VIP Mortgage: Introduction
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.
Let’s take a closer look.…
Background and Procedural History
Jennifer Gates (the “award defender”) worked as a loan officer for VIP Mortgage, the award challenger. After leaving the company, she brought wage claims in arbitration. VIP Mortgage asserted counterclaims, which were later settled by a stipulation that each side would bear its own attorneys’ fees and costs associated with the counterclaims. The arbitrator ultimately issued a final award in Gates’s favor, including overtime damages and attorneys’ fees. VIP petitioned the United States District Court for the District of Arizona to vacate the award, but the district court denied vacatur and confirmed the award. The award challenger appealed. VIP Mortgage, slip op. at 6–7.
VIP Mortgage: Principal Issue and Conclusion
Before the Court was whether the district court should have vacated the award under the “legally dispositive facts” doctrine under the circumstances of this case even though the parties did not argue the stipulation was relevant to the attorneys’ fees issue. The Court said the answer was “no,” the district court properly confirmed the award. VIP Mortgage, slip op. at 7–11.
VIP Mortgage Court’s Reasoning
The Ninth Circuit explained that the “legally dispositive fact” doctrine is a very narrow exception to the rule that an arbitrator’s factfinding is beyond judicial review. To vacate on this ground, the challenger must show (1) an outcome-determinative factual error and (2) that the fact was “so obvious and undisputed that the arbitrator must have known about it when she decided the legal issue.” The factual error must also have been “so critical, obvious, and intentional that it amounted to manifestly disregarding the law.” VIP Mortgage, slip op. at 9–10.
There was no question that the alleged error—failing to give effect to the fee stipulation—was legally dispositive. Had the stipulation been applied to the later fee motion, the arbitrator “would have ruled for VIP on this question.” VIP Mortgage, slip op. at 10.
But VIP could not satisfy prong two: the record did not establish that the arbitrator knew about (and then ignored) the stipulation when she decided the later fee motion. The opinion instead reads like a “preservation-of-the record” case—more than a year had passed, and neither party reminded the arbitrator of the stipulation in the fee briefing or argument. VIP Mortgage, slip op. at 10–11.
Discussion
In the author’s view, the case was correctly decided on the record the parties made. It also functions as a cautionary tale: if a stipulation or other contract term is truly outcome-determinative, it should be argued as such at the moment it matters, or the “dispositive facts” doctrine—or any other iteration of manifest disregard of the agreement or manifest disregard of the law—will likely remain out of reach.
The Ninth Circuit describes the “legally dispositive fact” theory as analogous to “manifest disregard of law.” VIP Mortgage, slip op. at 9–10. In this case, it is also fair to describe the doctrine as a form of “manifest disregard of the contract” (or “manifest disregard of the agreement”)—because the stipulation was part of the parties’ arbitration contract and, if applied, would have foreclosed the fee award on the counterclaims.
This case is reminiscent of Stolt-Nielsen. There, the Supreme Court vacated an award after the arbitral panel imposed class arbitration despite the parties’ stipulation that they had reached “no agreement” on that issue. Stolt-Nielsen, 559 U.S. at 668–69. The Court stressed that “a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so,” and it found no “conceivable” contractual basis where the parties stipulated that they had reached no agreement on the issue. Id. at 684.
VIP Mortgage presents as a Stolt-Nielsen-type problem with a twist: in Stolt-Nielsen the stipulation was dispositive of the merits, and the arbitrators’ disregard of the stipulation turned out to be dispositive of the challenging party’s motion to vacate. The arbitrators were informed of the parties’ stipulation but proceeded anyway. See id. at 668–69, 684.
Had VIP squarely argued the stipulation and its dispositive effect to the arbitrator, the outcome likely would have been different. But neither party did so, and that omission proved dispositive on vacatur. VIP Mortgage, slip op. at 10–11.
Note: The Ninth Circuit also issued an unpublished, nonprecedential opinion in VIP Mortgage, which addressed other issues. See here.
Contacting the Author
If you have any questions about this article, arbitration, arbitration-law, or 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 trial and appellate court arbitration-related litigation. A former BigLaw partner, he has 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.
This blog features links to several arbitration-related videos and webinars in which Mr. Loree appears.
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Tags: Attorney's Fees, Exceeded Powers, Exceeding Powers, FAA § 10(a)(4), Gates, legally dispositive fact, Manifest Disregard, Ninth Circuit, Oxford Health, stipulation, Stolt-Nielsen, Vacatur, VIP Mortgage
