Hall Street Associates, L.L.C. v. Mattel, Inc.

552 U.S. 576 (2008)

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Nature of the Case

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Facts

Hall (P) leased property to Mattel (D). The leases provided that D would indemnify P for any costs resulting from the failure to follow environmental laws while using the premises and even for prior uses of predecessors. Well, water showed high levels of trichloroethylene (TCE), the apparent residue of manufacturing discharges by D's predecessors between 1951 and 1980. D signed a consent order with the DEQ providing for cleanup of the site. D then gave notice of intent to terminate the lease in 2001. P filed this suit claiming that the lease obliged D to indemnify P for costs of cleaning up the TCE, among other things. D won on the termination issue, and after an unsuccessful try at mediating the indemnification claim, the parties proposed to submit to arbitration. The \parties drew up an arbitration agreement, which the court approved and entered as an order. The agreement provided that 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. The arbitrator decided for D. P then filed a District Court Motion for Order Vacating, Modifying And/Or Correcting the arbitration decision, on the ground that failing to treat the Oregon Act as an applicable environmental law under the terms of the lease was legal error. The District Court agreed, vacated the award, and remanded for further consideration by the arbitrator. The court expressly invoked the standard of review chosen by the parties in the arbitration agreement, which included review for legal error. The arbitrator amended the decision to favor P. P and D appealed and 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. P and D each appealed to the Court of Appeals for the Ninth Circuit. The Ninth Circuit reversed in favor of D in holding that the terms of the arbitration agreement controlling the mode of judicial review are unenforceable and severable. The Supreme Court eventually granted certiorari.