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First Circuit Court of Appeals Decides Close Case in Favor of Confirming FINRA Arbitration Panel Award: Raymond James Financial Services, Inc. v. Fenyk

May 1st, 2015 Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Choice-of-Law Provisions, Confirmation of Awards, Federal Courts, Grounds for Vacatur, Judicial Review of Arbitration Awards, Manifest Disregard of the Agreement, Manifest Disregard of the Law, Securities Arbitration, Statute of Limitations, United States Court of Appeals for the First Circuit Comments Off on First Circuit Court of Appeals Decides Close Case in Favor of Confirming FINRA Arbitration Panel Award: Raymond James Financial Services, Inc. v. Fenyk

Introduction

Probably most of the Federal Arbitration Act Section 10(a)(4) outcome-review challenges that parties file are disposed of pretty easily because the applicable highly-deferential standard of review forecloses relief as long as the arbitrators were at least arguably interpreting the parties’ agreement, the applicable law or both. The most challenging cases are those falling either on or close to that imaginary, blurry line dividing arguable interpretation from clear disregard of the contract.  Cf. Chicago Typographical Union v. Chicago Sun-Times, 935 F.2d 1501, 1506 (7th Cir. 1991) (“The zanier the award, the less plausible it becomes to ascribe it to a mere error in interpretation rather than to a willful disregard of the contract. This approach can make the line between error and usurpation waver.”).

yay-14640034-digitalIn Raymond James Financial Services, Inc. v.  Corp. v. Fenyk, No. 14-1252, slip op. (3rd Cir. Mar. 11, 2015), the U.S. Court of Appeals for the First Circuit addressed one of those challenging cases. The panel in a FINRA arbitration (the “FINRA Arbitration Panel” or “Panel”) awarded a discharged stock broker $600,000.00 in back pay for wrongful termination, but the district court vacated the arbitration award because it concluded that the FINRA Arbitration Panel did not have the authority to award back pay in the circumstances. On appeal the First Circuit reversed, explaining in clear and cogent terms why the case, while close, was not one warranting Section 10(a)(4) vacatur.

Facts

Mr. Fenyk served as a Raymond James Financial Services (“Raymond James” or “James”) securities broker for seven years. His career there began in New York City, but he worked in Vermont beginning in 2004, managing a small branch office. He had an independent contractor agreement with Raymond James, entitled “Independent Sales Associate Agreement,” which stipulated that Florida law would govern any disputes. He also executed a Business Ethics Policy, which required him to arbitrate disputes “arising out of the independent contractor relationship.”

yay-17336082-digitalIn May 2009 Raymond James, during a routine client-communication review, discovered an e-mail sent to Fenyk’s former domestic partner, which suggested that Fenyk had an alcohol problem.  The e-mail referred to “Fenyk’s ‘slip’ and his ‘need [for] meetings and real sobriety for a dialoug [sic] with you.'” The e-mail also explained that “Fenyk’s ‘new AA friend was very hard on [him] last night.'” Slip op. at 3.

Raymond James terminated its relationship with Fenyk after it learned about Fenyk’s apparent alcohol problem. About  two years later, Fenyk filed suit “in Vermont state court alleging that he had been fired on account of his sexual orientation and his status as a recovering a recovering alcoholic, in violation of Vermont’s Fair Employment Practices Act (“VFEPA”), Vt. Stat. Ann. tit. 21, § 495.” Slip op. at 4. Fenyk subsequently agreed to dismiss his complaint and commence a Financial Industry Regulatory Authority (“FINRA”) arbitration, as required by his agreement with Raymond James. Continue Reading »

The First Department Affirm’s Citigroup’s Motion to Vacate an Award based on Manifest Disregard of the Law

April 22nd, 2015 Appellate Practice, Authority of Arbitrators, Awards, Confirmation of Awards, Contract Interpretation, Grounds for Vacatur, Judicial Review of Arbitration Awards, Manifest Disregard of the Agreement, Manifest Disregard of the Law, New York Court of Appeals, New York State Courts, Practice and Procedure, United States Court of Appeals for the Second Circuit Comments Off on The First Department Affirm’s Citigroup’s Motion to Vacate an Award based on Manifest Disregard of the Law

yay-1274371Earlier this month, New York’s Appellate Division, First Department affirmed a New York County Supreme Court, Commercial Division judgment vacating an arbitration award for manifest disregard of the law under the Federal Arbitration Act. See Citigroup Global Markets, Inc. v. Fiorilla, No. 14-747, slip op. (1st Dep’t April 9, 2015). The Court’s characteristically brief opinion does not delve very deeply into the facts or explain the Court’s reasoning in detail, but there’s enough there to make the decision worth noting.

