IS THE MANIFEST DISREGARD OF LAW DOCTRINE DEAD IN THE FIRST CIRCUIT?
In an April 28, 2008 Special Focus posting and related article, we raised the question as to whether the manifest disregard of law doctrine would survive the Supreme Court’s decision in Hall Street Associates v. Mattel. This issue came up in a recent district court opinion. ALS & Associates sought the vacation of an arbitration award on three bases: (1) the arbitrator’s failure to postpone the proceedings; (2) the arbitrator’s evident partiality; and (3) the arbitrator’s manifest disregard of law. The district court confirmed the award. The court found that there was no evidence that the failure to postpone the proceedings to allow ALS to pursue documents from a third party deprived it of a fair hearing. The court noted that proceedings to enforce a subpoena to obtain 12 documents had been ongoing for two years, with two trips to the First Circuit, and that there was no showing that the documents were critical to ALS’s case. The court also rejected the contention that the arbitrator's very attenuated “connection” with one of the law firms resulted in any appearance of impropriety, much less evident partiality.
The interesting part of this opinion is the holding that the First Circuit has ruled that the manifest disregard of law doctrine is not a valid basis for vacating or modifying an arbitration award after Hall Street Associates. In so ruling, the district court relied upon the First Circuit’s decision in Ramos-Santiago v. UPS, No. 07-1024 (1st Cir. April 24, 2008), which stated that “manifest disregard of the law is not a valid ground for vacating or modifying an arbitral award in cases brought under the [FAA]”. That statement in Ramos-Santiago, however, is dicta, since the Court stated later in the footnote in which the statement appears that it was nevertheless not reaching that issue in deciding that case. However, in UMass Memorial Medical Center, Inc. v. United Food and Commercial Worker’s Union, No. 07-2527 (1st Cir. May 15, 2008), the First Circuit stated that courts still retain “inherent powers outside” the FAA to vacate arbitral awards, including situations in which the arbitrator acts in disregard of law. It seems that there is some dissention in the First Circuit on this issue. Stay tuned for further developments. ALS & Associates, Inc. v. AGM Marine Constructors, Inc., Case No. 06-10088 (USDC D. Mass. June 2, 2008).
This post written by Rollie Goss.
