Court Opinion

ID: 9475697
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:36:01.516725+00
Date Added: 2024-06-11T17:44:52.990684
License: Public Domain

MESKILL, Circuit Judge,
concurring:
I agree with the majority’s conclusion that the arbitrators did not act in manifest disregard of the law. This conclusion can be reached, however, without extensively analyzing the arbitrators’ decision and without comment on the propriety of the net long proviso of Rule 10b-4. In fact, one need look no further than the transcript of proceedings in this case to reach a proper result.
Even a cursory review of the record reveals that the arbitration panel engaged in a considered and detailed analysis of Rule 10b-4’s application to this case. As the majority points out, a separate arbitration session, comprising twenty pages of the record, was devoted exclusively to the proper interpretation of the Rule. In it, concern and confusion was expressed over the reach and meaning of a complicated rule and its application to an equally complex factual scenario.
The statements of Mr. Sullivan, chairman of the arbitration panel, reflect clearly that the focus of concern was upon the disposition of the case under Rule 10b-4:
Then it comes down to what you both said initially and what you said at the first meeting, Pat, that it is a matter of interpretation of the law, and you presented the law, Ms. Cotter, and you presented the law, Mr. Goldstein, and we now hopefully have to come up with the right answer on this law, and it is a very gray area. I think this is just going to be a deliberation we are going to have to go through.
J.App. at 233. Given this express statement of concern, it is apparent that the district court’s conclusion that the arbitrators ignored the applicable law is entirely without foundation.
In reviewing arbitrators’ decisions, manifest disregard of the law may be found only where the arbitrators “ ‘understood and correctly stated the law but proceeded to ignore it.’ ” Siegal v. Titan Industrial Corp., 779 F.2d 891, 893 (2d Cir.1985) (quoting Bell Aerospace v. Local 516, 356 F.Supp. 354, 356 (W.D.N.Y.1973), rev’d on other grounds, 500 F.2d 921 (2d Cir.1974). No evidence was presented here that the arbitrators ignored Rule 10b-4. As noted, all of the evidence is to the contrary.
The district court, however, held that the arbitrators must have ignored the Rule because their discussion was contrary to a clearly dictated legal result. J.App. at 308-09. The majority reverses the district court’s holding by demonstrating that the arbitrators’ decision was correct. This proves too much. Rule 10b-4 is a complex regulation which is subject to a number of different interpretations. Again, the statements of Mr. Sullivan attest to the difficulty encountered in administering the Rule: “I read that law and I cannot interpret it, and neither you nor Mr. Goldstein will admit this, either one of you can take the other side of this case, and argue it beauti*938fully, because it is so indeterminate, in my view.” J.App. at 223. The district court, in fact, far from expressing certainty in the Rule’s application, requested additional briefing on the issue from the SEC. Moreover, a separate arbitration session was required for the sole purpose of deciphering the regulation. Even after this session, with supplemental legal memoranda presented, the law remained “indeterminate” to the arbitration panel. Based on this record, the district court could not have found that the legal result was clear but was ignored by the arbitrators. Our analysis should end here.
Whether the majority disagrees with Judge Weinfeld’s decision on the merits is entirely beside the point. The standard of manifest disregard was adopted to insulate arbitration decisions from precisely this kind of inquiry. See Wilko v. Swan, 346 U.S. 427, 436-37, 74 S.Ct. 182, 187-88, 98 L.Ed. 168 (1953). The majority opinion in this ease perpetuates the district court’s error by reversing the district court on the merits of the arbitrators’ decision and by engaging in unnecessary speculation over the validity of Rule 10b-4. We need not express any view on the correctness of the arbitrators’ or district court’s decision. All that is needed here is a recognition of the arbitrators’ efforts to apply an unclear rule of law to a complex factual situation. When the appropriate legal principles are applied, it is clear that the arbitration panel did not act in manifest disregard of the law.