The Court affirmed the trial court’s order vacating the award because the arbitrators apparently denied without explanation one of the parties’ motions to enforce a settlement even though the moving party informed the arbitrators of controlling, New York case law requiring the enforcement of settlement agreements. “Although,” said the Court, “arbitrators have no obligation to explain their awards, when a reviewing court is inclined to hold that an arbitration panel manifestly disregarded the law, the failure of the arbitrators to explain the award can be taken into account.” Slip op. at 1 (citing and quoting Matter of Spear, Leeds & Kellogg v. Bullseye Sec., 291 A.D.2d 255, 256 (1st Dep’t 2002) (quotations omitted)).

While the Court does not directly address the question, it appears that the case arose under the Federal Arbitration Act, because cases interpreting arbitration statute (CPLR Article 75) do not recognize “manifest disregard of the law” as a ground for vacating an award. Under Article 75, the only “outcome review” standards are those that permit vacatur of awards that are irrational, violate a strong public policy or exceed clearly an express limitation on the arbitrators’ authority. See, e.g., Wein & Malkin LLP v. Helmsley-Spear, Inc., 6 N.Y.3d 471, 477-78 (2006); Matter of New York City Transit Auth. v. Transport Workers’ Union of Am., 6 N.Y.3d 332, 336 (2005).

New York cases interpreting the Federal Arbitration Act, however, recognize manifest disregard as a ground for vacating an award. While New York state courts need defer only to the United States Supreme C0urt on federal-law questions, the New York Court of Appeals has traditionally tended to follow established Second Circuit precedent on such issues in Federal Arbitration Act cases. Since the Second Circuit recognizes manifest disregard of the law as a ground for vacating an award under Section 10 of the Federal Arbitration Act, so too have the New York State courts, even though the U.S. Supreme Court has left the question open. See Hall Street Associates, LLC v. Mattel, Inc., 128 S. Ct. 1396, 1403 (2008); see, e.g., T. Co Metals v. Dempsey Pipe & Supply, 592 F.3d 329, 339-40 (2d Cir. 2010) (manifest disregard of the law survives Hall Street); Wein, 6 N.Y.3d at 480-81 (pre-Hall Street New York Court of Appeals follows Second Circuit authority on manifest disregard of the law in Federal Arbitration Act governed case); Tullett Prebon Financial Serv. v. BGC Financial, L.P., 111 A.D.3d 480, 481-82 (1st Dep’t 2013) (applying manifest disregard of the law standard to Federal Arbitration Act governed case post-Hall Street).

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One question the First Department decision prompts is whether resort to manifest disregard of the law was even necessary. The U.S. Supreme Court has unequivocally endorsed post-Hall Street what some refer to in shorthand as the “manifest disregard of the agreement” standard, or “essence from the agreement” standard, under which a court may vacate an award where the arbitrators do not even arguably interpret the agreement. See Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2098 (2013); Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758, 1767 (2010).

Presumably what happened in this case (though the opinion does not say) is that the parties had an agreement that contained an arbitration agreement, and the dispute arose out of or related to that main agreement. One or both parties demanded arbitration, the parties agreed to settle and one of the parties sought to enforce that agreement, which obviously arose out of or related to the main agreement, and was within the scope of issues that the parties agreed to submit and submitted to arbitration.

Under these circumstances it makes little sense to say that the manifest disregard of the agreement standard does not apply because the agreement that was manifestly disregarded was not the main agreement. And if, as the Court said, the arbitrators simply denied the motion to enforce the settlement agreement without comment, it seems to us that it did not even arguably interpret the settlement agreement and thus manifestly disregarded the parties’ agreement.

