Opinion ID: 4186067
Heading Depth: 2
Heading Rank: 2

Heading: Merits: Review of the Arbitrator's Decision

Text: While § 10 of the FAA provides the grounds upon which an arbitration award may be vacated, we previously stated that the common law doctrine of manifest disregard of the law, which is not included in § 10, allows courts a very limited power to review arbitration awards outside of section 10 [of the FAA]. Advest, Inc. v. McCarthy, 914 F.2d 6, 8 (1st Cir. 1990) (citation omitted). However, the Supreme Court, in Hall Street Associates, LLC v. Mattel, Inc., 552 U.S. 576 (2008), cast doubt on the continued existence of manifest disregard of the law as a ground for vacatur, and this court stated just this year that the doctrine remains only as a judicial gloss. Ortiz-Espinosa v. BBVA Sec. of P.R., Inc., 852 F.3d 36, 46 (1st Cir. 2017). Even so, this court has yet to decide whether manifest disregard of the law remains as a ground for vacatur of arbitration awards, and no manifest disregard -10- of the law occurred in the present case. We can therefore assume the validity of the doctrine and proceed to apply it. [A] successful challenge to an arbitration award, apart from section 10, depends upon the challenger's ability to show that the award is (1) unfounded in reason and fact; (2) based on reasoning so palpably faulty that no judge, or group of judges, ever could conceivably have made such a ruling; or (3) mistakenly based on a crucial assumption that is concededly a non-fact. McCarthy v. Citigroup Glob. Mkts., Inc., 463 F.3d 87, 91 (1st Cir. 2006)(internal citations omitted). No manifest disregard of the law occurred in this case. Applied argues that the arbitrator failed to apply Mastrobuono, which Applied believes should govern this dispute, and that, in doing so, the arbitrator disregarded the intentions of the parties. In fact, as discussed in greater detail above, the arbitrator carefully distinguished the dispute before him from Mastrobuono, principally on the grounds that Mastrobuono did not involve the issue of whether a dispute could be arbitrated as a matter of law -- whereas the dispute before him involved exactly that issue. To resolve whether the dispute before him could be arbitrated as a matter of law, the arbitrator carefully applied the framework of American Bankers, and determined that, because the McCarranFerguson Act applied, the NUAA reverse-preempted the FAA. -11- Therefore, the arbitrator reasoned, the dispute was not arbitrable as a matter of law, and the parties' intentions did not govern. We do not determine whether the arbitrator's decision was correct, because courts are not in the business of hear[ing] claims of factual or legal error by an arbitrator or to consider the merits of an award. Poland Spring Corp. v. United Food & Commercial Workers Int'l Union, Local 1445, 314 F.3d 29, 33 (1st Cir. 2002). However, the arbitrator's reasoning and conclusions are at the very least colorable. Even if we were to assume, for the sake of argument, that the arbitrator's legal conclusions were incorrect, his award plainly was not (1) unfounded in reason and fact; (2) based on reasoning so palpably faulty that no judge, or group of judges, ever could conceivably have made such a ruling.5 McCarthy, 463 F.3d at 91. Thus, no manifest disregard of the law occurred. Applied also argues that the arbitrator exceeded his powers. See 9 U.S.C. § 10(a)(4). To start, it is difficult to see how the arbitrator could exceed his powers by deciding precisely the question the district court, at Applied's request, authorized him to decide -- whether the dispute was arbitrable. 5 Applied has not argued that the arbitrator's award was mistakenly based on a crucial assumption that is concededly a non-fact. McCarthy, 463 F.3d at 91. -12- In any event, Applied here merely reprises the arguments it made in its attempt to show that the arbitrator manifestly disregarded the law. We have already rejected those arguments, because the arbitrator produced a well-reasoned award. The arbitrator therefore did not exceed his powers.