Confirmation / Vacation of Arbitration Awards

IMPORTANT DECISIONS ON MANIFEST DISREGARD OF LAW DOCTRINE ON THE HORIZON

November 3, 2008 by Carlton Fields

Since the Supreme Court’s Hall Street Associates decision last March, it has been unclear whether the manifest disregard of law doctrine survived as a basis upon which to vacate an arbitration award. Authoritative guidance on that issue from the Second and Ninth Circuits may be relatively close at hand. The United States Supreme Court has granted a petition for writ of certiorari in Improv West Associates v. Comedy Club, Inc., No. 07-1334 (Oct. 6, 2008), and has summarily vacated the decision of the Ninth Circuit at 514 F.3d 833, and remanded the case for further consideration in light of Hall Street Associates. The Ninth Circuit, in a decision issued prior to the Supreme Court’s decision in Hall Street Associates, had found that a decision of an arbitrator was in manifest disregard of California law. The Supreme Court wishes to have the Ninth Circuit consider whether that decision is still appropriate in light of the Hall Street Associates decision.

In the Second Circuit, the court recently affirmed the confirmation of an arbitration award, rejecting the contention that the award was in manifest disregard of law, concluding that “even if the manifest-disregard standard were to survive Hall Street Associates, it affords Sole no relief from the arbitration award challenged in this case.” Sole Resort, S.A. v. Allure Resort Management, LLC, No. 07-1284 (2d Cir. Oct. 20, 2008). The Sole opinion notes that the issue of whether the manifest disregard of law doctrine survived Hall Street Associates is pending in another case in the 2d Circuit, Stolt-Nielsen S.A. v. AnimalFeeds International Corp., No. 06-3474 (argued May 30, 2008). Therefore, there may be federal appellate court authority addressing the continued viability of the manifest disregard of law doctrine fairly soon.

This post written by Rollie Goss.

SECOND CIRCUIT UPHOLDS DISTRICT COURT’S CONFIRMATION OF ARBITRATION AWARD OVER MANIFEST DISREGARD OF LAW CHALLENGE

October 30, 2008 by Carlton Fields

Appellant appealed the confirmation of an arbitration award, contending that: (1) the contract required de novo review on appeal; (2) the award was in manifest disregard of law; (3) the arbitrator exceeded his authority in awarding consequential damages; and (4) the award was not “final and definite” as required by the Federal Arbitration Act. The court rejected the de novo review claim, citing the Supreme Court’s opinion in Hall Street Assoc., LLC v. Mattel, Inc., which held that the Federal Arbitration Act does not authorize expandable judicial review through contract. Although recognizing that some courts have questioned the continuing viability of the manifest disregard doctrine, the court affirmed the rejection of that challenge to the award on the basis that it was clear that the arbitrator did not manifestly disregard the law. Characterizing the remaining contentions as asserting that the arbitrator had erred, the court held that it could not vacate an award merely because it was convinced that the arbitration panel made an erroneous legal ruling. Esso Exploration & Prod. Chad, Inc. v. Taylors Int’l Serv., Ltd., No. 06-5673 (2d Cir. Sept. 17, 2008).

This post written by Dan Crisp.

COURT PERSISTS IN PUSHING ARBITRATION AWARDS TOWARDS FINALITY

October 6, 2008 by Carlton Fields

There have been a series of interesting orders entered in a case involving the allocation of response and remedial costs in an environmental contamination case. On March 31, 2008, the Court entered a 99 page order confirming two arbitration awards in a bifurcated arbitration proceeding, rejecting arguments that the arbitrators had acted in manifest disregard of both substantive and procedural laws, made procedural errors and that there was arbitrator misconduct. Noting uncertainty as to whether the Supreme Court’s opinion in Hall Street Associates eliminated the manifest disregard of law doctrine, in part because of uncertainty as to whether the doctrine was or was not a non-statutory ground for vacatur, the court considered the manifest disregard of law standard as both a non-statutory ground for vacatur and as a summary of statutory grounds for vacatur, finding no manifest disregard under either standard.

Next, on July 2, 2008, the court entered an order granting partial final judgment under FRCivP 54(b), entering judgment on the arbitration awards and leaving for further adjudication issues relating to other parties relating to the pollution sites. On the same day, the court entered a separate order denying a stay without a bond and providing for a stay upon the posting of a bond in an amount in excess of $14.3 million. The bond was posted that day.

Finally, on August 4, 2008, the court entered an order denying a Rule 59 motion to set aside the partial final judgment, rejecting Halliburton’s argument that the court’s ruling on manifest disregard of law violated its constitutional due process rights and essentially constituted manifest legal error.

Halliburton Energy Services, Inc. v. NL Industries, Case No. 05-4160 (USDC S.D. Tex.).

This post written by Rollie Goss.

