agreement provided that
*579 “[t]he United States District Court for the District of Oregon may enter judgment upon any award, either by confirming the award or by vacating, modifying or correcting the award. The Court shall vacate, modify or correct any award: (i) where the arbitrator’s findings of facts are not supported by substantial evidence, or (ii) where the arbitrator’s conclusions of law are erroneous.” App. to Pet. for Cert. 16a.
On remand, the arbitrator followed the District Court’s ruling that the Oregon Act was an applicable environmental law and amended the decision to favor Hall Street. This time, each party sought modification, and again the District Court applied the parties’ stipulated standard of review for legal error, correcting the arbitrator’s calculation of interest but otherwise upholding the award. Each party then appealed to the Court of Appeals for the Ninth Circuit, where Mattel switched horses and contended that the Ninth Circuit’s recent en banc action overruling LaPine in Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F. 3d 987, 1000 (2003), left the arbitration agreement’s provision for judicial review of legal error unenforceable. Hall Street countered that Kyocera (the later one) was distinguishable, and
The Ninth Circuit reversed in favor of Mattel in holding that, “[u]nder Kyocera the terms of the arbitration agreement controlling the mode of judicial review are unenforceable and severable.” 113 Fed. Appx. 272, 272-273 (2004). The Circuit instructed the District Court on remand to
“return to the application to confirm the original arbitration award (not the subsequent award revised after reversal), and ... confirm that award, unless ... the award should be vacated on the grounds allowable under 9 U. S. C. § 10, or modified or corrected under the grounds allowable under 9 U. S. C. § 11.” Id., at 273.
After the District Court again held for Hall Street and the Ninth Circuit again reversed,
II
Congress enacted the FAA to replace judicial indisposition to arbitration with a “national policy favoring [it] and placing] arbitration agreements on equal footing with all other contracts.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440, 443 (2006). As for jurisdiction over controversies touching arbitration, the Act does nothing, being “something of an anomaly in the field of federal-court jurisdiction”
The Act also supplies mechanisms for enforcing arbitration awards: a judicial decree confirming an award, an order vacating it, or an order modifying or correcting it. §§ 9-11. An application for any of these orders will get streamlined treatment as a motion, obviating the separate contract action that would usually be necessary to enforce or tinker with an arbitral award in court.
“(1) where the award was procured by corruption, fraud, or undue means;
“(2) where there was evident partiality or corruption in the arbitrators, or either of them;
“(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or
“(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.”
Ill
Hall Street makes two main efforts to show that the grounds set out for vacating or modifying an award are not exclusive, taking the position, first, that expandable judicial review authority has been accepted as the law since Wilko v. Swan, 346 U. S. 427 (1953). This, however, was not what Wilko decided, which was that § 14 of the Securities Act of 1933 voided any agreement to arbitrate claims of violations of that Act, see id., at 437-438, a holding since overruled by Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U. S. 477, 484 (1989). Although it is true that the Court’s discussion includes some language arguably favoring Hall Street’s position, arguable is as far as it goes.
The Wilko Court was explaining that arbitration would undercut the Securities Act’s buyer protections when it remarked (citing FA A § 10) that “[p]ower to vacate an [arbitration] award is limited,” 346 U. S., at 436, and went on to say that “the interpretations of the law by the arbitrators in contrast to manifest disregard [of the law] are not subject, in the federal courts, to judicial review for error in interpretation,” id., at 436-437. Hall Street reads this statement as recognizing “manifest disregard of the law” as a further ground for vacatur on top of those listed in § 10, and some Circuits have read it the same way. See, e. g., McCarthy v.
