Hall Street Associates, LLC v. Mattel, Inc.

Mattel, Inc. (defendant) leased property from Hall Street Associates, LLC (Hall) (plaintiff). Under the lease, Mattel was to indemnify Hall for any costs resulting from the failure of Mattel or its predecessor lessees to follow environmental laws. Tests of the property’s well water showed high trichloroethylene levels, a residue of discharges by Mattel’s predecessors. When more pollutants were discovered, Mattel notified Hall that it was terminating the lease. Hall sued Mattel, arguing that Mattel was not entitled to terminate the lease and seeking indemnification for the environmental cleanup. After the district court held that Mattel was entitled to terminate the lease, Mattel and Hall agreed to submit the indemnification issue to arbitration. They drafted an arbitration agreement that included a provision allowing the court to vacate, modify, or correct the arbitrator’s award if the arbitrator’s conclusions of law were erroneous. The court ordered arbitration, incorporating the agreement into the order. The arbitrator held in Mattel’s favor. Hall moved to vacate. The district court conducted review under the standard in the arbitration agreement and vacated the decision. On remand, the arbitrator held in Hall’s favor. Both parties sought review, and again the court applied the standard of review in the arbitration agreement. The court largely upheld the arbitrator’s decision. The Ninth Circuit reversed, holding that the exclusive standards for judicial review were those stated in the Federal Arbitration Act (FAA), not those in the arbitration agreement. The United States Supreme Court granted certiorari.