In addition to the grounds for vacating awards provided by the Federal Arbitration Act (FAA), courts have developed the doctrine of “manifest disregard” of the law as a common-law ground to vacate awards. An arbitral panel is said to have manifestly disregarded the law if, knowing the existence of a clear legal principle, refuse to apply it. However, in 2008, in Hall Street Associates, LLC v. Mattel, Inc., 128 S.Ct. 1396 (2008) the U.S. Supreme Court concluded that the statutory grounds for vacating arbitration awards are exclusive when a party seeks judicial review under the FAA. The Court indicated that “manifest disregard” of the law was not a basis for reviewing such awards. For background and commentary on Hall Street, visit our previous posts: Professor Alan Scott Rau Responds to Hall Street v. Mattel Jun. 9, 2008 Professor Alan Scott Rau Gives Justice Souter a C-minus Jun. 5, 2008 Glen Wilkerson on Hall Street v. Mattel April 19, 2008 No Longer Can You Craft Your Own Arbitral Standard of Review March 26, 2008 Over the past year, the circuit courts have differed over whether the “manifest disregard” doctrine survives the Supreme Court’s holding in Hall Street. The First Circuit, in Ramos-Santiago v. United Parcel Serv.,524 F.3d 120 (1st Cir. 2008), concluded that Hall Street abolished “manifest disregard” as a ground for vacating or modifying an award under the FAA. Similarly, In Citigroup Global Mkts v. Bacon, 562 F.3d 349 (5th Cir. 2009) the Fifth Circuit strongly rejected “manifest disregard” as an independent, nonstatutory ground for setting aside an award. It stated that “the term itself, as a term of legal art, is no longer useful in actions to vacate arbitration awards.” (read more here) However, other circuit courts have reached a different conclusion. The Second Circuit held that “manifest disregard” survives Hall Street in Stolt-Nielsen SA v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2008). The court explained that “manifest disregard” was shorthand for a statutory ground, merely that 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.” The court stressed that arbitration is a creature of contract law and that the parties did not agree to an arbitration carried out in “manifest disregard” of the law. (read more here) Likewise, the Ninth Circuit concluded in Comedy Club, Inc. v. Improv West Associates, 553 F.3d 1277 (9th Cir. 2008) that Hall Street did not abolish “manifest disregard” because its case law considers it as a shorthand for statutory ground in § 10(a)(4). Also, the Sixth Circuit, in The Coffee Beanery, Ltd. v. WW, LLC, 300 Fed. Appx. 415 (6th Cir. 2008) interpreted Hall Street to limit only the contractual expansions of the grounds for review. More recently, the Tenth Circuit decided ‘DMA Int’l, Inc. v. Qwest Communications Int’l, Inc., applying the doctrine of “manifest disregard” of the law. (read more here) Despite the split on the circuit courts over the doctrine, in October 2009, the U.S. Supreme Court denied certiorari to three “manifest disregard” of the law cases: The Coffee Beanery, Ltd. v. WW, LLC, 300 Fed. Appx. 415 (6th Cir. 2008); Grain v. Trinity Health, 551 F.3d 374 (6th Cir. 2008); and Comedy Club, Inc. v. Improv West Associates, 553 F.3d 1277 (9th Cir. 2008). Technorati Tags: law, ADR, arbitration

The year of of 2009 has seen no shortage of changes in the area of consumer and employment arbitration. I. The Arbitration Fairness Act of 2009 A general sense seems to be emerging, among some at least, that arbitration may be going too far, and a legislative movement at the federal level has emerged that promotes the so-called Arbitration Fairness Act of 2009, which, if passed, would limit the use of binding arbitration in consumer, employment, franchise, and civil rights disputes. (Senate version: S. 931; Status. House version: H.R. 1020; Status) The American Bar Association (ABA) passed some resolutions with respect to the Arbitration Fairness Act as it relates to international commercial arbitration. (read more here) II. Consumer Arbitration: The National Arbitration Forum In a surprising move, the National Arbitration Forum (NAF) —the country’s largest administrator of credit card and consumer collections arbitrations— has agreed to step aside from the credit card and consumer debt arbitration business. (read more here and here) This agreement came only a few days after Minnesota’s Attorney General sued NAF on July14 alleging consumer, deceptive trade practices, and false advertisement. (read more here). Also, the law firm of Milberg LLP filed a class action suit against NAF. The Complaint alleges that NAF misrepresented its services as neutral. (read more here) Following a U.S. Congressional Hearing on consumer arbitration held on July 22, (testimonies are here; videos are here) the American Arbitration Association (AAA) said (read more here) that it will not initiate arbitrations to collect from consumers until new guidelines are established. Soon after, JPMorgan Chase (read more here) and Bank of America (read more here) announced that they will no longer require mandatory arbitration on customers’ credit card disputes. In addition, Congress held a hearing on September 15th, titled “Mandatory Binding Arbitration – Is it Fair and Voluntary?” (testimonies are here) III. Employment Arbitration: Jones v. Halliburton Jones v. Halliburton Co. is an employment arbitration case with tragic facts that made the national headlines, including a story by the National Public Radio (NPR). (read more here) In this case, the Fifth Circuit held that claims for (1) assault and battery; (2) intentional infliction of emotional distress; (3) negligent hiring, retention and supervision of employees involved in a sexual assault; and (4) false imprisonment are not related to the plaintiff’s employment contract and refused to compel arbitration. (the case summary is here) The Halliburton case prompted the U.S. Senate to pass the “Franken Amendment” to H.R. 3326, which bars funds to defense contractors who require workers to arbitrate “any claim under Title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention.” (Senator Franken’s video is here) H.R. 3326 was signed by President Barack Obama and became law on December 19, 2009. (final version is here; major actions are here) Technorati Tags: law, ADR, arbitration

