Supreme Court Takes Up Arbitration Case

WASHINGTON-The outcome of an environmental cleanup dispute now before the Supreme Court could determine the future of arbitration as an alternative to lawsuits.

Tens of thousands of disagreements in the business world are resolved through arbitration each year, a process often regarded by the business community as a cost-saving, time-saving substitute for going to court.

The risk in arbitration is that the losing side cannot appeal to the judiciary except in limited circumstances. That's the subject of Supreme Court arguments on Wednesday.

The Supreme Court will consider whether the parties in arbitration can agree to take their cases to court for review of arbitration awards.

The American Arbitration Association says a cornerstone principle of federal law is that arbitrators' awards are final and binding.

If parties to a dispute are allowed to engage in expanded judicial review, arbitration will become a prelude to lawsuits instead of a substitute, the association said in court papers.

Many industries have an interest in the case, including the wireless communications industry which has filed papers in support of an expanded role for the courts.

The wireless industry says that in the absence of court review, parties may decide they are unwilling to "bet the company" on arbitration. The result would be a decline in the number of disputes sent to arbitration and an added workload for already-overburdened courts.

In the case before the justices, property owner Hall Street Associates L.L.C. wants toymaker Mattel Inc. to pay for cleanup at a contaminated factory site in Beaverton, Ore.

The toy company and the property owner agreed to submit the case to arbitration, signing an agreement allowing either side to seek court review of the decision.

The property that Mattel leased from Hall Street Associates contains high levels of the industrial solvent TCE used to degrease metal parts.

Mattel did not contaminate the grounds with the hazardous chemical and an arbitrator initially ruled the toy manufacturer did not have to pay for the cleanup.

The case then began a six-year odyssey through the federal court system.

A judge said the arbitrator's decision "defies logic." The arbitrator responded by reversing himself and awarding Hall Street $584,000.

This prompted another trip to the courts and ultimately an order by the 9th U.S. Circuit Court of Appeals in San Francisco to reinstate the original arbitration award in favor of Mattel.

Hall Street asked the Supreme Court to review the case.

The cleanup could prove costly. The chemical has seeped into the soil, well water, groundwater and the deep aquifer underlying the property.

Studies of human populations support the conclusion that TCE is a potential cause of kidney cancer, says a federally financed study by the National Research Council, which operates under the National Academy of Sciences. The council provides science and technology advice under a congressional charter.

Source: Associated Press
November 7, 2007

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