One of my colleagues expressed concern that the Hall Street decision might eliminate the use of the manifest disregard standard of review. I don’t think it will but am curious if anyone out there disagrees. Here is why I think manifest disregard still exists:
The Court said that the manifest disregard standard is different than the parties’ standard in Hall Street because the Court created it. By contrast, in Hall Street, the parties are attempting to create the standard of review. The Court also stated that manifest disregard may be part of section 10 already it may refer to the section 10 grounds “collectively, rather than adding to them.” Moreover, the Court stated, manifest disregard may just be a shorthand for the grounds identified in 10(a)(3) and 10(a)(4), the “subsections authorizing vacatur when the arbitrators were ‘guilty of misconduct’ or ‘exceeded their powers.’” I think it is interesting that the Court went out of its way to suggest that the manifest disregard standard may be grounded in section 10, when its decision could clearly have reached a different result (although that would have required rejecting dicta from First Options where the Court said “[t]he party still can ask a court to review the arbitrator’s decision, but the court will set that decision aside only in very unusual circumstances. See, e.g., 9 U.S.C. § 10 (award procured by corruption, fraud, or undue means; arbitrator exceeded his powers); Wilko v. Swan, 346 U.S. 427, 436-437, 74 S.Ct. 182, 187-188, 98 L.Ed. 168 (1953) (parties bound by arbitrator’s decision not in “manifest disregard” of the law), overruled on other grounds, Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989).”)
Although it appears that the Court preserved manifest disregard as a standard of review, I am not convinced that the manifest disregard standard is “different” simply because it is court created rather than party- created. I think a more consistent decision would have rejected manifest disregard as well. If section 10 and 11 provide the exclusive grounds, unless manifest disregard is simply another way to say the arbitrator engaged in misconduct or exceeded her powers, it should not be a viable standard of review. Moreover, I believe the decision raises questions about the viability of other judicially-created standards of review such as “completely irrational”, “public policy” and “arbitrary and capricious.” It is difficult to argue that those standards are contained within section 10. So, are they no longer viable standards of review? Because the Court does not address this question, I would advise clients not to rely on anything but section 10 and manifest disregard as standards of review.