Fifth Circuit Confirms Arbitration Award

On Wednesday, the Fifth Circuit released an opinion confirming an arbitral award (link is to .pdf file) in a dispute between two companies who had contracted to share in the duties of performing corrective laser eye surgery. The party that lost the arbitration sought vacatur on two grounds allowed in FAA jurisprudence: on the statutory ground that the arbitrator exceeded his authority, and on the non-statutory ground that the arbitrator manifestly disregarded the law. The Fifth Circuit, like the District Court before it, confirmed the award.

While the opinion is certainly consistent with Fifth Circuit jurisprudence in this area, it is still helpful as a recent and cogent explanation of the analysis on these two fairly common grounds parties assert when attempting to appeal arbitral awards. Interestingly, the arbitral award being challenged was apparently a non-reasoned award, something to which both parties agreed at the outset of the case. Subsequently, one party apparently changed its mind, but the arbitrator still refused to issue a reasoned award.

Despite the apparent brevity of the award itself, the Fifth Circuit reviewed the record in the case and noted that “the arbitrator was quite aware of the factual nuances of the case, the identities of the parties, and the flow of money.” The arbitral hearing, after all, lasted three days. All that being the case:

We will not second-guess multiple, implicit findings and conclusions underpinning the award. We do not decide if the award was free from error. We decide only that it is not the kind of extraordinary award that ineluctably leads to the conclusion that the arbitrator was ‘dispensing his own brand of industrial
justice.’ There are advantages and disadvantages in contracting for private resolution of a dispute announced without explanation of reason. When a party does so and loses, federal courts cannot rewrite the contract and offer review the party contracted away.

In other words, it remains clear that some sort of affirmative showing that an arbitrator refused to consider evidence seems to be required to prevail on a “manifest disregard” challenge to an arbitral award in the Fifth Circuit.

American Laser Vision v. The Laser Vision Institute, ___ F3d. ___ (5th Cir. 2007) (Cause No. 06-10260)

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