552 U.S. 576 (2008)
In 1998, tests of the property’s well water showed high levels of trichloroethylene, the apparent residue of manufacturing discharges by Mattel’s predecessors between 1951 and 1980.1 After the Oregon Department of Environmental Quality discovered even more pollutants, Mattel stopped drawing from the well.2 Mattel and one of its predecessors signed a consent order with the DEQ providing for cleanup of the site.3
After Mattel gave notice of intent to terminate the lease in 2001, Hall Street filed this suit in the United States District Court for the District of Oregon.4 The suit contested Mattel’s right to vacate on the date it gave.5 It also claimed that the lease obliged Mattel to indemnify Hall Street for costs of cleaning up the TCE.6 Following a bench trial, Mattel won on the termination issue.7 After an unsuccessful try at mediating the indemnification claim, the parties proposed to submit to arbitration.8 The District Court was amenable, and the parties drew up an arbitration agreement, which the court approved and entered as an order.9 The agreement provided that the court shall vacate, modify or correct any award where the arbitrator’s findings of facts are not supported by substantial evidence or where the arbitrator’s conclusions of law are erroneous.10
Arbitration took place and the arbitrator decided for Mattel.11 He held that no indemnification was due because the lease obligation to follow all applicable environmental laws did not require compliance with the testing requirements of the Oregon Drinking Water Quality Act.12 Hall Street then filed a District Court Motion for Order Vacating, Modifying And/Or Correcting Arbitration Accord.13 The motion was on the ground that failing to treat the Oregon Act as an applicable environmental law was legal error.14 The District Court agreed, vacated the award, and remanded for further consideration by the arbitrator.15
On remand, the arbitrator followed the District Court’s ruling and amended the decision to favor Hall Street.16 Each party then sought modification.17 The District Court applied the parties’ stipulated standard of review.18 It corrected the arbitrator’s calculation of interest but otherwise upheld the award.19 Each party appealed to the Court of Appeals for the Ninth Circuit.20 Mattel contended that the arbitration agreement’s provision for judicial review of legal error was unenforceable under Kyocera Corp. v. Prudential-Bache Trade Servs., Inc.21 The Ninth Circuit reversed in favor of Mattel.22 It held the terms of the arbitration agreement controlling the mode of judicial review unenforceable and severable.23 It instructed the District Court to return to the application to confirm the original arbitration 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. § 11.24 After the District Court again held for Hall Street and the Ninth Circuit again reversed, the Supreme Court granted certiorari.25
Whether the grounds for vacatur and modification provided by sections 10 and 11 of the Federal Arbitration Act are exclusive?26
The Federal Arbitration Act provides that the grounds for vacatur and modification of arbitration awards set forth in 9 U.S.C. §§ 10 and 11 are exclusive and may not be supplemented by agreement of the parties.27
Yes. The arbitration agreement permitted the district court to vacate an award if the arbitrator’s findings of fact were not supported by substantial evidence or if the arbitrator’s conclusions of law were erroneous.28 These grounds exceed the statutory list in §§ 10 and 11.29 The district court relied on the parties’ standard to vacate the first award for legal error in interpreting the lease and the Oregon Drinking Water Quality Act.30
Because the statute makes the listed grounds exclusive, the Ninth Circuit properly held the contractual review provision unenforceable and directed confirmation under only the statutory criteria.31
The grounds for vacatur and modification provided by sections 10 and 11 of the Federal Arbitration Act are exclusive.32
Related opinions on this issue
Joined by Justice Kennedy
Justice Stevens, joined by Justice Kennedy, dissented from the Court’s interpretation of the FAA.33 Prior to the enactment of the FAA in 1925, parties to an ongoing lawsuit could agree to submit their dispute to arbitration subject to judicial review for errors of law, and the answer to that question would have been yes.34 The centerpiece of the FAA is section 2, which makes arbitration agreements valid, irrevocable, and enforceable to ensure that private agreements are enforced according to their terms.35
In Stevens’s view, sections 10 and 11 are best understood as a shield meant to protect parties from hostile courts, not a sword to cut down parties’ valid agreements to arbitrate subject to judicial review for errors of law.36 He would have directed the Court of Appeals to affirm the judgment of the District Court enforcing the arbitrator’s final award.37
Justice Breyer dissented and agreed that the Federal Arbitration Act does not preclude a federal court from enforcing an arbitration agreement that gives the court power to set aside an award embodying an arbitrator’s mistake about the law.38 He saw no need to send the case back for further judicial decisionmaking.39 The agreement was entered into with the consent of the parties and the approval of the District Court.40
Aside from the FAA itself, no statute, rule, or other relevant public policy was identified that the agreement might violate.41 Breyer would have remanded the case with instructions that the Court of Appeals affirm the District Court’s judgment enforcing the arbitrator’s final award.42