At issue in VIP Mortgage, Inc. v. Gates, ___ F.4th ___, No. 24-7624, slip op. at 1 (9th Cir. Dec. 22, 2025), was the Ninth Circuit’s so-called “legally dispositive facts” doctrine—which recognizes a rare exception to the rule that courts may not vacate awards for even egregious mistakes of fact. We have discussed in numerous other posts how the Federal Arbitration Act (“FAA”) generally does not permit courts to review arbitration awards for factual or legal error and permits vacatur only on exceedingly narrow grounds, including “manifest disregard of the agreement,” and in some jurisdictions, “manifest disregard of the law.” (See, e.g., here, here, here, here, here, here, here, here, here, here; here, & here.)
Under the Ninth Circuit’s “legally dispositive facts” doctrine courts will vacate an award if the challenger shows: (1) the factual error was dispositive to the legal issue and (2) the arbitrator knew about the undisputed fact when deciding the issue. VIP Mortgage, slip op. at 9. The VIP Mortgage award challenger satisfied the first prong: the parties had previously stipulated to bear their own legal fees and the award of fees to the award defending party directly contravened the stipulation. If that’s all that mattered then the award challenger would have had a strong argument for vacatur under the U.S. Supreme Court’s decision in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 668–69, 684 (2010).
But the award challenger failed the second prong, making the case a clear candidate for confirmation. Neither the award challenger nor the award defender brought the stipulation to the arbitrator’s attention. The arbitrator, without the benefit of the stipulation, interpreted what she believed the contract said. She did her job, the parties’ pre-award argument did not rely on (or, as far we can tell, even mention) the stipulation, and the award accordingly could not be vacated.
The first four of those questions were answered in our October 18, October 21, and November 12, 2024, posts. This November 14, 2024, post answers the fifth question: “If there is a [United States Court of Appeals for the] Seventh Circuit appeal of the UpHealth decision, is it likely the decision will be overturned on appeal, and if so, on what grounds?”
We explained in our November 12, 2024, post that UpHealth has appealed the district court decision to the Seventh Circuit. And if you’ve been reading our prior UpHealth posts, then you’ve probably already guessed that the answer is “yes,” it seems likely the Seventh Circuit will reverse the UpHealth decision.
In terms of the grounds, for such a reversal, we think the Seventh Circuit will probably conclude that the only forms of outcome review the Seventh Circuit recognizes is manifest disregard of the contract and violation of public policy, and that UpHealth involves neither of those grounds. That is all the more so where, as here, there is no agreement or concession concerning the allegedly mistaken fact. (See November 12, 2024, post.)
We discussed all of these shortcomings in the UpHealth Court’s analysis in our October 7, 18, 21, and November 12, 2024, posts. We believe that the Seventh Circuit will probably also conclude that the UpHealth court erred by vacating the award in part, particularly since the Seventh Circuit recognizes outcome review in extremely narrow circumstances only and none of those circumstances are present here—where the district court has, for intents and purposes, second-guessed the arbitrator’s fact finding.
It will be interesting to see how the appellee (Damodaran) attempts to square the district court’s decision with Seventh Circuit and Supreme Court authority. We will continue to watch the appeal and report on significant developments.
Contacting the Author
If you have any questions about this article, arbitration, arbitration-law, arbitration-related litigation, then please contact Philip J. Loree Jr., at (516) 941-6094 or PJL1@LoreeLawFirm.com.
Philip J. Loree Jr. is principal of the Loree Law Firm, a New York attorney who focuses his practice on arbitration and associated litigation. A former BigLaw partner, he has nearly 35 years of experience representing a wide variety of corporate, other entity, and individual clients in matters arising under the Federal Arbitration Act, as well as in insurance- or reinsurance-related, and other, matters.
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We’ve seen how the Federal Arbitration Act authorizes confirmation and enforcement of various domestic and foreign arbitration awards falling within its scope. (Seehere, here, here, andhere.) Let’s look at what the Federal Arbitration Act has to say about vacating, modifying, or correcting awards.
