contract law

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

Issues 

Whether the Federal Arbitration Act sets forth the sole grounds for judicial review of arbitration awards, or whether parties may agree on additional and broader grounds for such review.

 

In 2000, Hall Street Associates filed suit seeking declaratory relief and damages from Mattel, Inc. for its failure to indemnify Hall Street for the cost of cleaning up water contamination at a toy manufacturing facility Mattel leased from Hall Street. After litigation began, the parties agreed to arbitrate some of the issues in dispute. They signed an agreement allowing either party to appeal the arbitrator's decision in court if it contained errors of law or unsubstantiated findings of fact. Subsequently, the Ninth Circuit ruled in a separate case that any arbitration provisions giving courts more review power than that granted to them in the Federal Arbitration Act (FAA) were invalid. Since the provisions of the arbitration agreement between Hall Street and Mattel went beyond those in the FAA, the Ninth Circuit invalidated the District Court's decision to review the arbitrator's findings according to the parties' provisions. At issue here is whether the FAA provides the sole grounds for judicial review of arbitration awards. Hall Street maintains that it is consistent with the spirit of the FAA and in the best interests of encouraging arbitration for courts to recognize all grounds for judicial review agreed upon by the parties, whether or not they go beyond those contained in the FAA. Mattel's position is that the best way to preserve the integrity of arbitration proceedings is to limit the review power of courts to the grounds contained in the FAA. Because the Supreme Court's decision in this case will affect the amount of freedom disputing parties have in crafting their arbitration agreements, ultimately it may affect whether parties choose to undergo the arbitration process at all.

Questions as Framed for the Court by the Parties 

Did the Ninth Circuit Court of Appeals err when it held, in conflict with several other federal Courts of Appeals, that the Federal Arbitration Act ("FAA") precludes a federal court from enforcing the parties' clearly expressed agreement providing for more expansive judicial review of an arbitration award than the narrow standard of review otherwise provided for in the FAA?

The present dispute between these parties concerns whether a clause in their arbitration agreement guaranteeing judicial review of an arbitrator's decision is valid under the Federal Arbitration Act (9 U.S.C. §§1-16) (FAA). Hall Street Associates owned property leased by Mattel and sought a ruling that Mattel was required to meet various contractual lease obligations. Hall Street Associates v. Mattel, Inc., 145 F. Supp. 2d 1211, 1213 (D. Ore. 2001).

Acknowledgments 

The authors would like to thank Professor John Barceló and his colleague Tibor Varady for their insights into this case.

Additional Resources 

Legal Information Institute: Alternative Dispute Resolution Overview
 
Securities and Exchange Commission: Arbitration Overview
 
Federal Mediation and Conciliation Service

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Alabama v. North Carolina

Issues 

Whether the Eleventh Amendment bars the Southeast Interstate Low-Level Radioactive Waste Management Commission, jointly with four compacting States, from asserting claims in a Supreme Court original action, that North Carolina has violated the Southeast Interstate Low-Level Radioactive Waste Management Compact and is subject to the Commission’s sanctions order.

Court below: 
Original Jurisdiction

 

Original Jurisdiction: On Motion of North Carolina to Dismiss Claims of the Southeast Interstate Low-Level Radioactive Waste Management Commission

This case involves a lawsuit brought by several states and the Southeast Interstate Low-Level Radioactive Waste Management Commission against the State of North Carolina for its alleged breach of contract under the Southeast Interstate Low-Level Radioactive Waste Management Compact to license a waste disposal facility. In June 2002, the member states of the Compact and the Commission filed a Bill of Complaint, which the Supreme Court granted. The Special Master then filed his Preliminary and Second Reports with this Court on April 2, 2009. The Supreme Court subsequently received these Reports and ordered them filed. This case is now before the Supreme Court as both an original and exclusive jurisdiction case; it also addresses issues of contract law. The Supreme Court’s decision in Alabama v. North Carolina may have significant effects on constitutional law, most notably on the extent of the Court’s original and exclusive jurisdiction over a judicial case or controversy between States.

Questions as Framed for the Court by the Parties 

Plaintiffs except to the following conclusions of the Special Master:

1.     Article 79F) of the Southeast Interstate Low-Level Radioactive Waste Management Compact (the “Compact”), which states that the Commission may “sanction[]” “[a]ny party state which fails to comply with the provisions . . . or . . . fulfill the obligations” of “this compact,” does not give the Commission the authority to level monetary sanctions against a party State when it fails to comply with the Compact. Preliminary Report 15–25.

