Opinion ID: 6116344
Heading Depth: 3
Heading Rank: 2

Heading: Manifest Disregard in Utah

Text: ¶30 The Utah Uniform Arbitration Act (UUAA) governs arbitrations under Utah law. See UTAH CODE § 78B-11-101 to -131. Like the FAA, the UUAA sets forth grounds on which a district court must, upon motion, vacate an arbitration award. Id. § 78B-11-124(1). And like the FAA, the UUAA permits a court to vacate an arbitration award when “an arbitrator exceed[s] the arbitrator’s authority.”9 Id. § 78B-11-124(1)(d). _____________________________________________________________ 9 A court may also vacate an arbitration award if: (a) the award was procured by corruption, fraud, or other undue means; (b) there was: (i) evident partiality by an arbitrator appointed as a neutral arbitrator; (ii) corruption by an arbitrator; or (iii) misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding; (c) an arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, (continued . . .) 10 Cite as: 2022 UT 4 Opinion of the Court ¶31 We first acknowledged the connection federal jurisdictions had made between the statutory grounds for vacatur and the manifest disregard standard in Buzas Baseball, Inc. v. Salt Lake Trappers, Inc., 925 P.2d 941 (Utah 1996). In Buzas Baseball, the Trappers appealed the trial court’s modification of an arbitration award. Id. at 946. The trial court’s modification was based, in part, on its conclusion that the arbitrator had manifestly disregarded the law prohibiting double recoveries. Id. at 946, 951. ¶32 We prefaced our analysis by admitting that we addressed the manifest disregard standard “because it was raised by Buzas Baseball and relied upon by the trial court below.” Id. at 951 n.8. And while we applied it to conclude that the trial court had erred in modifying the arbitration award because “nothing in the record establishe[d] that the arbitrators knew of the rule prohibiting double recovery and disregarded it,” id. at 951, we expressly “reserve[d] the issue of whether [the manifest disregard standard] [wa]s recognized in Utah,” id. at 951 n.8. ¶33 We next discussed the manifest disregard standard in Pacific Development, L.C. v. Orton, 2001 UT 36, 23 P.3d 1035. There, a developer appealed the district court’s confirmation of an arbitration award. Id. ¶ 1. The developer alleged, in part, that the arbitrator had “manifestly disregarded the law pertaining to th[e] covenant [of good faith and fair dealing].” Id. ¶ 15. Before addressing each of the developer’s grounds for appeal, we again acknowledged the connection between the manifest disregard standard and section 78B-11-124(1)(d) of the UUAA. Id. ¶ 7 n.3. And we explained that the developer’s argument that the arbitrator had manifestly disregarded the law “turn[ed] on whether the arbitrator [had] exceeded his authority.” Id. We then concluded that “the arbitrator’s decision explicitly addressed the covenant of good faith and fair dealing,” id. ¶ 15, and “[the developer]’s manifest disregard argument simply amount[ed] to a ‘manifest disagreement’ with the arbitrator’s refused to consider evidence material to the controversy, or otherwise conduct the hearing contrary to Section 78B-11-116, . . .; ... (e) there was no agreement to arbitrate, . . .; (f) the arbitration was conducted without proper notice of the initiation of an arbitration . . . . UTAH CODE § 78B-11-124(1)(a)–(c), (e)–(f). 11 AHHMIGO, LLC v. SYNERGY CO. Opinion of the Court findings and final award,” id. (citing Pac. Dev., L.C. v. Orton, 1999 UT App 217, ¶ 16, 982 P.2d 94). And this, we said, did not entitle the developer to reversal. Id. ¶ 16. ¶34 The manifest disregard standard assumed its current form in Westgate Resorts, Ltd. v. Adel, 2016 UT 24, 378 P.3d 93. There, we explained that a district court may vacate an arbitrator’s decision “if the [arbitrator] ‘exceeded [their] authority,’ or if [their] decision demonstrate[d] a manifest disregard of the law.’” Id. ¶ 10 (internal citation omitted). We further explained that while “the ‘manifest disregard’ doctrine derives from the ‘exceeded its authority’ rule, the two entail different standards of review.” Id. The manifest disregard standard, we reasoned, “is an extremely deferential standard,” id. ¶ 11, whereas “we s[aw] no reason to defer to the [arbitration] panel’s construction of the UUAA sections that govern the panel’s own powers,” id. ¶ 11–12. ¶35 We articulated a tripartite test that a court was to employ to decide if an arbitrator had manifestly disregarded her authority: First, the [arbitrator]’s decision must actually be in error. Second, the error “must have been obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator.” Third, the [arbitrator] must have “appreciate[d] the existence of a clearly governing legal principle but decide[d] to ignore or pay no attention to it.” Id. ¶ 11 (third and fourth alterations in original) (citing Buzas Baseball, 925 P.3d at 951). We applied that test to conclude that the arbitration panel had not manifestly disregarded the law. Id. ¶ 26. ¶36 But while we applied the manifest disregard standard in Westgate, we also “recognize[d] there may be issues with the standard’s compatibility with the UUAA.” Id. ¶ 10 n.3. We “render[ed] no decision on the matter,” however, because “the parties [did] not ask[] us to abandon the standard and Westgate’s challenge to the arbitration award fail[ed] even under the manifest disregard standard.” Id. ¶37 In the interest of facilitating discussion in a later case, we note two things about the manifest disregard standard. First, we have never applied the standard to vacate an arbitration award. ¶38 Second, we have been less than clear when we have talked about the link between the manifest disregard standard and the UUAA. 12 Cite as: 2022 UT 4 Opinion of the Court ¶39 In Buzas Baseball, for example, we spoke of the manifest disregard standard as a “judicially created doctrine stemming from the exceeding authority statutory ground.” 