In confirming an arbitration award, a Texas federal court held that regardless of whether a federal, state, or common law standard of vacatur is used, parties cannot expand the scope of judicial review of an arbitration award.

In Ascension Orthopedics, Inc. v. Curasan, AG, No. H-07-4033, 2008 WL 2074058 (S.D. Tex. May 14, 2008), Ascension breached an exclusive distributorship agreement that it had with Curasan. An arbitration award was issued in favor of Curasan, and Ascension moved to vacate the award under the language of the agreement, which expanded the applicable scope of judicial review of the award.

Applying the expanded scope of review, the Court granted an order vacating the arbitration award for errors of law. However, after the United States Supreme Court's decision in Hall Street Associates, L.L.C., v. Mattel, Inc., 128 S.Ct. 1396 (2008), which held that the vacatur standard outlined in § 10 of the Federal Arbitration Act (FAA) is the exclusive standard of review under the FAA, the Court immediately vacated its order and reconsidered the case in light of Hall Street's holding.

Ascension argued that it moved to vacate under Texas law, so the FAA did not apply and the Court should allow the expanded scope of review for which the parties contracted under the Texas General Arbitration Act (TGAA). Alternatively, Ascension argued that Texas common law dictated that the award be vacated on the theory of "gross mistake."

The Court confirmed the award, holding that regardless of which of the three legal theories was used, the standard for vacatur was not met. Analyzing under the FAA, the Court held that none of the arbitrator misconduct enumerated in § 10(a) of the FAA was present, so the award would be confirmed if the FAA applied.

The Court held that the results would be the same under the TGAA. Ascension argued that Texas courts had cited Fifth Circuit case law allowing for expanded judicial review with favor, but the Court rejected that argument because the Texas courts that were citing Fifth Circuit law were construing the FAA, not the TGAA. Also, the Court held that the Texas Supreme Court had essentially foreclosed such an argument by holding that the statutory grounds for vacatur were limited to those expressly identified by the TGAA.

Finally, the Court held that even under the Texas common law standard of "gross mistake," the award would still be confirmed. Under that standard, an award could be vacated on a showing that the arbitrators acted with bad faith, rendering the award arbitrary or capricious. Since there was no showing of bad faith, the Court held that the award would be confirmed under the Texas common law standard, as well.

In conclusion, the Court held that "[i]n the instant case, the arbitrators were faced with a choice of divergent paths of law. That this court would have taken the other path is simply not enough to demonstrate any bad faith on the part of the arbitrators."