The Federal Arbitration Act also provides some limited remedies for challenging arbitration awards where a party can show certain kinds of unusual and material violations of an arbitration agreement by an arbitrator or an opposing party, or an obvious mathematical, typographical, or technical error that appears on the face of the award. These remedies are orders: (a) modifying or correcting the award under Section 11 of the Federal Arbitration Act; or (b) vacating the award in whole or in part under Section 10 of the Federal Arbitration Act.
Vacating an Award under Section 10 of the Federal Arbitration Act
An arbitration award is effectively a contract resulting from the performance of one or more other contracts, including the pre-dispute agreement to arbitrate and the post-dispute submission to arbitration. Two parties agree to appoint arbitrators, submit their dispute to arbitration and abide by the award. The parties ordinarily consent to entry of judgment on the award, and it can be confirmed under Sections 9 or 207 of the Federal Arbitration Act (or a state law equivalent when the Federal Arbitration Act doesn’t apply). Alternatively, it may be enforced through the plenary and summary procedures that apply to ordinary contracts (subject to any special rules governing arbitration awards).
So what happens when things go awry—or at least seem to have gone awry—and the arbitration award is or appears to be fundamentally unfair, divorced from the contract or the result of fraud, bias, or some form of prejudicial misconduct on the part of the arbitrators? Section 10 of the Federal Arbitration Act provides a modest safety net in the form of a motion or petition to vacate the award. (State arbitration statutes and law applicable in actions to enforce arbitration awards generally provide similar recourse, but our focus here is on the Federal Arbitration Act.)
Arbitrators are human and occasionally they make awards that cannot be squared with logic and law, and courts may, in appropriate circumstances, vacate those awards as being in manifest the agreement, or in some circuits, in manifest disregard of the law. The U.S. Court of Appeals for the Second Circuit considered such an award in Weiss v. Sallie Mae, Inc., ___ F.3d ___, No. 18-2362, slip op. (Sept. 12, 2019), and solved the problem in a way that imposed minimal costs and delay on the parties and, at the same time, gave effect to the parties’ reasonable contractual expectations, including that the arbitrator would make an award with a colorable basis in the law or the parties’ agreement, not one in manifest disregard of the law or the agreement. It is therefore a good example of a case that promotes arbitration as an alternative to litigation.
Background
W is a student-loan borrower who in 2011 defaulted on a loan issued by S (N is the successor of S, but we shall refer to both as “S”). W gave S her phone number (“Phone Number 1”) when she obtained the loan and consented to S contacting her via an automatic telephone dialing system (“ATDS”). S made ATDS calls to her using Phone Number 1 prior to her default on the loan in 2011.
Also prior to her 2011 default W obtained a second telephone number (“Phone Number 2”) but did not give S consent to contact her on that number via an ATDS.
After W’s 2011 default, S contacted W seven or eight times a day at Phone Number 2 via an ATDS, attempting to collect the debt. S made 774 ATDS calls to Phone Number 2 during the period September 16, 2011 through July 1, 2013.
The Arbitration
A dispute arose between W and S about whether S’s ATDS calls had violated the Telephone Consumer Protection Act (“TCPA”) and W commenced an action in the U.S. District Court for the Western District of New York. The action was stayed after the parties stipulated to arbitration pursuant to an arbitration agreement in a student-loan promissory note.
The Award: Was it in Manifest Disregard of the Law or the Agreement?
Following a hearing an arbitrator made an award granting W $108,000 in statutory damages under the TCPA. But the award held that W was a class member in a class action that S had settled. The class-action settlement (the “Arthur Settlement”) “included as a class member, ‘any person who received ATDS calls from [S] between October 27, 2005 and September 14, 2010.’” Slip op. at 5 (citation omitted).
W did not contend that the calls S made to Phone Number 1 violated the TCPA (W had consented to those calls), and W contended that, accordingly, she was not bound by the settlement, even though she had received ATDS on Phone Number 1 during the specified period. The arbitrator, however, found that argument “‘unpersuasive,’” and “ruled that Weiss was a class member and that ‘the proof was conclusive that [S] provided [W] with the required notice of the settlement and of her rights and obligations under the terms of the settlement.’” Slip op. at 5-6 (citation omitted).
