Second Circuit Rules that Manifest Disregard Exists After Hall Street

The Second Circuit in Stolt-Nielsen SA v. Animalfeeds Int’l Corp., No. 06-3473 (2nd Cir. 2008),, held that courts may continue to review arbitration awards to determine whether the arbitrator manifestly disregarded the law when he or she rules on a case. Acknowledging that some courts have held that manifest disregard did not survive the 2008 Supreme court Hall Street decision, the Second Circuit held instead that the manifest disregard standard is contained within section 10 of the FAA and thus continues to exist as a grounds for reviewing an arbitration award.

According to the court, “[t]he Hall Street Court held that the FAA sets forth the “exclusive” grounds for vacating an arbitration award. That holding is undeniablyinconsistent with some dicta by this Court treating the “manifest disregard” standard as a ground for vacatur entirely separate from those enumerated in the FAA. . . . But the Hall Street Court also speculated that “the term ‘manifest disregard’ . . . merely referred to the § 10 grounds collectively, rather than adding to them” — or as “shorthand for § 10(a)(3) or § 10(a)(4).” Hall Street, 128 S. Ct. at 1404. It did not, we think, abrogate the “manifest disregard” doctrine altogether.”

With a split in authority on this issue only a few months after the Hall Street decision, we may see another arbitration case, this time on the viability of the manifest disregard standard of review, headed to the high court.

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