But this is too much for Wilko to bear. Quite apart from its leap from a supposed judicial expansion by interpretation to a private expansion by contract, Hall Street overlooks the fact that the statement it relies on expressly rejects just what Hall Street asks for here, general review for an arbitrator’s legal errors. Then there is the vagueness of Wilko’s phrasing. Maybe the term “manifest disregard” was meant to name a new ground for review, but maybe it merely referred to the §10 grounds collectively, rather than adding
to them. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U. S. 614, 656 (1985) (Stevens, J., dissenting) (“Arbitration awards are only reviewable for manifest disregard of the law, 9 U. Si C. §§ 10, 207”); I/S Stavborg v. National Metal Converters, Inc., 500 F. 2d 424, 431 (CA2 1974). Or, as some courts have thought, “mani-
fest disregard” may have been shorthand for § 10(a)(3) or § 10(a)(4), the paragraphs authorizing vacatur when the arbitrators were “guilty of misconduct” or “exceeded their powers.” See, e. g., Kyocera, supra, at 997. We, when speaking as a Court, have merely taken the Wilko language as we found it, without embellishment, see First Options of Chicago, Inc. v. Kaplan, 514 U. S. 938, 942 (1995), and now that its meaning is implicated, we see no reason to accord it the significance that Hall Street urges.
Second, Hall Street says that the agreement to review for legal error ought to prevail simply because arbitration is a creature of contract, and the FAA is “motivated, first and foremost, by a congressional desire to enforce agreements into which parties ha[ve] entered.” Dean Witter Reynolds
To that particular question we think the answer is yes, that the text compels a reading of the §§10 and 11 categories as exclusive. To begin with, even if we assumed §§10 and 11 could be supplemented to some extent, it would stretch basic interpretive principles to expand the stated grounds to the point of evidentiary and legal review generally. Sections 10 and 11, after all, address egregious departures from the parties’ agreed-upon arbitration: “corruption,” “fraud,” “evident partiality,” “misconduct,” “misbehavior,” “exceed[ing]... powers,” “evident material miscalculation,” “evident material mistake,” “award[s] upon a matter not submitted”; the only ground with any softer focus is “imperfections],” and a court may correct those only if they go to “[a] matter of form not affecting the merits.” Given this emphasis on extreme arbitral conduct, the old rule of ejusdem generis has an implicit lesson to teach here. Under that rule, when a statute sets out a series of specific items ending with a general term, that general term is confined to covering subjects comparable to the specifics it follows. Since a general term included in the text is normally so limited, then surely a statute with no textual hook for expansion cannot authorize contracting parties to supplement review for specific instances of outrageous conduct with review for just any legal error. “Fraud” and a mistake of law are not cut from the same cloth.
In fact, anyone who thinks Congress might have understood § 9 as a default provision should turn back to § 5 for an example of what Congress thought a default provision would look like:
*588 “[i]f in the agreement provision be made for a method of naming or appointing an arbitrator . . . such method shall be followed; but if no method be provided therein, or if a method be provided and any party thereto shall fail to avail himself of such method, . . . then upon the application of either party to the controversy the court shall designate and appoint an arbitrator . . . .”
“[I]f no method be provided” is a far cry from “must grant... unless” in § 9.
Instead of fighting the text, it makes more sense to see the three provisions, §§9-11, as substantiating a national policy favoring arbitration with just the limited review needed to maintain arbitration’s essential virtue of resolving disputes straightaway. Any other reading opens the door to the full-bore legal and evidentiary appeals that can “rende[r] informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process,” Kyocera, 341 F. 3d, at 998; cf. Ethyl Cory. v. United Steelworkers of America, 768 F. 2d 180,184 (CA7 1985), and bring arbitration theory to grief in postarbitration process.
Nor is Dean Witter, 470 U. S. 213, to the contrary, as Hall Street claims it to be. Dean Witter held that state-law claims subject to an agreement to arbitrate could not be remitted to a district court considering a related, nonarbitrable federal claim; the state-law claims were to go to arbitration immediately. Id., at 217. Despite the opinion’s language “reject[ing] the suggestion that the overriding goal of the [FAA] was to promote the expeditious resolution of claims,” id., at 219, the holding mandated immediate enforcement of an arbitration agreement; the Court was merely trying to explain that the inefficiency and difficulty of conducting simultaneous arbitration and federal-court litigation was not a good enough reason to defer the arbitration, see id., at 217.