The opinion, however, relies solely on manifest disregard of the law. Given the uncertainty surrounding whether manifest disregard is a viable ground for vacatur, and the corresponding certainty that manifest disregard of the agreement is a valid basis for vacating an award under Section 10(a)(4) of the Federal Arbitration Act, that sole reliance has the potential to cause relying solely on that standard without any explanation might confuse litigants who are not well-versed in Federal Arbitration Act practice and procedure. We are quite certain, however, that was not the Court’s intention, and there may well be good reasons why the court did not rely on manifest disregard of the agreement as at least an alternative basis for its sound conclusion.

 

Photo Acknowledgements:

All photos used in the text portion of this post are licensed from Yay Images and are subject to copyright protection under applicable law. Text has been added to both images. Hover your mouse pointer over any image to view the Yay Images abbreviation of the photographer’s name.

What Standards Apply to Lance Armstrong’s Putative Challenge to the $10,000,000.00 Arbitration Award?

March 1st, 2015 Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Choice-of-Law Provisions, Contract Interpretation, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, FAA Preemption of State Law, Judicial Review of Arbitration Awards, New York Convention, Practice and Procedure, State Courts, Texas Supreme Court, United States Supreme Court Comments Off on What Standards Apply to Lance Armstrong’s Putative Challenge to the $10,000,000.00 Arbitration Award?

SCA v. Armstrong:

Anatomy of an Arbitration Award—Part II

What Standards Apply to Lance Armstrong’s Putative Challenge to the Arbitrators’ $10,000,000.00 Sanctions Award?

 

yay-10447276-digitalAs discussed in Part I, if Lance Armstrong (“Armstrong”) and Tailwind Sports Corp. (“Tailwind”) (collectively, the “Armstrong Parties”) challenge the Armstrong Arbitration Award, that challenge will be based on the Panel allegedly exceeding its powers. To meaningfully assess whether the Panel exceeded its powers we need to consider what law applies. Continue Reading »

Arbitration and Mediation FAQs: Can I Appeal an Arbitration Award in Court?

May 21st, 2014 Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Awards, Drafting Arbitration Agreements, Grounds for Vacatur, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure Comments Off on Arbitration and Mediation FAQs: Can I Appeal an Arbitration Award in Court?

Introduction

When a party is on the wrong end of an arbitration award that he, she or it thinks is fundamentally unfair, tainted by impropriety, or disconnected from the agreement the arbitrator was supposed to interpret and apply, the first question that comes to mind is whether there might be some form of recourse available. In court,  the usual avenue of relief from an adverse judgment or order is an appeal.

Can a losing party to an arbitration award governed by the Federal Arbitration Act (the “FAA”) appeal it in court? Since private arbitration is an alternative to public, government-sponsored court litigation, since the court system plays an important role in enforcing arbitration agreements, since both arbitration and court litigation share at least some of the same attributes and since in the U.S. procedural due process and the primacy of the rule of law are as dear to us as baseball and apple pie, it is natural to assume that one should be able to appeal an adverse arbitration award.

But one cannot—in any meaningful sense of the word—“appeal” an arbitration award to a court. In court litigation an appeal involves judicial review by an appellate court under which a panel of judges reviews trial-court rulings on questions of law independently—that is, as if the appellate court were deciding the question for itself in the first instance. The appellate court reviews the trial court’s findings of fact on a “clearly erroneous” or “clear error” standard of review, that is, paying a certain degree of deference to the finder of fact (the jury or trial judge). While appellate review thus does not involve a retrial on the merits, it is broad and searching, particularly where outcomes turn solely on questions of law.

The FAA does not authorize courts to review arbitration awards under an appellate standard of review, even if the parties consent to a court applying such a standard. Parties can agree before or after a dispute arises to an arbitration procedure that empowers another arbitrator or panel of arbitrators to review an award under an appellate or some other standard of review, but arbitration awards are subject to very limited and deferential review by courts and then only on a few narrow grounds.

The FAA Award-Enforcement Process

The FAA award enforcement process permits either party to make an application to vacate, modify or correct an award, or an application to “confirm” it, that is, enter judgment on it. Since the deadline for applying to vacate, modify or correct an award is considerably shorter than that for confirming an award, in many cases, parties who are seeking relief from the award make the initial application. If a putative challenging party does not timely seek relief, and the other party seeks confirmation after the expiration of the deadline for making an application to vacate, modify or correct the award, then the challenging party is time-barred from asserting grounds for vacatur or modification, even simply as affirmative defenses to confirmation. (See, e.g., L. Reins. & Arb. Law Forum post here.)

