Confirmation / Vacation of Arbitration Awards

Courts continue to confirm arbitration awards at a very high rate:

• In this reinsurance matter, the court determined that whether to award post-judgment interest on an award, and at what rate, was for the court, not an arbitration panel, to decide, even if the issue was addressed in the reinsurance agreement., The court determined to award post-judgment interest at the statutory rate, since the contract did not clearly displace that rate, and to award attorneys’ fees as provided for in the agreement. Newmont U.S.A. Limited v. Ins. Co. of N. A., Case No. 06-1178 (USDC D. Col. Sept. 19, 2008).
• The court in Merrill Lynch, Pierce, Fenner & Smith Inc. v. Rothstein, Case No. 08-373 (USDC S.D. N.Y. Sept. 29, 2008) confirmed an award, rejecting a contention that the award was in manifest disregard of law, without any discussion of the Hall Street Associates opinion.
• The court confirmed an award under a collective bargaining agreement in Bemis Co., Inc. v. Graphic Communication Union Local No. 735-S, Case No. 07-1307 (USDC M.D. Pa. Sept. 15, 2008), finding that the arbitrator had reasonably interpreted the agreement with no arbitrator bias.
• In The Householder Group v. Caughran, Case No. 07-316 (USDC E.D. Tex. Sept. 17, 2008), the court limited its consideration of a request to vacate an award to the statutory factors in the Federal Arbitration Act, pursuant to Hall Street Associates, and confirmed the award, in the face of what amounted to evidentiary and procedural challenges, some of which had not even been raised during the arbitration hearing.
• A Magistrate Judge recommended confirmation of an award in Int’l. Brotherhood of Elec. Workers v. Firstenergy Generation Corp., Case No. 07-304 (USDC W.D. Pa. Aug. 22, 2008), on the basis that the award drew its essence from the agreement, which the arbitrator interpreted. The district judge overruled objections to the recommendation, confirming the award.
• An award against an individual in his personal capacity, who signed an agreement in a representative capacity, was vacated in Millmaker v. Bruso, Case No. 07-3837 (USDC S.D. Tex. Oct. 9, 2008). The court noted that Hall Street Associates pout the continued viability of the manifest disregard of law doctrine in doubt, but that there had been no manifest disregard in this case. The court also upheld an award of attorneys’ fees pursuant to the terms of the contract.

This post written by Rollie Goss.

The Second Circuit Court of Appeals has held that the manifest disregard of law standard is a judicial gloss on the specific grounds for vacature of arbitration awards enumerated in section 10 of the Federal Arbitration Act, and remains a valid ground for vacating arbitration awards after the Supreme Court's Hall Street Associates decision. The issue in this case was whether class arbitration was appropriate under an arbitration agreement which was silent on that issue. It was undisputed that this was a question for the arbitrator to initially decide, and that it was a question of contract interpretation. The arbitrator allowed class arbitration, but the District Court found that decision to be in manifest disregard of law. The Second Circuit, noting the very narrow scope of the manifest disregard of law doctrine, disagreed, and remanded with directions that the District Court deny the request to vacate the arbitration award. Stolt-Nielsen SA v. AnimalFeeds Int'l. Corp., No. 06-3474 (2d Cir. Nov. 4, 2008). This decision further develops the conflict in court decisions as to whether the manifest disregard of law doctrine remains viable.

This post written by Rollie Goss.

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.

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.