SECOND CIRCUIT REJECTS MANIFEST DISREGARD ARGUMENTS
The Second Circuit has summarily affirmed a district court’s denial of a petition to vacate an arbitration award, and granted the cross-petition to confirm. We noted in our December 15, 2010 post that the Southern District of New York confirmed the award to Bayou Funds, a group of bankrupt entities which had been run as a massive Ponzi scheme. The district court ruled that the arbitrator did not manifestly disregard the law, even though he did not explicate the reasons for his ruling. Goldman Sachs, Bayou Funds’ clearing broker, continued to argue on appeal that the award must be vacated because it was rendered in manifest disregard of the law. After confirming that the manifest disregard doctrine remains viable in the Second Circuit, the appeals court rejected, among other things, Goldman’s arguments that it was not an “initial transferee” under the Bankruptcy Code’s § 550(a), and that the panel manifestly disregarded the law in concluding that it was. A district court decision in a different case supported Bayou Funds’ position and, although the Second Circuit declined to expressly endorse that earlier decision, it was enough to hold there was no manifest disregard. Goldman Sachs Execution & Clearing L.P. v. The Official Unsecured Creditors’ Committee of Bayou Group, LLC, No. 10-5049 (2d Cir. July 3, 2012).
This post written by Brian Perryman.
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