Can an arbitration award be vacated for manifest disregard of the evidence?
<p>A AAA arbitration over a credit card billing dispute between a consumer and a bank concluded recently. The consumer &quot;won&quot;, in the sense that he obtained equitable relief, but lost, in the sense that he failed to recover damages.</p>
<p>A key question of fact was whether the bank made billing statements available online. In his award, the arbitrator stated &quot;[consumer] presented no evidence that his Ink account statements were not available ... [bank] presented evidence that such statements were available on the [website]. So, there was no showing of failure on the part of [bank] to provide access to statements&quot;.</p>
<p>However, the bank presented no such evidence at the hearing. They called a single witness, who had no personal knowledge relating to online statement access, and even testified quite plainly under questioning <em>from the arbitrator himself</em> that the bank had no evidence, e.g.:</p>
<blockquote>
<p>ARBITRATOR: [M]y question to [witness] is, does [bank] have any way to show whether or not the statements were actually posted to one of those username accounts that could be accessed online at the time?</p>
<p><strong>WITNESS: No. There wouldn't be anything in [the evidentiary record] that would reflect that.</strong></p>
<p>ARBITRATOR: Okay, all right. When you say that, are you suggesting that there could be evidence somewhere else?</p>
<p><strong>WITNESS: Not that I'm aware of, no.</strong></p>
<p>ARBITRATOR: Well, how do you deal with the allegation that [consumer] is making that he would go to the account ... and not see any statements? Can you prove or disprove that?</p>
<p><strong>WITNESS: I cannot prove or disprove that, no.</strong></p>
</blockquote>
<p>Is this grounds to vacate the award?</p>

<h2><a href="https://globalarbitrationreview.com/guide/the-guide-challenging-and-enforcing-arbitration-awards/1st-edition/article/united-states" rel="nofollow noreferrer">No</a></h2>
<blockquote>
<p>Chapter 1, Section 10 of the FAA states that a court may vacate an arbitral award only if it finds that one of the following limited grounds applies: (1) the award is a result of corruption or fraud; (2) evident partiality or corruption of an arbitrator; (3) arbitrator misconduct, such as refusing to hear pertinent and material evidence; or (4) the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final and definite award was not made.</p>
</blockquote>
<p>There is no “the arbitrator screwed up” basis. This is pretty much universal across jurisdictions for arbitration.</p>
<p>One of the features (whether you think it’s a good or bad feature is up to you) is that arbitration is, for all practical purposes, <strong>final</strong>. That’s it, we’re done.</p>
<p>The law is written that way because parties to an arbitration freely and voluntarily <em>chose</em> this method of dispute resolution over the courts. In theory, at least. Having made their choice, the courts will not unmake it.</p>

<p>Probably not. Arguably, manifest disregard for the law can be a ground for overturning an arbitration award, although this exception is extremely narrow and it is contested whether it actually exists at all. But disregarding evidence could sometimes imply a manifest disregard for the legal conclusions that the evidence implies, if the arbitrator seems to be aware of the evidence and declines to apply it.</p>
<p>However, in this fact pattern, it appears the arbitrator, at most, made a simple mistake of fact and not a mistake of law. So there is probably no grounds to contest the ruling.</p>
<p>Historically, the U.S. Supreme Court noted in dictum that “the interpretations of the law by the arbitrators in contrast to manifest disregard, are not subject, in federal courts, to judicial review for error in interpretation,&quot; <em>Wilko v. Swan</em>, 346 U.S. 427, 436-437 (1953). This led all U.S. Circuit Courts of Appeal to recognize a manifest disregard of the law ground for invalidating an arbitration award.</p>
<p>But, some lower courts concluded that the U.S. Supreme Court implicitly eliminated this ground for review of arbitration awards when it decided <em>Hall Street Assoc., L.L.C. v. Mattel, Inc.</em>, 128 S. Ct. 1396 (2008) (holding that the grounds set forth in the Federal Arbitration Act (“FAA”) at 9 U.S.C. §§ 10(a) (1)-(4) and 11 are the exclusive grounds upon which an arbitral award may be vacated or modified.)</p>
<p>Since then, the U.S. Supreme Court has, at a minimum, strongly disfavored the manifest disregard of the law ground for invalidating an arbitration award, but hasn't stated whether this historically recognized ground for setting aside an arbitration award is available at all or not under the Federal Arbitration Act as a clearly as it might. <em>See, e.g., Oxford Health Plans LLC v. Sutter</em>, 569 U.S. 564, 572-573 (2013) (“The potential for . . . mistakes [by the arbitrator] is the price for agreeing to arbitration.”).</p>
<p>As a result, there is now a circuit split between U.S. Court of Appeals circuits over the ultimate issue of whether even &quot;manifest disregard for the law&quot;, which was once widely accepted as a ground for setting aside an arbitration award, is still a basis for invalidating an arbitration award under the Federal Arbitration Act (the FAA). <em>Compare, e.g., Weiss v. Sallie Mae, Inc</em>., 939 F.3d 105 (2d Cir. 2019) (reversing a lower federal trial court’s decision to vacate that award on grounds that the arbitrator manifestly disregarded the law), to <em>Wachovia Securities, LLC v. Brand</em>, 671 F.3d 472, 483 (4th Cir. 2012) (recognizing that &quot;manifest disregard&quot; of the law also exists as either an independent ground for overturning arbitral awards or as a judicial gloss on the grounds for vacatur set forth in 9 U.S.C. § 10). <em>See also</em> Liz Kramer and Bri’An Davis, &quot;Manifest Disregard: The Circuit Split Persists&quot;, American Bar Ass’n. (Jul. 6, 2015) (the Fifth, Eighth and Eleventh Circuits have held that manifest disregard did not survive <em>Hall Street Assoc., LLC</em>, while the Second, Fourth, Seventh, Ninth and Tenth Circuits continue to allow manifest disregard challenges) (with the 2nd Circuit subsequently changing sides in the circuit split in <em>Weiss</em> in 2019 leaving four circuits on each side of the split and five circuits with no binding precedents addressing the issue since 2008).</p>
<p>In circuits where manifest disregard for the law is a ground for setting aside an arbitration award the standard to do so is as follows:</p>
<blockquote>
<p>[A] court's belief that an arbitrator misapplied the law will not
justify vacation of an arbitral award. Rather, appellant is required
to show that the arbitrators were aware of the law, understood it
correctly, found it applicable to the case before them, and yet chose
to ignore it in propounding their decision.</p>
</blockquote>
<p><em>Remmey v. PaineWebber, Inc</em>., 32 F.3d 143, 149 (4th Cir. 1994).</p>
<p>Generally, conservatives on the U.S. Supreme Court have disfavored allowing arbitration awards to be vacated on the ground of manifest disregard for the law, while liberals have favored allowing these challenges, although the issue is not entirely partisan. So, given the current very conservative 6-3 majority on the current U.S. Supreme Court, if it resolved the split, it would probably be most likely to resolve it in favor of not allowing arbitration awards to be challenged on the ground of manifest disregard for the law.</p>
<p>Alternately, the ruling could be used as one piece, not nearly the most important, of a larger case of undue influence or undisclosed conflict of interest by the arbitrators shown with other facts, to show that the alleged undue influence or undisclosed conflict of interest actually caused harm. But this works only if facts not suggested by the question are present.</p>

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