When all these arguments based on prior legal authority are done with, Hall Street and Mattel remain at odds over what happens next. Hall Street and its amici say parties
In holding that §§10 and 11 provide exclusive regimes for the review provided by the statute, we do not purport to say that they exclude more searching review based on authority outside the statute as well. 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 §§ 9, 10, and 11, deciding nothing about other possible avenues for judicial enforcement of arbitration awards.
Although one such avenue is now claimed to be revealed in the procedural history of this case, no claim to it was presented when the case arrived on our doorstep, and no reason then appeared to us for treating this as anything but an FAA case. There was never any question about meeting the FAA § 2 requirement that the leases from which the dispute arose be contracts “involving commerce.” 9 U. S. C. § 2; see Allied-Bruce Terminix Cos. v. Dobson, 513 U. S. 265, 277 (1995) (§ 2 “exercisefsf Congress’ commerce power to the full”). Nor is there any doubt now that the parties at least had the FAA in mind at the outset; the arbitration agreement even incorporates FAA § 7, empowering arbitrators to compel attendance of witnesses. App. to Pet. for Cert. 13a.
While it is true that the agreement does not expressly invoke FAA § 9, § 10, or § 11, and none of the various motions to vacate or modify the award expressly said that the parties were relying on the FAA, the District Court apparently thought it was applying the FAA when it alluded to the Act in quoting LaPine, 130 F. 3d, at 889, for the then-unexceptional proposition that “ ‘[ffederal courts can expand
One unusual feature, however, prompted some of us to question whether the case should be approached another way. The arbitration agreement was entered into in the course of district-court litigation, was submitted to the District Court as a request to deviate from the standard sequence of trial procedure, and was adopted by the District Court as an order. See App. 46-47; App. to Pet. for Cert. 4a-8a. Hence a question raised by this Court at oral argument: should the agreement be treated as an exercise of the District Court’s authority to manage its cases under Federal Rule of Civil Procedure 16? See, e. g., Tr. of Oral Arg. 11-12. Supplemental briefing at the Court’s behest joined issue on the question, and it appears that Hall Street suggested something along these lines in the Court of Appeals, which did not address the suggestion.
Although we agree with the Ninth Circuit that the FAA confines its expedited judicial review to the grounds listed in 9 U. S. C. §§ 10 and 11, we vacate the judgment and remand the case for proceedings consistent with this opinion.
It is so ordered.
JuSTiCE Scaua joins all but footnote 7 of this opinion.
All undated references in this case to 9 U. S. C. are to the 2006 edition.
On remand, the District Court vacated the arbitration award because it supposedly rested on an implausible interpretation of the lease and thus exceeded the arbitrator’s powers, in violation of 9 U. S. C. § 10. Mattel appealed, and the Ninth Circuit reversed, holding that implausibility is not a valid ground for vacating or correcting an award under § 10 or § 11. 196 Fed. Appx. 476, 477-478 (2006).
Because the FA A is not jurisdictional, there is no merit in the argument that enforcing the arbitration agreement’s judicial review provision would create federal jurisdiction by private contract. The issue is entirely about the scope of judicial review permissible under the FAA.
Unlike Justice Stevens, see post, at 595 (dissenting opinion), we understand this expedited review to be what each of the parties understood it was seeking from time to time; neither party’s pleadings were amended to raise an independent state-law contract claim or defense specific to the arbitration agreement.
Title 9 U. S. C. § 10(a) (2000 ed., Supp. V) provides in part:
“In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration—
“In either of the following cases the United States court in and for the district wherein the award was made may make an order modifying or correcting the award upon the application of any party to the arbitration—
“(a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award.
“(b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted.
“(c) Where the award is imperfect in matter of form not affecting the merits of the controversy.
“The order may modify and correct the award, so as to effect the intent thereof and promote justice between the parties.”