This month, the United States Supreme Court handed down Union Pacific v. Brotherhood of Locomotive Engineers, 558 U.S. ___(Dec. 8, 2009). Justice Ginsburg delivered the opinion for a unanimous Court. The Railway Labor Act (RLA) as amended, provides for arbitration of “minor disputes” of railroad employees before a panels at the National Railroad Adjustment Board (NRAB or Board). These panels are composed of two representatives of labor and two of industry, with a neutral referee as tiebreaker. Before proceeding to arbitration, employees and carriers must exhaust all procedures (also known as “on-property” proceedings) stated in their Collective Bargaining Agreement (CBA). Then, a pre-arbitration “conference” is required in which the parties must attempt to settle the dispute. In the present case, Union Pacific Railroad Co. (the Carrier) charged five of its employees with disciplinary violations. Dissatisfied with the outcome of the “on-property” procedures, Locomotive Engineers and Trainmen (the Union) filed for arbitration before the NRAB. However, the parties did not submit timely proof of pre-arbitration conferences and NRAB dismissed the petitions for want of jurisdiction. The panel reasoned that it could not consider de novo evidence. The district court affirmed the NRAB’s decision and the Seventh Circuit reversed. The U.S. Supreme Court noted that Court of Appeals are divided on whether in addition to the statutory grounds for judicial review provided by the RLA, courts may review NRAB proceedings for due process violations. However, the Court clarified that the satisfaction of the pre-arbitration conference “does not condition the adjudicatory authority of the Board.” The Court held that the Seventh Circuit erred in resolving the case under a constitutional, rather than a statutory issue. Accordingly, the Court affirmed that the panel did not lack jurisdiction over the employees’ claims. Technorati Tags: law, ADR, arbitration

Recent opinions from the U.S. Supreme Court, the Texas Supreme Court, and the U.S. Court of Appeals for the Fifth Circuit demonstrate that it is quite possible for an agreement to arbitrate to exist in the absence of an actual written agreement signed by both purportedly bound parties to the litigation. I. U.S. Supreme Court In March 2009, the U.S. Supreme Court held in Arthur Anderson that a non-party to an arbitration agreement could appeal a trial court ruling that rejected the third party’s motion to compel arbitration. Arthur Anderson LLP v. Carlisle, 129 S.Ct. 1896 (2009). (post available here) II. Texas Supreme Court Texas courts have employed different and unusual theories in order to find that an agreement to arbitrate exists in the absence of a traditional written agreement: direct-benefits estoppel, incorporation by reference, assumption, agency, alter ego, and third-party beneficiary. In re Kellogg Brown & Root, 166 S.W.3d 732 (Tex. 2005). These theories stem from contract law, since an agreement to arbitrate is a contract. In Labatt, the Texas Supreme Court resolved the issue of whether non-signatories to an arbitration agreement should be compelled to arbitrate claims when the decedent’s claims would have to be arbitrated. In re Labatt Food Service, L.P., 279 S.W.3d 640 (Tex. 2009). Plaintiffs in this case are family members who brought a wrongful death action against the employer Labatt Food Service, L.P. The Texas Supreme Court stated that “is well established that statutory wrongful death beneficiaries’ claims place them [the family members] in the exact ‘legal shoes’ of the decedent, and they are subject to the same defenses to which the decedent’s claims would have been subject.” The court reasoned that if the employee had not died from his injuries, his claims would have been arbitrated. Similarly, in Jindal, the Texas Supreme Court held that an arbitration agreement between a decedent and his employer required the non-signatories beneficiaries to arbitrate their claims against the employer. In re Jindal Saw Ltd., 2009 WL 490082, 52 Tex. Sup. Ct. J. 407 (Tex. Feb. 27, 2009) III. Fifth Circuit Finally, the Fifth Circuit held in Graves that non-signatories plaintiffs were bound by the arbitration agreement between the decedent and his employer. Plaintiffs in Graves are the surviving relatives of an employee of defendant JV Industrial Companies, who died in a work-related accident at a BP facility in Texas. Graves v. BP America, Inc., 568 F.3d 221 (5th Cir. 2009). (post available here) Technorati Tags: law, ADR, arbitration