Opinion ID: 6116344
Heading Depth: 3
Heading Rank: 1

Heading: The Split on the (Hall) Street

Text: ¶25 The FAA governs the federal arbitration process. See 9 U.S.C. §§ 1–16. “Congress enacted the FAA to replace judicial indisposition to arbitration with a ‘national policy favoring [it] and plac[ing] arbitration agreements on equal footing with all other contracts.’” Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 581 (2008) (alterations in original) (citation omitted). In line with this policy, the FAA specifies grounds on which a U.S. district court may, upon motion, vacate an arbitration award. 9 U.S.C. § 10(a). One such ground exists “where the arbitrator[] exceed[s] their powers.” Id. § 10(a)(4).8 _____________________________________________________________ 7 We could not confirm the existence of the stipulation in the record. And while we recognize that this may be the product of the limited record an arbitration proceeding may generate, we also recognize that it may be because, as Synergy claims, no such stipulation occurred. 8 Other grounds include:
fraud, or undue means; (continued . . .) 8 Cite as: 2022 UT 4 Opinion of the Court ¶26 In Wilko v. Swan, the United States Supreme Court seemed to add to the statutory grounds for vacatur. 346 U.S. 427 (1953), overruled on other grounds by Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477 (1989). The Court stated, albeit in dicta, that “the interpretations of the law by the arbitrators in contrast to manifest disregard are not subject, in the federal courts, to judicial review for error in interpretation.” Id. at 436–37 (emphasis added). After Wilko, each of the circuit courts eventually recognized “manifest disregard [of the law]” as either an implicit or nonstatutory ground for vacatur under the FAA. See Coffee Beanery, Ltd. v. WW, L.L.C., 300 Fed. Appx. 415, 419 (6th Cir. 2008) (listing cases). ¶27 The U.S. Supreme Court later acknowledged the “vagueness of Wilko’s phrasing” in Hall Street, 552 U.S. at 585. But the Court’s explanation was not the tonic needed to cure the vagueness. The Court pontificated that, Maybe the term “manifest disregard” was meant to name a new ground for review, but maybe it merely referred to the [FAA] grounds [for vacatur] collectively, rather than adding to them. Or, as some courts have thought, “manifest disregard” may have been shorthand for . . . the paragraphs authorizing vacatur when the arbitrators were “guilty of misconduct” or “exceeded their powers.” Id. And while Hall Street refused to read Wilko to allow parties to contractually expand the grounds for vacatur under the FAA, which it considered “exclusive,” it ultimately declined to determine whether those grounds could be expanded judicially. Id. at 585–87; see also Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 672 n.3 (2010) (“We do not decide whether ‘“manifest disregard”’ survives our decision in [Hall Street] as an independent ground for (2) where there was evident partiality or corruption in the arbitrators . . .; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, . . . or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior . . .; or (4) where the arbitrators . . . so imperfectly executed [their powers] that a mutual, final, and definite award upon the subject matter submitted was not made. 9 U.S.C. § 10(a)(1)–(4). 9 AHHMIGO, LLC v. SYNERGY CO. Opinion of the Court review or as a judicial gloss on the enumerated grounds for vacatur set forth [in the FAA].”). ¶28 The question Hall Street left unanswered created a split among jurisdictions as to whether the manifest disregard standard remains a viable ground for vacatur. Some jurisdictions have read Hall Street to confine the grounds for vacatur to only those specifically enumerated in the statute. See, e.g., Med. Shoppe Int’l, Inc. v. Turner Invs., Inc., 614 F.3d 485, 489 (8th Cir. 2010); Frazier v. CitiFinancial Corp., LLC, 604 F.3d 1313, 1324 (11th Cir. 2010). ¶29 Others have maintained the standard’s viability. Those that do generally fall into two camps. The first seems to treat the manifest disregard standard as a nonstatutory, standalone ground for vacatur. See Coffee Beanery, 300 Fed. Appx. at 418–19. And the second sees the standard as a judicial gloss on the court’s statutorilygranted authority to vacate an arbitration award where the arbitrator has exceeded her own powers. See Seneca Nation of Indians v. New York, 988 F.3d 618, 625 (2nd Cir. 2021); Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1290 (9th Cir. 2009). But both camps seem to interpret the standard to mean, in essence, that the arbitrator appreciated but “willfully flouted” a controlling legal principle. See, e.g., Seneca Nation of Indians, 988 F.3d at 626.