Commercial Litigation and Arbitration

Arbitration — Current State of the Circuit Split Concerning the Viability of Manifest Disregard as Ground for Vacatur

Bangor Gas Company, LLC v. H.Q. Energy Servs., 2012 U.S. App. LEXIS 20218 (1st Cir. Sept. 26, 2012):

[T]his court in the past recognized a common law ground for vacating arbitration awards that are in "manifest disregard of the law," McCarthy v. Citigroup Global Mkts. Inc., 463 F.3d 87, 91 (1st Cir. 2006) (quoting Wonderland Greyhound Park, Inc. v. Autotote Sys., Inc., 274 F.3d 34, 35 (1st Cir. 2001), while limiting this notion primarily to cases where the award conflicts with the plain language of the contract or where "the arbitrator recognized the applicable law, but ignored it." Gupta v. Cisco Sys., Inc., 274 F.3d 1, 3 (1st Cir. 2001).

The manifest-disregard doctrine has been thrown into doubt by Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576, 128 S. Ct. 1396, 170 L. Ed. 2d 254 (2008), where the Supreme Court "h[e]ld that [9 U.S.C. § 10] . . . provide[s] the FAA's exclusive grounds for expedited vacatur." Id. at 584 (emphasis added). This has caused a circuit split,

Footnote 3. Compare Wachovia Sec., LLC v. Brand, 671 F.3d 472, 480 (4th Cir. 2012) (recognizing continuing validity of manifest disregard doctrine), Johnson v. Wells Fargo Home Mortgage, Inc., 635 F.3d 401, 415 n.11 (9th Cir. 2011) (same), Stolt-Nielsen SA v. Animal Feeds Int'l Corp., 548 F.3d 85, 94 (2d Cir. 2008), rev'd on other grounds, 130 S. Ct. 1758, 176 L. Ed. 2d 605 (2010) (same), and Coffee Beanery, Ltd. v. WW, L.L.C., 300 Fed. App'x 415, 418 (6th Cir. 2008)(unpublished opinion) (same), with Frazier v. CitiFinancial Corp.,604 F.3d 1313, 1324 (11th Cir. 2010) (rejecting manifest disregard doctrine as invalid), Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d 349, 350 (5th Cir. 2009) (same), and Crawford Grp., Inc. v. Holekamp, 543 F.3d 971, 976 (8th Cir. 2008) (same).

with this court saying (albeit in dicta) that "manifest disregard of the law is not a valid ground for vacating or modifying an arbitral award in cases brought under the Federal Arbitration Act," Ramos-Santiago v. United Parcel Serv., 524 F.3d 120, 124 n.3 (1st Cir. 2008).

Even if the manifest-disregard doctrine were assumed to survive and were applied in this case, the award neither conflicts with the plain language of the Agreement nor did the arbitrators [*14] recognize the applicable law but ignore it.

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