Arbitration — Is Manifest Disregard a Permissible Ground to Overturn an Award under the FAA? — Circuit Split — If So, It Requires More Than Legal Error — Arbitrator Must Appreciate & Ignore Clearly Governing Legal Principle
Global Liquidity Partners, LLC v. Wegher, 2016 U.S. Dist. LEXIS 165427 (D.N.J. Nov. 30, 2016):
C. Manifest Disregard of the Law under 10(a)(4)
Respondents bring their manifest disregard for the law assertion under 9 U.S.C. § 10(a)(4). Courts vary in their interpretation of the standard. See Hall St. Assocs., LLC v. Mattel, Inc., 552 U.S. 576, 585 (2008) ("Maybe the term 'manifest disregard' [means] to name a new ground for review, but maybe it merely refer[s] to the § 10 grounds collectively, rather than adding to them. . . . Or, as some courts have thought, 'manifest disregard' may have been shorthand for §10(a)(3) or § 10(a)(4)."). The Third Circuit has declined to determine whether the manifest disregard for the law standard has survived the Supreme Court's decision in Hall Street Associates. See Whitehead v. Pullman Grp., LLC, 811 F.3d 116, 120 (3d Cir. 2016) ("Whether [the manifest disregard of the law] standard survived the Supreme Court's conclusion in Mattel . . . is an open question. A circuit split has since developed, and this Court has not yet weighed-in. We decline the opportunity to do so now."). Assuming the standard persists, it "requires more than legal error. [Instead], the arbitrator's [*14] decision 'must fly in the face of clearly established legal precedent,' such as where an arbitrator 'appreciates the existence of a clearly governing legal principle but decides to ignore or pay no attention to it.'" Id. at 121 (quoting Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 933 (2d Cir. 1986)).
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