Let’s assume a party makes a timely motion to vacate an award. What will likely then happen is the other party will cross-move to confirm the award. The burden on the party seeking confirmation is pretty modest. Generally the party moving to confirm will need to show that the parties: (a) agreed to arbitrate; (b) consented to entry of judgment on the award; (c) appointed an arbitrator or panel of arbitrators; and (d) submitted the dispute to the arbitrators, who issued the award. The award is presumed valid and the court does not review its outcome or substance.

Once the modest prerequisites for confirmation have been established by a properly supported petition or motion to confirm an award, then the court “must grant” confirmation “unless the award is vacated, modified or corrected” under FAA Sections 10 or 11. 9 U.S.C. § 9. Thus, apart from those relatively rare cases where a party can show that the parties never agreed to arbitrate at all (and that the challenging party did not waive that defense), or perhaps never even impliedly consented to entry of judgment on the award, the only grounds on which the losing party can oppose confirmation are those set forth in Section 10 and 11.

The only exception might be if the award interprets the contract in a way that causes it to violate a well-defined and explicit public policy, or if the remedy the arbitrator awards violates the criminal law or requires one of the parties to do so. For example, one would not expect a court to enter judgment on an award that purported to authorize the prevailing party to inflict bodily harm on the losing party or vice-versa. That principle is simply an application of the contract-law rule that courts will not enforce contracts that violate public policy. See, generally, W. R. Grace & Co. v. Rubber Workers, 461 U.S. 757, 766 (1983); United Food & Commercial Workers Int’l Union v. King Soopers, 743 F.3d 1310, 1315 (10th Cir. 2014).

Continue Reading »

Belz v. Morgan Stanley Smith Barney: Does a Petition to Vacate an FAA-Governed Award Timely Commenced in State Court Become Time-Barred Simply Because it is Removed to Federal Court?

April 6th, 2014 Arbitration Practice and Procedure, FAA Preemption of State Law, Grounds for Vacatur, Nuts & Bolts: Arbitration, Practice and Procedure, State Arbitration Law, Statute of Limitations, United States Supreme Court Comments Off on Belz v. Morgan Stanley Smith Barney: Does a Petition to Vacate an FAA-Governed Award Timely Commenced in State Court Become Time-Barred Simply Because it is Removed to Federal Court?

Part I

Belz v. Morgan Stanley Smith Barney, LLC, No. 3:13-cv-636-J-34 (MCR), slip op. (M.D. Fla. March 5, 2014), is one of those deceptively complex cases. The petitioner, successor trustee of a family trust (the “Trustee”), timely commenced under the Florida Arbitration Code (the “FAC”) in Florida state court  a petition to vacate an arbitration award by filing it within the 90-day period allowed by state law, but did not serve it until a few days after the three-month period required to vacate an award under Section 10 of the Federal Arbitration Act (the “FAA”) had elapsed. Compare Fla. Stat. §§ 682.13(2) & 682.17 with 9 U.S.C. §§ 6, 10 & 12.[1]. The petition requested an order vacating the award under both the FAA and the FAC, which allows service to be effected after expiration of the 90-day filing deadline. See Fla. Stat. §§ 682.13 & 682.17.

The respondent, a well-known securities broker-dealer (the “Broker-Dealer”), removed the case to the United States District Court for the Middle District of Florida based on the court’s diversity jurisdiction. In federal court the Broker-Dealer argued that the petition was time-barred because service was not effected within the FAA Section 12’s three-month deadline. The district court agreed and dismissed the petition as time-barred.

The district court apparently thought that, once a court determines that an arbitration agreement falls within the scope of the FAA, all of its provisions—whether substantive, procedural or a combination of the two—supersede their state law counterparts if they conflict in any way with them, irrespective of whether the conflict frustrates the purposes and objectives of the FAA. The court also seems to have thought that the state of Florida could not, independently from the FAA, declare an arbitration agreement falling under the FAA to be valid, irrevocable and enforceable under Florida substantive arbitration law, and enforce that arbitration agreement through Florida’s own statutory, summary procedures that are, for the most part, identical to those provided by the FAA, and, in any event, do not frustrate the purposes and objectives of the FAA.