ARBITRATION AWARD CONFIRMED, FINDING ARBITRATION CLAUSE APPLIED, DESPITE FAILURE TO NAME BOTH PARTIES IN FORM CONTRACT

October 1, 2008 by Carlton Fields

Plaintiff, Philip Green, filed a wrongful discharge complaint in federal court in the Southern District of Texas against Defendant, Service Corporation International (“SCI”), an affiliate of his former employer. SCI moved to compel arbitration of the claim under Green’s employment contract, which contained an arbitration clause which explicitly applied to the employer’s “affiliates.” Green objected to SCI’s motion to compel arbitration, arguing that the employment contract left blank the name of the employer, though the cover page of the contract identified SCI. The Court granted SCI’s motion to compel arbitration, finding that the only possible reading of the contract indicated that SCI, as an “affiliate” of Plaintiff’s employer, was clearly covered by the arbitration clause, insofar as Green was plainly aware of the identity of his employer, and SCI was indisputably its affiliate. Reconsideration was denied.

When the panel convened, Green challenged the panel’s jurisdiction, raising the same contract interpretation issue again, which the panel rejected, entering an award against Green. Green moved to vacate the award, raising the same issue yet again to a court which already had rejected the argument twice. Not surprisingly, the Court denied Green’s motion to vacate and confirmed the award. Still not willing to give up, Green has filed a notice of appeal. Green v. Service Corp. Int’l., Case No. 06-833 (USDC S.D. Tex. August 25, 2008).

This post written by John Pitblado.

ARBITRATION CONFIRMATION DECISIONS

September 22, 2008 by Carlton Fields

Courts have continued to brush aside objections and confirm arbitration awards, with an uneven consideration of the impact of Hall Street Associates on the manifest disregard of law doctrine.

Arbitration awards have been confirmed: Cline v. Chase Manhattan Bank USA, Case No. 07-650 (USDC D. Utah Sept. 11, 2008) (Magistrate Judge’s Report & Recommendation; District Court’s Order Approving the R&R) (rejecting arguments that there was no valid arbitration agreement, arbitrator bias and the lack of a fundamentally fair hearing); Hartford Fire Ins. Co. v. The Evergreen Org., Inc., Case No. 07-7977 (USDC S.D.N.Y. Sept. 9, 2008) (confirming after remanded by court to arbitration panel for clarification of award); Southern N. J. Building Laborers’ Dist. Council v. GMAC Constr., Inc., Case No. 08-2896 (USDC D.N.J. July 24, 2008) (award not completely irrational); Commercial Union Ins. Co. v. Lines, Case No. 02-0573 (USDC S.D.N.Y. June 11, 2008) (opinion and Final Judgment) (issues resolved in a reasonable and sound manner) (Notice of Appeal filed July 8, 2008).
Several courts have considered the manifest disregard of law doctrine: Hereford v. D. R. Horton, Inc., 2008 WL 4097594 (Ala. Sept. 5, 2008) (under Hall Street Associates, “manifest disregard of law is no longer a proper basis under the Federal Arbitration Act for vacating, modifying, or correcting an arbitrator’s award”) (Alabama Supreme Court decisions are available only by subscription); Kuest v. Citigroup Global Markets Inc., No. 07-35005 (9th Cir. Aug. 26, 2008) (very short opinion affirming district court’s confirmation of award, in part based on there being no manifest disregard of law, without mentioning Hall Street Associates) (see December 5, 2006 blog post on the underlying district court ruling); DMA Int’l, Inc. v. Qwest Communciations Int’l, Case No. 08-358 (USDC D. Col. Sept. 12, 2008) (articulate but not reach Hall Street Associates impact since the award was not in manifest disregard of law; also rejects claims of arbitrator partiality and arbitrator error); Legacy Trading Co. v. Hoffman, Case No. 07-1383 (USDC W.D. Ok. Aug. 18, 2008) (rejecting manifest disregard of law challenge without mentioning Hall Street Associates; also rejects evident partiality of arbitrator and public policy challenges to the award).
Ameritech Corp. v. Int’l Brotherhood of Elec. Workers, No. 05-2574 (7th Cir. Sept. 10, 2008) addressed an interesting scenario in which there were two consecutive arbitrations with differing results, and the question arose as to which award controlled. The parties agreed to participate in a third arbitration under Fed. R. App. Pro. 33, with the result of the resulting arbitration controlling. The court held the parties to that agreement.
An award was partially vacated in Verizon Washington, DC Inc. v. Communications Workers of Am., Case No. 07-1460 (USDC D.D.C. Aug. 5, 2008) because the arbitrator had clearly disregarded a contractual provision which limited the duration of back pay awards, awarding back pay for a longer period of time than that provided for in the contract, exceeding the authority granted by the contract. See the opinion and the remand Order.

This post written by Rollie Goss.