Manifest Disregard of Law No Longer Grounds to Vacate Arbitration Award
The United States Court of Appeals for the Fifth Circuit recently held that the United States Supreme Court's decision in Hall Street Associates v. Mattel "restricts the grounds for vacatur" of an arbitration award and, thus, "manifest disregard for the law is no longer an indepdendent ground for vacating arbitration awards under the FAA." Consequently, the only bases for setting aside an arbitration award are (1) fraud or corruption in obtaining the award; (2) evident partiality by the arbitrator; (3) misconduct or misbehavior by the arbitrator; and (4) where the arbitrator exceeded its power. See 9 U.S.C. sec. 10(a).
In reaching its conclusion, the Fifth Circuit disagreed with decisions from the Sixth, Second, and Ninth Circuits holding that "manifest disregard" survived the Supreme Court's decision in Hall. The Fifth Circuit noted the Supreme Court's "repeated statements [in Hall] that: 'We hold that the statutory grounds are exclusive.' " As a result, the Fifth Circuit held that "manifest disregard of the law as an independent, nonstatutory ground for setting aside an award, must be abandoned and rejected." The Court also expressly overruled any precedent to the contrary. The Fifth Circuit's opinion in Citigroup Global Markets, Inc. v. Bacon is availble at this link.