Belz is deceptively complex because at first glance the case seems relatively straightforward: (a) the FAA applied to the arbitration agreement and award; (b) the FAA’s three-month statute of limitations for vacating an award is not tolled until service is effected; (c) the court determined service was not timely under the FAA; (d) the FAC’s statute of limitations, which requires only that an application for vacatur be filed within the 90-day period, did not apply because the FAA applied; and (d) therefore, the application to vacate was untimely.

But in Belz there was an “elephant in the room,” albeit one well-camouflaged by its inherent complexity: federalism—a principle reflected in the text of the FAA, in the Continue Reading »

Oxford Health Plans LLC v. Sutter—SCOTUS Reaffirms FAA Section 10(a)(4) Manifest Disregard of the Agreement Outcome Review Standard and Elaborates on Its Scope: Part I

July 19th, 2013 Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Class Action Arbitration, Consolidation of Arbitration Proceedings, Contract Interpretation, Grounds for Vacatur, Judicial Review of Arbitration Awards, Labor Arbitration, United States Supreme Court Comments Off on Oxford Health Plans LLC v. Sutter—SCOTUS Reaffirms FAA Section 10(a)(4) Manifest Disregard of the Agreement Outcome Review Standard and Elaborates on Its Scope: Part I

On June 10, 2013 the U.S. Supreme Court in Oxford Health Plans LLC v. Sutter, No. 12-135, slip op. at 4-5 (U.S. June 10, 2013) (Kagan, J.), unanimously reaffirmed that Section 10(a)(4) of the FAA authorizes courts to vacate awards that are not even arguably based on an interpretation of the parties’ agreement.

While the Court broke no new ground, Associate Justice Elena Kagan’s well-written opinion—together with Associate Justice Samuel A. Alito’s opinion in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010)—defines in fairly clear terms the scope of contract-based judicial review Section 10(a)(4) authorizes. Justice Kagan’s opinion raises not only some issues specific to class and consolidated arbitration, but also some relevant to Federal Arbitration Act (“FAA”)-governed arbitration in general. Continue Reading »

The Agency Model of Arbitral Power: University of Chicago Law School Law and Economics Professor Tom Ginsburg Explains Why Deferential Review Does Not Necessarily Make Arbitration an Effective Substitute for Adjudication

April 7th, 2010 Authority of Arbitrators, Awards, Grounds for Vacatur, United States Court of Appeals for the Seventh Circuit, United States Supreme Court Comments Off on The Agency Model of Arbitral Power: University of Chicago Law School Law and Economics Professor Tom Ginsburg Explains Why Deferential Review Does Not Necessarily Make Arbitration an Effective Substitute for Adjudication

In George Watts & Son v. Tiffany & Co., 248 F.3d 577 (7th Cir. 2001), then Circuit Judge (now Chief Judge) Frank H. Easterbrook of the United States Court of Appeals for the Seventh Circuit said:   “What the parties may do, the arbitrator as their mutual agent may do.”  248 F.3d at 581.   Chief Judge Easterbrook made this statement in the course of defining the “manifest disregard” standard of review.  Applying his “agency model,” he concluded that “the ‘manifest disregard’ principle is limited to two possibilities:  an arbitral order requiring the parties to violate the law.  .  . , and an arbitral order that does not adhere to the legal principles specified by contract, and hence unenforceable under § 10(a)(4).”   Id. 

Chief Judge Easterbrook’s “agency” model of arbitral authority is instructive.  Just as agents derive their authority by the consent of the principal (subject to the rules of apparent and implied authority), arbitrators derive their authority from the parties via the arbitration agreement and the submission.  Subject to any restrictions in the arbitration agreement, the arbitrators’ powers to resolve a dispute under a broad arbitration agreement are arguably co-extensive with those of the parties that appointed them. 

