Commercial Litigation and Arbitration

Arbitration — “Manifest Disregard” Survives Hall Street — Ninth Circuit Joins Second

From Comedy Club, Inc. v. Improv West Assocs., 2009 U.S. App. LEXIS 1634 (9th Cir. Jan. 29, 2009):

*** We determine that Hall Street Associates does not undermine our prior precedent, Kyocera Corp. v. Prudential-Bache T. Servs., 341 F.3d 987 (9th Cir. 2003) (en banc). As a result, in this circuit, an arbitrator's manifest disregard of the law remains a valid ground for vacatur of an arbitration award under § 10(a)(4) of the Federal Arbitration Act. ***


We have already determined that the manifest disregard ground for vacatur is shorthand for a statutory ground under the FAA, specifically 9 U.S.C. § 10(a)(4), which states that the court may vacate "where the arbitrators exceeded their powers." Kyocera Corp. v. Prudential-Bache T Servs., 341 F.3d 987, 997 (9th Cir. 2003) (en banc) (holding that "arbitrators 'exceed their powers' . . . when the award is 'completely irrational,' or exhibits a 'manifest disregard of law' ") (citations omitted). The Supreme Court did not reach the question of whether the manifest disregard of the law doctrine fits within §§ 10 or 11 of the FAA. Hall Street Associates, 128 S. Ct. at 1404. Instead, it listed several possible readings of the doctrine, including our own. Id. ("Or, as some courts have thought, 'manifest disregard' may have been shorthand for §10(a)(3) or § 10(a)(4), the subsections authorizing vacatur when the arbitrators were 'guilty of misconduct' or 'exceeded their powers.'") (citing Kyocera, 341 F.3d at 997). We cannot say that Hall Street Associates is "clearly irreconcilable" with Kyocera and thus we are bound by our prior precedent. See Miller v. Gammie, 335 F.3d 889, 900 (9th Cir. 2003) (en banc). Therefore, we conclude that, after Hall Street Associates, manifest disregard of the law remains a valid ground for vacatur because it is a part of § 10(a)(4). We note that we join the Second Circuit in this interpretation of Hall Street Associates. Stolt-Nielsen Transportation,548 F.3d 85, *27 (2d Cir. 2008). But see Ramos-Santiago v. UPS, 524 F.3d 120, 124 n.3 (1st Cir. 2004).

We have stated that for an arbitrator's award to be in manifest disregard of the law, "[i]t must be clear from the record that the arbitrator[ ] recognized the applicable law and then ignored it." Mich. Mut. Ins. Co. v. Unigard Sec. Ins. Co., 44 F.3d 826, 832 (9th Cir. 1995).

Share this article:


Recent Posts