Opinion ID: 622202
Heading Depth: 3
Heading Rank: 2

Heading: The FAA Authorizes Limited Review of the Final Award.

Text: We next consider Biller's argument that the district court erred by not conducting a merits review of the Final Award, urging that was required by the Severance Agreement. In Kyocera Corp. v. Prudential-Bache Trade Serv. Inc., 341 F.3d 987 (9th Cir.2003) (en banc), we considered an arbitration agreement that expanded the grounds on which a court could vacate, modify, or correct an arbitration award under the FAA. Id. at 990-91. Specifically, the arbitration agreement there permitted the court to vacate, modify or correct any award: (i) based upon any of the grounds referred to in the [FAA], (ii) where the arbitrators' findings of fact are not supported by substantial evidence, or (iii) where the arbitrators' conclusions of law are erroneous. Id. We held that: The [FAA], 9 U.S.C. §§ 1-16, enumerates limited grounds on which a federal court may vacate, modify, or correct an arbitral award. Neither erroneous legal conclusions nor unsubstantiated factual findings justify federal court review of an arbitral award under the statute, which is unambiguous in this regard. Because the Constitution reserves to Congress the power to determine the standards by which federal courts render decisions, and because Congress has specified the exclusive standard by which federal courts may review an arbitrator's decision, we hold that private parties may not contractually impose their own standard on the courts. Id. at 994 (emphasis added). We went on to note that under the FAA, if a party seeks a judicial order confirming an arbitration award, the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 [vacatur] and 11 [modification] of [the FAA]. Id. at 997 (internal quotation marks and citations omitted). Because Biller seeks vacatur of the Final Award, we limit our discussion hereafter to § 10 of the FAA. Under § 10 of the FAA, vacatur is permitted only: (1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. 9 U.S.C. § 10(a). Under the FAA: [A] federal court [may] correct a technical error, [ ]strike all or a portion of an award pertaining to an issue not at all subject to arbitration, and[] vacate an award that evidences affirmative misconduct in the arbitral process or the final result or that is completely irrational or exhibits a manifest disregard for the law. These grounds afford an extremely limited review authority, a limitation that is designed to preserve due process but not to permit unnecessary public intrusion into private arbitration procedures. Kyocera, 341 F.3d at 997-98. Five years after our holding in Kyocera, the Supreme Court took up the issue of the proper scope of review of arbitral awards under the FAA in Hall St. Assoc., LLC v. Mattel, Inc., 552 U.S. 576, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008) ( Hall Street ). In Hall Street, the Court considered whether an arbitration agreement could expand the scope of judicial review for vacatur of an arbitral award to include review for legal error along with the enumerated grounds in § 10 of the FAA. The Court agreed with our holding in Kyocera and held that § [ ]10 . . . provide[s] the FAA's exclusive grounds for expedited vacatur.. . . Id. at 584, 128 S.Ct. 1396. Kyocera's and Hall Street's holdings then stand for the proposition that § 10 of the FAA provides the exclusive means by which a court reviewing an arbitration award under the FAA may grant vacatur of a final arbitration award, and that such review under the FAA is limited. Indeed, § 10 of the FAA provides no authorization for a merits review. Under this framework we reject Biller's argument that the district court erred by not conducting a merits review of the Final Award. Biller's reliance on Cable Connection, Inc. v. DirecTV, Inc., 44 Cal.4th 1334, 82 Cal.Rptr.3d 229, 190 P.3d 586 (2008) is misplaced, because the FAA governs the arbitration agreement, as we have already decided. In Cable Connection, the California Supreme Court considered an arbitration agreement under the CAA. The California Supreme Court relied on the United States Supreme Court's statement in Hall Street that [t]he FAA is not the only way into court for parties wanting review of arbitration awards: they may contemplate enforcement under state statutory or common law, for example, where judicial review of different scope is arguable, Hall Street, 552 U.S. at 590, 128 S.Ct. 1396, to conclude that Hall Street did not foreclose a more searching merits review of arbitral awards when done so under authority other than the FAA. [5] The state supreme court went on to hold that the CAA established the statutory grounds for judicial review with the expectation that arbitration awards are ordinarily final and subject to a restricted scope of review, but that parties may . . . provid[e] for review of the merits in the arbitration agreement. Cable Connection, 44 Cal.4th at 1364, 82 Cal.Rptr.3d 229, 190 P.3d 586. The parties here might have chosen to expand the scope of judicial review by providing for a merits review of the arbitration award and designating the California Arbitration Act as the controlling law under which review of an arbitral award was to occur. They did not do so. Instead, they specified that the FAA governed the arbitration provision. In keeping with our precedent in Kyocera, the parties, by choosing the FAA as the vehicle for judicial review, may not by contract expand the scope of judicial review beyond that which the FAA authorizes. Kyocera, 341 F.3d at 994 ([W]e hold that private parties may not contractually impose their own standard on the courts.). In light of our conclusion that the FAA governs judicial review of the Severance Agreement, the California Supreme Court's decision in Cable Connection is inapposite to the facts presented here.