May 24, 2016 Articles

Can Parties to an Arbitration Agreement Contract for Expanded Judicial Review?

By Linda L. Morkan

By now, everyone is familiar with the benefits arbitration offers as an alternative to traditional litigation. Contracting parties can acknowledge the possibility of a future dispute and negotiate how that dispute will be resolved in private arbitration. They can choose an arbitrator, which is especially important in specialized trades where expertise is essential to understanding the parties’ agreement. They can choose a time frame, because we all know how court cases can drag on. And they can choose the scope of the remedy, perhaps removing the option for class actions or the recovery of punitive damages, for example.

But in 2008, the U.S. Supreme Court held that the Federal Arbitration Act (FAA) does not allow contracting parties to choose how arbitration awards will be reviewed, once such rewards are submitted to a trial court for confirmation or vacatur. Hall St. Assocs. v. Mattel, Inc., 552 U.S. 576, 590 (2008). In so interpreting federal law, however, the Supreme Court also indicated that state arbitration laws may differ from the FAA, and state law might allow contracting parties to agree to a broader grant of review. The intervening years have seen states lining up on either side of the issue, creating a great divide in state/federal arbitration law. Massachusetts is the latest to join the majority position, following the U.S. Supreme Court’s lead. Katz, Nannis & Solomon, P.C. v. Levine, 473 Mass. 784, 46 N.E.3d 541 (2016). There are vocal outliers, though, and these courts insist that they are the ones defending the underlying philosophy that arbitration is a formal dispute resolution tool controlled by the parties who agreed to it. It is not a fight that will be resolved any time soon.

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