But the model is not perfect.  First, unlike agents, arbitrators are not subject to the control of their principals and owe them no fiduciary duties.  Second, analogizing arbitrators as agents of the parties in the way Chief Judge Easterbrook does effectively empowers arbitrators not only to decide cases, but to negotiate settlements that the parties could have entered into.  It therefore does not require arbitrators to even arguably interpret the contract or apply the law:  As long as the arbitrators do not require the parties to violate the law, and as long as the arbitrators are at least arguably faithful to the parties’ expressed choice-of-law, if any, they can reach whatever decision they wish, whether by application of facts to legal norms or by a compromise settlement that may or may not be rooted in the parties’ agreement.    That arguably does not comport with the parties’ presumed, legitimate expectations.  For the arbitrator’s job is to decide cases; settlement is a matter for the parties, and should be subject to the parties’ control. 

University of Chicago Law School Professor Tom Ginsburg has written an excellent white paper that argues that the deferential standard of review espoused by Watts and other courts does not necessarily make arbitration an attractive substitute for litigation.  See Tom Ginsburg, John M. Olin Law & Economics Working Paper No. 502 (2d Series), The Arbitrator as Agent: Why Deferential Review Is Not Always Pro-Arbitration  (Dec. 2009) (copy available here).  He argues that a more searching standard of review would make the market for arbitrators more transparent, and thus more effective.  He advocates using Chief Judge Easterbrook’s agency model as an analytical framework for allowing parties to choose whether they prefer a very deferential standard of review, like that prescribed in Watts; something akin to de novo review, like that available in litigation; or something in between the two.  Professor Ginsburg is in the process of publishing in the University of Chicago Law Review an article based on his white paper. Continue Reading »

Fourth Circuit Vacates Securities Arbitration Award: Raymond James Financial Services, Inc. v. Bishop

March 2nd, 2010 Arbitrability, Authority of Arbitrators, Awards, Grounds for Vacatur, Securities Arbitration, United States Court of Appeals for the Fourth Circuit 1 Comment »

I.  Introduction

Arbitration is not a perfect process for resolving disputes, but neither is court adjudication.  One advantage of court adjudication is a fairly rigorous standard of review:  appellate courts generally review the trial court’s factual findings for clear error and legal conclusions de novo.  By contrast, courts review arbitration awards under the very deferential standards of review prescribed by Sections 10 and 11 of the Federal Arbitration Act.  The trade-off is one of informality, speed and reduced expense for a heightened risk that the decision maker will commit unreviewable legal and factual errors — even some pretty egregious ones.   

But every so often an arbitration award can be so far off the mark that one of the parties is deprived of the benefit of the bargain it made when it agreed to arbitrate.  These are not cases where the arbitrators merely did a shoddy job, but ones where the arbitrators did not do the job the parties asked them to do.  These are the cases that Section 10(a)(4) of the Federal Arbitration Act was designed to address:  ones where “the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final award on the subject matter was not made.” 

Today we take a brief look at Raymond James Financial Serv., Inc. v. Bishop, ___ F.3d ___, No. 09-1038, slip op. (4th Cir. Feb. 22, 2010), a recent example of one of those rare cases.  And we’ll see how how confusion about the scope of Section 10(a)(4) resulting – quite unintentionally – from the United States Supreme Court decision in Hall Street Assoc., L.L.C. v. Mattel , Inc, 552 U.S. ___, slip op. at __ (March 25, 2008) apparently motivated the United States Court of Appeals for the Fourth Circuit to decide the case solely on the ground that the arbitrators were not authorized to rule on the claim on which they admittedly based their award.  (See, generally, “Hall Street Meets Pearl Street: Stolt-Nielsen and the Federal Arbitration Act’s New Section 10(a)(4).”)

The Court reached the right result, but its decision is of limited utility in future cases.  For under many broad arbitration agreements and submissions the arbitrators have authority to rule on pretty much any claim that is related to the subject matter of the  parties’ dispute.  Abitrators may have the authority to resolve a claim, but may do so in a way that has not even a barely colorable justification under the law and facts.   

