As I noted back in June (here), a circuit split exists over whether, under the Federal Arbitration Act, courts may vacate arbitration awards where an arbitrator has manifestly disregarded the law (e.g., an award based on a coin flip rather than applicable case law). Last week Judge Michael Boudin, writing for the First Circuit in Bangor Gas Co., LLC v. H.Q. Energy Services U.S., noted that the courts of appeals are divided on this issue:
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,3 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).
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 App'x 415, 418 (6th Cir. 2008) (unpublished opinion) (same), with Frazier v. CitiFinancial Corp., 604 F.3d 1313, 1324 (11th Cir. 2010) (rejecting manifest disregard doctrine as invalid), Citigroup Global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).
No. 12-1386 (1st Cir. Sept. 26, 2012). As such, the court concluded, "[e]ven 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 recognize the applicable law but ignore it."[*Image courtesy of awrose on flickr.]