Court Opinion

ID: 4667861
Source: CourtListenerOpinion
Date Created: 2021-03-16 00:00:30.910145+00
Date Added: 2024-06-11T08:02:59.632565
License: Public Domain

Case: 20-30428     Document: 00515781137         Page: 1     Date Filed: 03/15/2021

           United States Court of Appeals
                for the Fifth Circuit
                                                                     United States Court of Appeals
                                                                              Fifth Circuit

                                                                            FILED
                                                                      March 15, 2021
                                  No. 20-30428                         Lyle W. Cayce
                                                                            Clerk

   Tiffany Y. Jones,

                                                           Plaintiff—Appellant,

                                       versus

   Michaels Stores, Incorporated,

                                                           Defendant—Appellee.

                  Appeal from the United States District Court
                      for the Middle District of Louisiana
                            USDC No. 3:18-CV-948

   Before Higginbotham, Costa, and Oldham, Circuit Judges.
   Gregg Costa, Circuit Judge:
          Tiffany Jones agreed to arbitrate employment disputes with her
   former employer, Michaels Stores, Inc.        She invoked that arbitration
   agreement after she was fired, alleging violations of the company handbook.
   The arbitrator ruled against her.
          Jones then tried to sue Michaels in federal court, challenging the same
   termination on a different theory: that it amounted to discrimination and
   retaliation in violation of Title VII. The parties agreed to stay the lawsuit
   pending a second arbitration. The new arbitrator ruled that res judicata
Case: 20-30428          Document: 00515781137             Page: 2     Date Filed: 03/15/2021

                                           No. 20-30428

   barred the Title VII claims because they arose from the same transaction at
   issue in her first arbitration.
           Jones then asked the district court to vacate the arbitrator’s res
   judicata ruling.        She argued that the arbitrator manifestly disregarded
   Louisiana law in finding her new claims precluded.                    Michaels sought
   confirmation of the arbitration order.
           The district court sided with Michaels. It noted uncertainty about
   whether the manifest-disregard standard retains any role in determining
   whether an arbitration award should be vacated. It also observed that Jones
   did not invoke any of the four grounds listed in the Federal Arbitration Act
   (FAA) for vacatur, see 9 U.S.C. § 10(a), 1 but was relying on manifest
   disregard as an independent ground.                The court nonetheless assumed
   arguendo that manifest disregard of the law alone could allow a court to undo
   an arbitration award because it concluded that the arbitrator did not
   manifestly disregard res judicata law.

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               Those statutory grounds for vacatur are:
           (1) where the award was procured by corruption, fraud, or undue means;
           (2) where there was evident partiality or corruption in the arbitrators, or
           either of them;
           (3) where the arbitrators were guilty of misconduct in refusing to postpone
           the hearing, upon sufficient case shown, or in refusing to hear evidence
           pertinent and material to the controversy; or of any other misbehavior by
           which the rights of any party have been prejudiced; or
           (4) where the arbitrators exceeded their powers, or so imperfectly
           executed them that a mutual, final, and definite award upon the subject
           matter submitted was not made.
   9 U.S.C. § 10(a). The next section of the code lists grounds for modifying awards. See id.
   § 11.

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Case: 20-30428      Document: 00515781137          Page: 3   Date Filed: 03/15/2021

