Reverse and Render : Texas Appellate Lawyer & Attorney : Cowles & Thompson Law Firm : Court of Appeals, Texas Supreme Court

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.  

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The Dallas Court of Appeals recently held that a provision calling for application of the Texas General Arbitration Act necessarily excludes application of the Federal Arbitration Act.  First, the Court held that because the motion to abate was made under  the FAA, the Court had jurisdiction to review the trial court's order by mandamus.  Next, the Court acknowledged the Texas Supreme Court's test that a general choice of law clause will not be read to exclude federal law unless the clause "specifically excludes the application of federal law."  Third, the Court acknowledged that the FAA generally controls transactions involving interstate commerce.  Lastly, the Court held that the parties excluded application of federal law by agreeing that the Texas General Arbitration Act applied.  The Court noted that a general choice of law provision does not specifically exclude  federal law because "the FAA was part of the substantive law of Texas."  Nevertheless, by naming the Texas Act, the parties excluded the FAA.  The Court's opinion in In re Olshan Foundation Repair Co., L.L.C. can be found at this link.

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