The Ninth and Tenth Circuits have held that parties may not contract for expanded judicial review. See Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F. 3d 987, 1000 (CA9 2003) (en banc); Bowen v. Amoco Pipeline Co., 254 F. 3d 925, 936 (CA10 2001). The First, Third, Fifth, and Sixth Circuits, meanwhile, have held that parties may so contract. See Puerto Rico Tel. Co. v. U S. Phone Mfg. Corp., 427 F. 3d 21, 31 (CA1 2005); Jacada (Europe), Ltd. v. International Marketing Strategies, Inc., 401 F. 3d 701, 710 (CA6 2005); Roadway Package System, Inc. v. Kayser, 257 F. 3d 287, 288 (CA3 2001); Gateway Technologies, Inc. v. MCI Telecommunications Corp., 64 F. 3d 993, 997 (CA5 1995). The Fourth Circuit has taken the latter side of the split in an unpublished
Hall Street claims that §9 supports its position, because it allows a court to confirm an award only “[i]f the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration.” Hall Street argues that this language “expresses Congress’s intent that a court must enforce the agreement of the parties as to whether, and under what circumstances, a judgment shall be entered.” Reply Brief for Petitioner 5; see also Brief for Petitioner 22-24. It is a peculiar argument, converting agreement as a necessary condition for judicial enforcement into a sufficient condition for a court to bar enforcement. And the text is otherwise problematical for Hall Street: § 9 says that if the parties have agreed to judicial enforcement, the court “must grant” confirmation unless grounds for vacatur or modification exist under § 10 or § 11. The sentence nowhere predicates the court’s judicial action on the parties’ having agreed to specific standards; if anything, it suggests that, so long as the parties contemplated judicial enforcement, the court must undertake such enforcement under the statutory criteria. In any case, the arbitration agreement here did not specifically predicate entry of judgment on adherence to its judicial review standard. See App. to Pet. for Cert. 15a. To the extent Hall Street argues otherwise, it contests not the meaning of the PAA but the Ninth Circuit’s severability analysis, upon which it did not seek certiorari.
The history of the FAA is consistent with our conclusion. The text of the FAA was based upon that of New York’s arbitration statute. See S. Rep. No. 536, 68th Cong., 1st Sess., 3 (1924) (“The bill. . . follows the lines of the New York arbitration law enacted in 1920 . . . ”). The New York Arbitration Law incorporated pre-existing provisions of the New York Code of Civil Procedure. See 1920 N. Y. Laws p. 806. Section 2373 of the code said that, upon application by a party for a confirmation order, “the court must grant such an order, unless the award is vacated, modified, or corrected, as prescribed by the next two sections.” 2 N. Y. Ann. Code Civ. Proe. (Stover 6th ed. 1902) (hereinafter Stover). The subsequent sections gave grounds for vacatur and modification or correction virtually identical to the 9 U. S. C. §§ 10 and 11 grounds. See 2 Stover §§ 2374, 2375.
In a brief submitted to the House and Senate Subcommittees of the Committees on the Judiciary, Julius Henry Cohen, one of the primary drafters of both the 1920 New York Act and the proposed FAA, said, “The grounds for vacating, modifying, or correcting an award are limited. If the award [meets a condition of § 10], then and then only the award may be vacated. ... If there was [an error under § 11], then and then only it may be modified or corrected____” Arbitration of Interstate Commercial Disputes, Joint Hearings before the Subcommittees of the Committees on the Judiciary on S. 1005 and H. R. 646, 68th Cong., 1st Sess., 34 (1924). The House Report similarly recognized that an “award may ... be entered as a judgment, subject to attack by the other party for fraud and corruption and similar undue influence, or for palpable error in form.” H. R. Rep. No. 96, 68th Cong., 1st Sess., 2 (1924).
In a contemporaneous campaign for the promulgation of a uniform state arbitration law, Cohen contrasted the New York Act with the Illinois Arbitration and Awards Act of 1917, which required an arbitrator, at the re