                                    No. 20-30428

          The district court correctly recognized some murkiness in our
   manifest-disregard caselaw. This appeal is an opportunity to emphasize at
   least one thing that we have directly resolved: “manifest disregard of the law
   as an independent, nonstatutory ground for setting aside an award must be
   abandoned and rejected.” Citigroup Glob. Mkts., Inc. v. Bacon, 562 F.3d 349,
   358 (5th Cir. 2009).
          A brief chronicle of manifest-disregard cases shows why our court no
   longer recognizes manifest disregard as a standalone basis for vacatur. For a
   time, we did recognize manifest disregard as its own basis for setting aside an
   arbitration award, though that standard was “difficult to satisfy.” Id. at 354
   (citing Kergosien v. Ocean Energy, Inc., 390 F.3d 346 353 (5th Cir. 2004),
   Prestige Ford v. Ford Dealer Computer Servs., Inc., 324 F.3d 391, 395–96 (5th
   Cir. 2003)).
          Then, in 2008, the Supreme Court held that an arbitration agreement
   could not establish a ground for vacatur or modification of an arbitration
   award apart from those listed in the Federal Arbitration Act. See Hall St.
   Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008). In rejecting the notion
   that a contract could create a new vacatur standard, Hall Street reasons that
   the statutory grounds for vacatur and modification are the “exclusive
   grounds.” Id. at 584. Although the case did not involve a claim of manifest
   disregard, the Supreme Court noted that some courts, like ours, had read the
   phrase “manifest disregard” in a prior Supreme Court opinion as a
   nonstatutory ground for vacatur. Id. (citing Wilko v. Swan, 346 U.S. 427
   (1953)). But the Court rejected the “manifest disregard” caselaw as general
   support for nonstatutory vacatur grounds. Id. at 585. In doing so, it explained
   that “maybe the term ‘manifest disregard’ was meant to name a new ground
   for review, but maybe it merely referred to the § 10 grounds collectively,
   rather than adding to them.” Id. It also noted that the phrase “may have
   been shorthand” for statutory grounds for vacatur such as “when the

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   arbitrators were ‘guilty of misconduct’ or ‘exceeded their powers.’” Id.
   (quoting 9 U.S.C. §§ 10(a)(3),(4)).
          We soon addressed whether “manifest disregard of the law remains
   valid, as an independent ground for vacatur, after Hall Street.” Citigroup
   Global, 562 F.3d at 355. The answer, we concluded, “seem[ed] clear”
   because the Supreme Court had “unequivocally held that the statutory
   grounds are the exclusive means for vacatur under the FAA.” Id. We thus
   held that “to the extent that manifest disregard of the law constitutes a
   nonstatutory ground for vacatur, it is no longer a basis for vacating awards
   under the FAA.” Id.; see also OJSC Ukrnafta v. Carpatsky Petrol. Corp., 957
   F.3d 487, 503 (5th Cir. 2020) (“We have rejected manifest disregard as a
   nonstatutory basis for vacating domestic arbitration awards.” (citing
   Citigroup Global, 562 F.3d at 355)).
          Citigroup Global’s direct holding that manifest disregard is no longer
   an independent ground for vacatur sounds like the end of the matter. But
   perhaps a Supreme Court decision issued just a year later is a source for some
   lingering confusion on this issue. See Stolt-Nielsen S.A. v. AnimalFeeds Int’l
   Corp., 559 U.S. 662 (2010). The Court refused to decide “whether ‘manifest
   disregard’ survives” 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.” Id. at 672 n.3. But because we had decided at least the first part of that
   question—concluding that manifest disregard is no longer an independent
   vacatur ground, see Citigroup Global, 562 F.3d at 355—the Supreme Court’s
   later abstaining from deciding that issue cannot overrule our precedent. See
   Gruver v. La. Bd. of Supervisors, 959 F.3d 178, 181 (5th Cir. 2020) (explaining
   that, under the rule of orderliness, only an “unequivocal” change in law from
   the Supreme Court can override one of our precedents).

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                                   No. 20-30428

          As still-binding precedent, Citigroup Global resolves this case. Jones
   relies on manifest disregard as a freestanding ground for vacatur, untethered
   to any of the FAA’s four grounds for vacatur. Her case is thus unlike one in
   which a party argued that an arbitrator’s manifest disregard of the law
   showed that he had “exceeded [his] powers within the meaning of 9 U.S.C.
   § 10(a)(4).” McKool Smith, P.C. v. Curtis Int’l, Ltd., 650 F. App’x 208, 212
   (5th Cir. 2016) (per curiam) (alteration in original). Because of uncertainty
   about whether the manifest-disregard standard could still be used as a means
   of establishing one of the statutory factors, McKool Smith assumed arguendo
   that it could because the standard was not met in any event. Id. at 213; see
   also DynaColor, Inc. v. Razberi Techs., Inc., 795 F. App’x 261, 264 (5th Cir.
   2020) (also assuming arguendo that manifest disregard could still be used
   because the standard was not met). As Jones does not invoke any statutory
   ground for vacatur, her appeal cannot overcome our instruction that
   “arbitration awards under the FAA may be vacated only for reasons provided
   in § 10.” Citigroup Global, 562 F.3d at 358.
          The judgment of the district court is AFFIRMED.

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