Source: https://www.scotusblog.com/2011/09/the-uncertain-future-of-the-manifest-disregard-doctrine/
Timestamp: 2019-04-25 23:52:24+00:00

Document:
The following contribution to our arbitration symposium is by John Elwood. Mr. Elwood is a partner at Vinson & Elkins in Washington, D.C., specializing in appellate litigation and administrative law, and also teaches the University of Virginia School of Law’s Supreme Court litigation clinic. He served as senior deputy in the Justice Department"™s Office of Legal Counsel from 2005 until 2009 and served as an assistant to the Solicitor General from 2002 until 2005.
In recent years, arbitration has been one of the Supreme Court"™s "evergreen" subjects; the Court always seems to have an arbitration case or two on its docket. The perennial presence of such cases during the last decade reflects both the importance of the subject and the prevalence of such cases in the lower courts, where the volume of arbitration-related litigation has spawned a stream of cases for High Court review. But although the Court devotes particular attention to arbitration, there remains one question it has failed to resolve for several years: the status of "manifest disregard" doctrine in the wake of the Court"™s decision in Hall Street Associates, L.L.C. v. Mattel, Inc. (2008).
While courts have long recognized "manifest disregard" as a ground for vacatur of arbitral awards made under the Federal Arbitration Act (FAA), the phrase appears nowhere in the text of that statute. Rather, it first appeared in dicta in Wilko v. Swan (1953), in which the Court stated that "interpretations of the law by the arbitrators in contrast to manifest disregard are not subject . . . to judicial review for error." While Wilko has since been overruled on other grounds, "manifest disregard" entered the law and was for years widely understood to be a common-law exception to the limited grounds for vacatur of arbitral awards enumerated by the FAA. The doctrine has been understood to allow courts to refuse to enforce awards that reflect "manifest disregard of the law." Courts have struggled to articulate what the standard means. Although there is widespread agreement that it means more than simple legal error, it is still something of an open question how much more "“ whether it is enough that the error is obvious, as some courts have held, or whether the arbitrators engaged in willful defiance of clearly applicable authority.
Hall Street has had the effect of producing profound uncertainty about the state of "manifest disregard" doctrine. In the wake of that decision, court of appeals opinions have tended to fall into three categories, each of them based on disparate comments in Hall Street. First, the Second and Ninth Circuits have taken the position that the "manifest disregard" doctrine continues to have force, although in diminished form as essentially a restatement of FAA statutory standards. The Second Circuit held in Stolt-Nielsen SA v. AnimalFeeds, Int"™l that Hall Street did not "abrogate the "manifest disregard"™ doctrine altogether"; rather, it survived through review under section 10(a)(4) for "when the arbitrators have exceeded their powers." The Ninth Circuit likewise held in Comedy Club, Inc. v. Improv West Assocs. that "manifest disregard" was a species of violation of section10(a)(4).
Second, some courts have suggested or held that the doctrine is no longer valid. The Fifth Circuit emphatically concluded in Citigroup Global Markets Inc. v. Bacon that, in the wake of Hall Street, "manifest disregard of the law as an independent, nonstatutory ground for setting aside an award must be abandoned and rejected." That opinion has been widely regarded as sounding the death-knell of manifest disregard, but a close reading of the opinion suggests the court assiduously avoided taking a position whether the doctrine survives through FAA section 10(a)(4). The Alabama Supreme Court reached a similar conclusion. The Eleventh Circuit essentially followed Bacon in Frazier v. Citifinancial Corp. "“ although that opinion takes a more categorical tone than Bacon in suggesting the doctrine may be dead. Most categorically, the First Circuit "acknowledge[d]" in dicta in Ramos-Santiago v. UPS that after Hall Street, "manifest disregard of the law is not a valid ground for vacating or modifying an arbitral award in cases brought under the [FAA]." And the Eighth Circuit similarly said in Medical Shoppe Int"™l v. Turner Investments that "the claim that the arbitrator disregarded the law, [is] not included among those specifically enumerated in §10 and are therefore not cognizable" under the FAA.
By contrast, the Sixth Circuit "“ admittedly in an unpublished opinion, Coffee Beanery Ltd v. WW L.L.C. "“ has formally adopted the position that Hall Street changes little, and has held that that court will "continue to employ the "manifest disregard"™ standard." The court emphasized the distinction between private contracting parties and courts, noting that "[t]he [Supreme] Court held that the FAA does not allow private parties to supplement by contract the FAA"™s statutory grounds for vacatur of an arbitration award." The Fifth Circuit explicitly rejected Coffee Beanery"™s analysis in Bacon.
Courts and commentators have recognized the confusion and divergence of holdings, and the Third Circuit has repeatedly recognized what it terms a "circuit split" on the availability of "manifest disregard" after Hall Street. The issue is undeniably recurring and important. One scholar estimated in 2009 that "a state or federal court . . . faced this question an average of once a week." Yet the Supreme Court has declined at least four certiorari petitions seeking review of the issue, including petitions filed in the Coffee Beanery and Comedy Club cases.
The Court may have denied review in the past because of concerns that vacatur would have been warranted under one of the FAA"™s statutory grounds (so that the courts"™ recognition of manifest disregard had no effect on the outcome in those cases), because of perceived vehicle problems, or some other reason not apparent from the record. But the Court acknowledged in Stolt-Nielsen S.A. v. AnimalFeeds Int"™l that it is still an open question "whether "manifest disregard"™" survives our decision in Hall Street . . . as an independent ground for review or as a judicial gloss on the enumerated grounds for vacatur set forth at 9 U. S. C. §10." There is a good chance the Court will have to consider that question in the next Term or two.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 §10
 v. 
 v. 
 §10