2.     Even if North Carolina violated the Compact, it was not subject to the sanctions authority of the Commission because it withdrew from the Compact before sanctions were imposed. Preliminary Report 25–29.

3.     North Carolina did not waive its right to contest the legality of the sanctions proceedings even though it attended and refused to participate in the hearing. Preliminary Report 29–30.

4.     Even though the Compact expressly provides that the Commission is “the judge of the [party States’] compliance with the conditions and requirements of this compact,” Art. 7(C), the Commission’s determination that North Carolina breached the Compact is neither conclusive nor entitled to any deference from the Court. Second Report 1920.

5.     While it is undisputed that North Carolina ceased taking any steps to license a facility in December 1997, more than 18 months before it withdrew from the Compact, North Carolina, as a matter of law, did not breach its duty under the Compact to “take appropriate steps to ensure that an application for a license to construct and operate a facility . . . is filed.” Art. 5 (C). Second Report 10?24.

6.     The implied duty of good faith and fair dealing does not apply to interstate compacts and North Carolina did not withdraw from the Compact in bad faith. Second Report 29–35.

7.     North Carolina did not repudiate the Compact when it informed the Commission that it would take no further steps to license a facility. Second Report 24–28.

The State of North Carolina takes exception to the following conclusions of the Special Master:

1.     The recommended denial of North Carolina’s motion to dismiss all claims brought by plaintiff Southeast Interstate Low-Level Radioactive Waste Management Commission. Under both the Eleventh Amendment and common-law sovereign immunity principles, only the United States or a sister State may sue a non-consenting State in federal court, absent a valid congressional abrogation of the State’s sovereign immunity. Because North Carolina has not waived, and Congress has not abrogated, North Carolina’s sovereign immunity from suit by the Commission, the Commission’s claims cannot proceed in this Court. In this case, this Court has jurisdiction to the Special Master’s recommendation, North Carolina’s motion to dismiss the Commission’s claims should be granted.

2.     The failure to recommend granting North Carolina’s motion for summary judgment on the quasi-contract claims asserted in Counts III, IV, and V of the Bill of Complaint. It is a settled common-law rule that where the parties’ relationship concerning a given subject matter is governed by the terms of an express contract, no equitable claim will lie in addition to a claim for breach of contract. The Special Master declined to address North Carolina’s motion at this stage in the proceedings, but the motion is legally and factually ripe for adjudication, and should be granted.

This is an original jurisdiction case brought by the States of Alabama, Florida, Tennessee, and Virginia, joined by the Southeast Interstate Low-Level Radioactive Waste Management Commission (the "Commission") (collectively "petitioners") seeking remedy for the State of North Carolina's alleged breach of the Southeast Interstate Low-Level Radioactive Waste Management Compact (the "Compact").

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Valuable consideration

Definition

A benefit conferred or a detriment incurred by a party in exchange for another's promise. Valuable consideration may be non-monetary as long as it is of some value to one or both parties. Also called good and valuable consideration and legal consideration.

Illustrative caselaw

See, e.g. Digital Equipment Corp. v. Desktop Direct, Inc., 511 U.S. 863 (1994).

 

Keywords: 

parol evidence rule

Overview

The parol evidence rule governs the extent to which parties to a case may introduce into court evidence of a prior or contemporaneous agreement in order to modify, explain, or supplement the contract at issue. The rule excludes the admission of parol evidence. This means that when the parties to a contract have made and signed a completely integrated written contract, evidence of antecedent negotiations (called "parol evidence") will not be admissible for the purpose of varying or contradicting what is written into the contract. 

Adhesion Contract (Contract of Adhesion)

Overview

An adhesion contract (also called a "standard form contract" or a "boilerplate contract")  is a contract drafted by one party (usually a business with stronger bargaining power) and signed by another party (usually one with weaker bargaining power, usually a consumer in need of goods or services). The second party typically does not have the power to negotiate or modify the terms of the contract. Adhesion contracts are commonly used for matters involving insurance, leases, deeds, mortgages, automobile purchases, and other forms of consumer credit.

Keywords: 

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