We would have liked to see the Court rule not only on the authority issue, but also on two other grounds relied upon by the district court:  manifest disregard of the law and the award’s failure to “draw its essence” from the parties’ agreements.  As we have said before, we believe that those grounds are statutorily permitted by Section 10(a)(4), and that they provide a useful safety valve for addressing those (thankfully) rare cases where the arbitrators resolve a dispute within the scope of their authority, but do so in a way that completely deprives one of the parties of the benefit of its arbitration agreement.    Continue Reading »

SCOTUS Denies Certiorari in All Three Federal Arbitration Act Manifest Disregard Cases Considered at Last Week’s Conference

October 5th, 2009 Awards, Grounds for Vacatur, United States Court of Appeals for the Ninth Circuit, United States Court of Appeals for the Sixth Circuit, United States Supreme Court Comments Off on SCOTUS Denies Certiorari in All Three Federal Arbitration Act Manifest Disregard Cases Considered at Last Week’s Conference

Last week we reported that the United States Supreme Court was considering three petitions for certiorari concerning whether manifest disregard of the law remains a viable ground for vacating or modifying an arbitration award after Hall Street Assoc., L.L.C. v. Mattel , Inc, 552 U.S. ___, slip op. (March 25, 2008) (post here).  Today the Court denied certiorari in all three cases:  The Coffee Beanery, Ltd. v. WW, LLC, 300 Fed. Appx. 415 (6th Cir. 2008) (08-1396);  Grain v. Trinity Health, 551 F.3d 374 (6th Cir. 2008) (08-1446); and Improv West Associates v. Comedy Club, Inc.,  553 F.3d 1277 (9th Cir. ) (08-1529).

Update on Federal Arbitration Act Cases Pending in the United States Supreme Court

September 29th, 2009 Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, United States Court of Appeals for the Ninth Circuit 1 Comment »

Today the United States Supreme Court is considering whether to grant certiorari in three cases that concern whether manifest disregard of the law remains a viable ground for vacating or modifying an arbitration award after Hall Street Assoc., L.L.C. v. Mattel , Inc, 552 U.S. ___, slip op. (March 25, 2008).  The first is The Coffee Beanery, Ltd. v. WW, LLC, 300 Fed. Appx. 415 (6th Cir. 2008), petition for cert. filed May 11, 2009 (08-1396), in which the United States Court of Appeals for the Sixth Circuit held that manifest disregard survived Hall Street as an independent ground for vacatur, and that an award in favor of a franchisor must be vacated because the arbitrator manifestly disregarded Maryland franchise law requiring franchisors to disclose certain types of prior criminal convictions.  The Sixth Circuit also found that the franchisor’s failure to disclose the conviction vitiated the arbitration clause contained in the franchise contract, a holding that seems questionable in light of Buckeye Check Cashing v. Cardegna, 546 U.S. 440, 449 (2006). 

The second case is Grain v. Trinity Health, 551 F.3d 374 (6th Cir. 2008), petition for cert. filed May 19, 2009 (08-1446), in which the Sixth Circuit held that the arbitrators’ failure to enforce the parties’ choice of Michigan law as respects the issue of costs and attorney fees — characterized as manifest disregard of the law — was not a valid ground for modifying an arbitration award under Federal Arbitration Act Section 11.  

The third is Improv West Associates v. Comedy Club, Inc.,  553 F.3d 1277 (9th Cir. ), petition for cert. filed June 8, 2009 (08-1529), in which the United States Court of Appeals for the Ninth Circuit held that manifest disregard of the law remained viable after Hall Street because it fell within the ambit of Federal Arbitration Act Section 10(a)(4), and vacated an award on the ground that the arbitrator’s interpretation of applicable state law was “fundamentally incorrect,” albeit made in good faith. 

The briefs in support of and in opposition to both petitions, as well as the lower court decisions, can be obtained by visiting one of our favorite blogs, the SCOTUSblog, here and  here.  It will be interesting to see whether the United States Supreme Court decides to grant certiorari in any or all of these cases.   

On a related matter, Petitioners’ and amici merits briefs in  Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) can be accessed via the American Bar Association’s website, here.  Respondent’s briefs are due later in October and oral argument has been scheduled for December 9, 2009.  (See Russ Kunkel’s LawMemo Arbitration Blog here).  We have written extensively on Stolt-Nielsen, which concerns whether class arbitration may be imposed on parties whose contracts are silent on that point.  (Posts available here,  here, here, here, here, here, here, here and here.)  

 Finally, we are following the petition for certiorari filed in the American Express Merchants’ Litigation (blogged here), which has not yet come up for conference.   The Amex Merchants’ Litigation concerns whether class arbitration waivers comport with federal antitrust policy. 

We shall keep readers apprised of developments as and when they occur.  .  .  .

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