The Fifth Circuit concluded yesterday that Hall Street Assocs., L.L.C. v. Mattel, Inc., 128 S. Ct. 1396 (2008), killed off whatever remained of "manifest disregard of law" as a non-statutory basis for vacating an arbitration award under the federal Arbitration Act. Citigroup Global Markets Inc. v. Bacon, No. 07-20670 (5th Cir. Mar. 5, 2009).
The underlying dispute involved a claim by Debra M. Bacon that Citigroup messed up when it allowed her husband to make withdrawals from her individual retirement accounts. She hadn't given him permission. The claims proceeded to arbitration, which resulted in an award in her favor. Citigroup moved to vacate the award on the ground that the arbitration panel manifestly disregarded the law. The district court granted the motion.
The Fifth Circuit surveyed Supreme Court case law dating back to 1828 as well as the history of "manifest disregard" in the courts of appeals before concluding that Hall Street meant what it said when it said sections 10 and 11 of the FAA furnish "the exclusive regimes for the review provided by the statute". Hall Street, 128 S. Ct. at 1406. The court respectfully disagreed with the Second, Sixth, and Ninth Circuits to the extent they have held otherwise but noted that the Second and Ninth merely regarded "manifest disregard" as a different way to say arbitrators exceeded their powers within the meaning of section 10(a)(4). Citigroup Global Markets, slip op. at 11-15.
