Commercial Litigation and Arbitration

Arbitration — Right to Appeal from Confirmation Subsumes Right to Appeal from Refusal to Modify Award — “Manifest Disregard” Is Not a Ground to Modify

From Grain v. Trinity Health, 551 F.3d 374 (6th Cir. Dec. 24, 2008):

[Right to Appeal Unmodified Award.] Grain and Barnes filed this action under the Federal Arbitration Act, seeking to confirm the arbitrators' decision in part (by upholding their liability ruling) and seeking to modify the arbitrators' decision in part (by increasing the award from $ 1.6 million to roughly $ 3.2 million). Although the Act permits a district court to grant both forms of relief, 9 U.S.C. §§ 9, 10, the court in this instance granted just one of them: It granted the couple's request to confirm the liability ruling but denied their request to modify the damages award. All of this resulted in a district-court order "confirming . . . an award," which is precisely what § 16(a)(1)(D) permits a disappointed party, even a partly disappointed party, to appeal. Nothing about this provision of the Act, or anything else in the Act, indicates that a party to a district-court proceeding under the Act must challenge all of a district court's confirmation decision, as opposed to just some of it, in order to file an appeal.

The Act, it is true, directly authorizes appeals from district-court orders that "modify[]" arbitration awards, 9 U.S.C. § 16(a)(1)(E), and yet does not directly say that an unsuccessful party may appeal an "unmodified" award or a "denied modification request." But this is of no moment because an "unmodified" award frequently will become a "confirm[ed]" award, as indeed happened here. Jurisdiction exists to review the district court's decision.


[Mathematical Miscalculation.] Grain and Barnes claim that the award must be modified because there was "an evident material miscalculation of figures." 9 U.S.C. § 11(a)…. By its terms, "an evident . . . miscalculation of figures" concerns a computational error in determining the total amount of an award — what the Fourth Circuit calls a "mathematical error appear[ing] on the face of the award." … No such error appears on the face of the award, and Grain and Barnes have not pointed to any such error. Instead of complaining that the arbitrators made an obvious numerical gaffe in computing the total award, Grain and Barnes argue that the arbitrators made a mistake on the merits when they refereed a dispute between the parties over the appropriate start and stop dates for calculating the interest award. Whatever else such an alleged error may be, it is not "an evident material miscalculation of figures." …

[Imperfect in Form.] Grain and Barnes face a similar problem in contending that the award was "imperfect in matter of form not affecting the merits of the controversy," 9 U.S.C. § 11(c), on the theory that it did not include a sufficient amount of attorneys' fees. Here, too, we have a complaint about a merits dispute, and here, too, we have a provision that deals with a process-driven problem. An award that is "imperfect in matter of form," as these terms suggest, is one that suffers from a scrivener's error or that otherwise does not deliver on the arbitrator's stated purpose in granting relief. ***

Grain and Barnes cite no case--and we can locate none--in which the outcome of an arbitrator's reasoned decision regarding the appropriate amount of an attorneys' fees award is viewed as a "matter of form." ***

[Limitations of Manifest Disregard.] Grain and Barnes principally argue that their award should be doubled, not because it implicates one of the enumerated grounds for modifying an award, but because it turned on a "manifest disregard of the law." This theory, however, appears nowhere in § 11, and the Supreme Court has recently explained that the enumerated grounds in §§ 10 and 11 provide the "exclusive" grounds for obtaining relief from an arbitration decision. Hall St. , 128 S. Ct. at 1406. To the extent that "manifest disregard" is "shorthand" for the grounds enumerated in § 11, as the Supreme Court suggested might be the case for some of the grounds listed in § 10, id. at 1404, that does Grain and Barnes no good. As we have shown, the enumerated grounds upon which they rely simply do not apply to their merits-based complaints about the award.

It is true that we have said that "manifest disregard of the law" may supply a basis for vacating an award, at times suggesting that such review is a "judicially created" supplement to the enumerated forms of FAA relief. See, e.g., Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros, 70 F.3d 418, 421 (6th Cir. 1995). Hall Street's reference to the "exclusive" statutory grounds for obtaining relief casts some doubt on the continuing vitality of that theory. But, either way, we have used the "manifest disregard" standard only to vacate arbitration awards, not to modify them. As we held in NCR Corp. v. Sac-Co, Inc. , "[a] court's power to modify an arbitration award is confined to the grounds specified in [FAA] § 11," 43 F.3d 1076, 1080 (6th Cir. 1995), which do not include "manifest disregard of law." See Thomas H. Oehmke, Commercial Arbitration § 132:1 (2008); cf. Major League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 509-11, 121 S. Ct. 1724, 149 L. Ed. 2d 740 (2001) (noting that, in the labor arbitration context, neither procedural misconduct nor irrational findings by an arbitrator will justify a court's reformation of the arbitration of the award because the appropriate remedy in both situations is to remand the case for further arbitration).

Grain and Barnes claim that we have repudiated the holding of NCR, but that is an overstatement. The two cited cases deal only with a court's power to vacate awards based on the "manifest disregard" standard, and neither one contains even a kernel of dicta supporting this theory. See Dawahare v. Spencer, 210 F.3d 666, 669 (6th Cir. 2000); Jaros, 70 F.3d at 421. Other cases, it is true, do contain dicta suggesting that a reviewing court may vacate or modify an arbitration award based on manifest disregard. But nothing turned on these casual remarks. In two cases, we noted in passing that an award may be modified based on manifest disregard, despite the fact that the parties were seeking only vacatur, not modification. See Elec. Data Sys. Corp. v. Donelson, 473 F.3d 684, 686, 691 (6th Cir. 2007); Buchignani v. Vining-Sparks IBG, No. 98-6692, 2000 U.S. App. LEXIS 3520, 2000 WL 263344, at *1-2 (6th Cir. 2000). Another case made a similar comment, without indicating that modification had been sought below and without concluding that modification was warranted. See Legair v. Circuit City Stores, Inc. , 213 F. App'x 436, 439 (6th Cir. 2007). By contrast, the vast majority of our decisions applying the manifest-disregard standard do so only to determine whether vacatur is an appropriate remedy. See, e.g., Coffee Beanery, Ltd. v. WW, L.L.C. , No. 07-1830, 2008 U.S. App. LEXIS 23645, 2008 WL 4899478, at *3 (6th Cir. Nov. 14, 2008); Donelson, 473 F.3d at 686, 691; Jaros, 70 F.3d at 421; Anaconda Co. v. Dist. Lodge No. 27, Int'l Ass'n of Machinists, 693 F.2d 35, 37-38 (6th Cir. 1982). NCR remains the law of this circuit and prohibits modifying an award based on an alleged "manifest disregard" of law.

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