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Confirmation / Vacation of Arbitration Awards

VARYING RULINGS WITH RESPECT TO ARBITRATION AWARDS

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Courts have confirmed and vacated arbitration awards on different bases:

This post written by Rollie Goss.

APPELLATE COURTS SPLIT ON CONTINUED VIABILITY OF “MANIFEST DISREGARD OF LAW” DOCTRINE

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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.

COURTS CONFIRM ARBITRATION AWARDS WITH SOME DISCUSSION OF MANIFEST DISREGARD OF LAW DOCTRINE

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Courts have continued (with one exception) to confirm arbitration awards, with some discussion of the manifest disregard of law doctrine.

This post written by Rollie Goss.

ACTION TO CONFIRM ARBITRATION AWARD DISMISSED FOR LACK OF SUBJECT MATTER JURISDICTION

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On December 2, 2008, we reported on an order by the U.S. District Court for the Eastern District of Michigan granting the Respondent’s motion to seal in part, permitting the Respondent to “temporarily file” its motion to dismiss and the award under seal, pending a determination of the motion to dismiss for lack of subject matter jurisdiction in the Petitioners’ action to confirm the arbitration award. After the order, the Respondent filed its motion to dismiss and the Petitioners moved for sanctions. The district court noted that the arbitration award included declaratory provisions but no monetary award. Petitioners argued that the court retained jurisdiction from an earlier action to appoint an umpire and that the amount sought in the arbitration, rather than the award, provided diversity jurisdiction. In granting the motion to dismiss, the district court first stated that jurisdiction was not retained because the earlier action was dismissed without the court issuing an order to compel arbitration, which would have retained jurisdiction on a subsequent motion to confirm. The district court next stated that the amount in controversy is the amount of the arbitration award sought to be confirmed. Since no monetary damages were awarded and the Petitioners did not show that the declaratory provisions had any real value, the court concluded the amount in controversy did not meet the threshold required to exercise diversity jurisdiction, which will force the Petitioners to file a similar motion to confirm in state court. Petitioners sought sanctions against Respondent’s local counsel for costs incurred to defend against the motion to dismiss and to address the motion to seal and related motion papers. The court ultimately denied the motion for sanctions because the Respondent’s position in the motion to dismiss was correct and the arbitration premised on the parties’ own agreement necessitated the motion to seal. American Bankers Insurance Co. of Florida v. National Casualty Co., Case No. 08- 13522 (USDC E.D. Mich. Feb. 3, 2009).

This post written by Dan Crisp.

COURTS CONTINUE TO REJECT FAIRLY ROUTINE OBJECTIONS TO ARBITRATION AWARDS

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Courts have continued to confirm arbitration awards. Recent decisions include one that characterizes the manifest disregard of law doctrine in the Seventh Circuit as being part of the statutory ground relating to the scope of the arbitrators’ authority.

  • Manifest disregard of law: Doerflein v. Pruco Securities, LLC, Case No. 07-738 (USDC S.D.In. Jan 30, 2009) (confirming award, rejecting challenges to how arbitration was conducted and manifest disregard of law; states that manifest disregard of law is an example of an arbitrator exceeding his/her authority under the FAA).

This post written by Rollie Goss.