The First Circuit, citing numerous instances in which the arbitral panel’s decisions may have been erroneous and at least one that left the Court ‘perplexed’, nonetheless reversed the district court’s vacatur and remanded for entry of an order confirming the award. Raymond James Financial Services, Inc. v. Robert Michael Fenyk, No. 14-1252, (1st Cir. March 11, 2015). While the First Circuit may not have ‘squarely’ disavowed the doctrine of manifest disregard, if the doctrine isn’t applicable when the arbitrators ignored Florida’s one-year statute of limitations, has it been practically disavowed?

Plaintiff Fenyk claimed that he was unlawfully terminated from his job as a stock broker because he is an alcoholic. Fenyk worked as an independent broker-dealer for RJFS in Vermont. RJFS is based in Florida and the parties’ agreement provided that Florida law would govern any disputes between them. Fenyk also agreed to arbitrate any conflicts ‘arising out of the independent contractor relationship.’

On July 1, 2009, RJSF terminated its relationship with Fenyk. In June 2011, Fenyk filed a complaint in Vermont alleging violation of Vermont’s Fair Employment Practices Act. Once reminded of his arbitration agreement, Fenyk dismissed the complaint and brought an arbitration proceeding before FINRA alleging retaliation based on sexual orientation and disability in violation of Vermont law.

RJFS, in addition to denying allegations of discrimination, claimed that Vermont law did not apply to the parties relationship, that Fenyk was an independent contractor and not an employee so neither Florida nor Vermont’s employment discrimination statutes were applicable, and that his claims were time barred by Florida’s one year statute of limitations.

On the first day of the hearing, Fenyk  sought to add a claim under the Americans With Disabilities Act (but not the related Florida statute); the panel proceeded without deciding the motion. Following the hearing, Fenyk moved to amend to add disability discrimination claims under federal, New York, and Florida law, arguing that the elements of the claims were essentially the same as those in Vermont. The arbitral panel denied Fenyk’s motion to amend; the panel did grant what it described as a request from both parties to apply Florida law to the proceedings.

In a brief statement containing no legal analysis or explanation, the panel awarded Fenyk $600,000 in back pay and $36,042.03 in attorney’s fees and costs. RJFS moved in federal court to vacate the award claiming that the arbitrators exceeded their authority by awarding damages on a claim under the Florida Civil Rights Act that Fenyk never made.

The district court agreed, noting that while review of arbitral awards is very narrow, it still exists. According to the district court, the arbitral panel concluded that Florida law governed the case, yet ignored the application of Florida’s one-year statute of limitations which would have barred Fenyk’s claim. Having ignored that statute, the arbitrators “somehow construed Florida law to find a violation of a Vermont statute—a statute which, given the governing law, was wholly inapplicable to the case.”

The First Circuit began its analysis with the ‘exceedingly deferential ‘review given an arbitral award and reiterated that it was not enough for a party to show that the panel committed even a serious error. Instead, an arbitral award was unenforceable only if “it imposed the arbitrators’ ‘own view of sound policy’ instead of adhering to the agreement that governs the parties’ relationship”. The court side-stepped the ‘uncertainty’ over manifest disregard stating that even if it remained available, it would not invalidate the award in this case.

Addressing RJFS’s argument that Fenyk’s claim was time barred, the First Circuit found that the applicability of Florida’s statute of limitations to arbitrations was evolving at the time of the panel’s decision and, as ‘even serious error’ by arbitrators will not invalidate an award, “any error by the panel in refusing to dismiss Fenyk’s claims as untimely does not rise to the level necessary to justify vacatur.”

The court then turned to the panel’s award of damages based on Florida law despite its denial of Fenyk’s motion to amend to include Florida claims. While the First Circuit claimed to “understand” the district court’s “discomfort” with the award, it could not conclude that, “the arbitrators’ decision to impose liability on RJFS under Florida law ‘willfully flouted the governing law’ or otherwise exceeded the bounds of the arbitrators’ authority to resolve the parties’ dispute.”

In focusing on whether the arbitrators’ decision, however erroneous, was authorized by the parties’ agreement, the court found the arbitrators were empowered to resolve employment claims under Florida law and that was what they did. One could certainly conclude, as did the district court, that [a]warding damages to a plaintiff who has pled no claims under the applicable law plainly transgressed the limits of the arbitrators’ power.”