The Supreme Court decided on 3/25/08 that parties may not contract for more expansive judicial review of an arbitration award than is generally provided for under the Federal Arbitration Act. That Act provides very limited grounds for federal court review of arbitration awards.
In this case, the parties agreed in advance that a court should be able to review the validity of an arbitrator’s conclusions of law. The Ninth Circuit, however, ruled that the parties do not have the power to alter the FAA’s requirements by agreement. The Supreme Court agreed, saying that the FAA addresses extreme arbitral conduct, not just any legal error, as a basis for judicial review. The case underscores the importance of an arbitrator's decision, although it suggested that certain awards might be challenged under state statutory or common law. The ruling clarifies that companies that employ arbitration may not contractually expand the scope of judicial review of the arbitrator's decision.