925 P.2d at 951 (emphasis added). That if an arbitrator has manifestly disregarded the law, “they can be said to have exceeded their authority.” Id.; see also Pac. Dev., 2001 UT 36, ¶ 7 n.3 (“The contention that an arbitrator has manifestly disregarded the law is a judicially created doctrine derived from the statutory provision that an arbitrator’s decision may be challenged if an arbitrator has exceeded his or her authority.”). ¶40 But in Westgate, we seemed to, at the very least, weaken the connection we had described in Buzas Baseball. In Westgate, we suggested that the manifest disregard standard and section 78B-11124(1)(d) of the UUAA were two separate grounds on which a court might vacate an arbitration award. See 2016 UT 24, ¶ 10. We then really muddied the waters, explaining that the manifest disregard standard “derives from” section 78B-11-124(1)(d) but that each “entail[s] different standards of review.” Id.; see id. ¶ 12–13 (dubbing the manifest disregard standard “an extremely deferential standard” but “see[ing] no reason to defer to the [arbitrator’s] interpretation of th[e] statutes” that govern the arbitrator’s own authority). Under our case law, then, we cannot say whether the manifest disregard standard operates as only a gloss on section 78B-11-124(1)(d) of the UUAA, or whether it is a standalone ground on which a court may vacate an arbitration award. And if it is the latter, we have yet to come across any justification for our decision to add something to the statute that the Legislature did not. See, e.g., Berrett v. Purser & Edwards, 876 P.2d 367, 370 (Utah 1994) (“A cardinal rule of statutory construction is that courts are not to infer substantive terms into the text that are not already there. Rather, the interpretation must be based on the language used, and the court has no power to rewrite the statute to conform to an intention not expressed.”). ¶41 The standard’s murky origins lead us to wonder if perhaps manifest disregard of the law is better thought of as a way of sussing out whether the arbitrator exceeded her authority in a manner that deprived the parties of the benefit of their bargain. ¶42 “Arbitration is a matter of contract law.” Ellsworth v. Am. Arb. Ass’n, 2006 UT 77, ¶ 14, 148 P.3d 983; see also UTAH CODE § 78B11-108(1) (instructing a court to order arbitration if it finds that an enforceable agreement to arbitrate exists). “The parties to the arbitration determine the scope and questions to be resolved during the proceedings.” Buckner v. Kennard, 2004 UT 78, ¶ 18, 99 P.3d 842. 13 AHHMIGO, LLC v. SYNERGY CO. Opinion of the Court And precisely because arbitration is a bargained-for remedy, an arbitrator cannot (manifestly) disregard the boundaries the parties have set for her. To the contrary, “arbitration contracts are to be enforced according to their terms, and . . . in the manner to which the parties have agreed.” Id. ¶43 Fittingly, each of the grounds for vacatur the UUAA provides seems designed to ensure that the parties receive the arbitration they contracted for. For example, a district court can vacate an award if the arbitrator or the arbitration proceeding is corrupt, fraudulent, impartial, or otherwise unfairly prejudicial. See UTAH CODE § 78B-11-124(1)(a)–(f). These grounds all protect against something interfering with a party receiving the neutral arbitration they agreed to in the contract. See Util. Trailer Sales of Salt Lake, Inc. v. Fake, 740 P.2d 1327, 1329 (Utah 1987) (“As a general rule, awards will not be disturbed on account of irregularities or informalities, or because the court does not agree with the award, so long as the proceeding has been fair and honest and the substantial rights of the parties have been respected.”). ¶44 In this context, the manifest disregard standard might be better viewed as a tool to inquire whether the arbitrator deprived the parties of their bargained-for arbitration by disregarding the law that the parties agreed would apply. That is, an arbitrator might manifestly disregard the law if the parties’ contract calls for Utah law, but the arbitrator prefers Colorado law and applies that instead. In that case, the parties did not get what they expected to get when they contracted—the application of Utah law to their dispute. ¶45 At the very least, even our limited application of the manifest disregard standard causes us to view with suspicion a standard that permits a party to ask a district court to vacate an award based upon what is, in essence, an argument that the arbitrator misapplied the law dressed up as an argument that the arbitrator disregarded the law. ¶46 When a party voluntarily agrees to arbitrate, she agrees to forego the protections of a substantive judicial review of the merits of the arbitration decision. A party should not be able to participate in arbitration and then subject the resulting arbitration award to the review it rebuffed in the first place. After all, arbitration is, “[a]t its core, . . . supposed to be an alternative to litigation in a court of law, not a prelude to it.” UNIF. ARB. ACT § 23 cmt. B, 1 (UNIF. L. COMM’N 2000). 14 Cite as: 2022 UT 4 Opinion of the Court