Reinsurance Focus

We have posted several times about the manifest disregard of law doctrine for vacating arbitration awards, and on the implications for that doctrine of the Supreme Court’s holding last year that the grounds for vacating or modifying arbitration awards set out in the FAA are the “exclusive grounds” upon which federal courts may modify or vacate such awards. Hall Street Assocs., L.L.C. v. Mattel, Inc., 128 S. Ct. 1396 (2008). Hall Street left open the question of whether courts, as opposed to parties, could create different standards for vacating arbitration awards. In two recent opinions, the Fifth and Ninth Circuits have reached different conclusions about the impact of Hall Street on the judicially created “manifest disregard of law” doctrine.

In January, the Ninth Circuit issued an opinion stating that “in this circuit, an arbitrator’s manifest disregard of the law remains a valid ground for vacatur of an arbitration award under § 10(a)(4) of the Federal Arbitration Act.” Comedy Club, Inc. v. Improv West Assoc., No. 05-55739 (9th Cir. Jan. 29, 2009). This holding was predicated upon the Ninth Circuit characterizing the manifest disregard doctrine as an example of Section 10(a)(4) of the FAA, situations in which the arbitrator exceeds his/her authority. Recently, however, the Fifth Circuit concluded that Hall Street “unequivocally” restricted the grounds for vacatur to those set forth in the FAA, and that the “manifest disregard of law” doctrine is not a valid basis for vacating an arbitration award under the FAA. Citigroup Global Markets Inc v. Bacon, No. 07-20670 (5th Cir. March 5, 2009). These opinions demonstrate an increasing split of authority as to the continuing viability of the doctrine.

This post written by Lynn Hawkins.