The Arthur Settlement “notice offered class members the opportunity to file a ‘consent Revocation’ document by September 15, 2012; absent such a filing, ‘the ATDS calls would not stop and the borrower’s prior consent to give them [sic] would be deemed to have been given.’” Slip op. at 6 (citation omitted; bracketed text in original).
While W contended that she was not aware of the Arthur Settlement, S testified that notice was successfully emailed to W.
The agreement implementing the Arthur Settlement featured a general release, “under which class members were ‘deemed to have fully released and forever discharged [S]’. . . from any and all claims and causes of action, inter alia, ‘that arise out of or are related in any way to the use of an [ATDS]. . . used by any of the Released Parties in connection with efforts to contact or attempt to contact Settlement Class Members including, but not limited to, claims under or for violations of the [TCPA].’” Slip op. at 6 (citations omitted; some bracketed text in original).
Even though the general release, to which the arbitrator determined W was bound, deemed W to have “waived ‘any and all’ TCPA claims effective the date of final judgment in the Arthur Settlement action[,]” the arbitrator’s award did not acknowledge the existence of that release. Slip op. at 6-7. “Instead,” said the Court, “the arbitrator interpreted [W]’s failure to submit a consent revocation pursuant to the Arthur class notice as precluding recovery for any calls placed to [Phone Number 2] after the September 15, 2012 deadline but also as permitting recovery for ATDS calls placed to [Phone Number 2] between September 6, 2011, and September 16, 2012.” Slip op. at 7.
The arbitrator awarded TCPA statutory damages in the amount of $108,500 ($500 per call for 217 calls during the applicable period). W moved to confirm the award and S cross-moved to vacate it.
The district court vacated the award, finding that “by neglecting to ‘apply—or even address—an explicit, unambiguous term of the settlement agreement,’ which “clearly and unambiguously bars recovery for claims until and including the date of the agreement,’ the arbitrator manifestly disregarded the law.” Slip op. at 7. W appealed.
In Steyn v. CRTV, LLC (In re Steyn), 175 A.D. 3d 1 (1st Dep’t 2019), New York’s Appellate Division, First Department decided a case falling under the Federal Arbitration Act (the “FAA”) that involved two challenges: one to an award of attorney fees on manifest disregard of the law grounds, and the other to an award that a nonsignatory obtained by joining the petitioner’s counterclaim.
The Court rejected the manifest-disregard challenge to the attorney fee award in favor of a signatory to the arbitration agreement, but held that the trial court should have vacated the award made in favor of a nonsignatory (which included both damages and attorney fees).
Background: Attorney Fee and Arbitrability Challenges
The appeal arose out of a
contract “dispute between Mark Steyn, a renowned author and television and
radio personality, and CRTV, an online television network, currently known as
BlazeTV, which features conservative commentators such as Glenn Beck and Phil
Robertson.” 2019 N.Y. Slip Op. 5341, at *2. We’ll call Steyn the “Host” and
CRTV the “Network.”
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At issue in VIP Mortgage, Inc. v. Gates, ___ F.4th ___, No. 24-7624, slip op. at 1 (9th Cir. Dec. 22, 2025), was the Ninth Circuit’s so-called “legally dispositive facts” doctrine—which recognizes a rare exception to the rule that courts may not vacate awards for even egregious mistakes of fact. We have discussed in numerous other posts how the Federal Arbitration Act (“FAA”) generally does not permit courts to review arbitration awards for factual or legal error and permits vacatur only on exceedingly narrow grounds, including “manifest disregard of the agreement,” and in some jurisdictions, “manifest disregard of the law.” (See, e.g., here, here, here, here, here, here, here, here, here, here; here, & here.)
Will the Seventh Circuit reverse the judgment in the UpHealth case?
We’ve seen how the Federal Arbitration Act authorizes confirmation and enforcement of various domestic and foreign arbitration awards falling within its scope. (See 
