A decision that came out of the Florida Supreme Court in November of last year, Visiting Nurse Ass’n of Florida, Inc. v. Jupiter Med. Ctr., Inc., No. SC11-2468, 2014 WL 6463506 (Fla. Nov. 6, 2014),may be the ideal case for the U.S. Supreme Court to resolve once and for all a growing conflict among the U.S. Courts of Appeals as to the grounds available for vacating an arbitration award separate and apart from those expressly articulated in Section 10 and 11 of the Federal Arbitration Act (“FAA”). To date, the Court during Justice Robert’s term has been both pro-business and arbitration-friendly. It certainly has not shied away from further bolstering the case precedent that gives considerable deference to the resolution of commercial disputes through private arbitration when it is contractually agreed. However, since its decision in Hall Street Assocs., LLC v. Mattel, Inc , 552 U.S. 576 (2008), lower courts have struggled with the scope and meaning of that decision, and in particular, the Court’s holding that “Sections 10 and 11 respectively provide the FAA’s exclusive grounds for expedited vacatur and modification [of arbitration awards].” Even the Court’s subsequent holding in Stolt-Nielson SA v. Animal Feeds International Corp., 559 US 662 (2010), left open the question of whether “manifest disregard of the law” survived as an alternative basis for vacating an arbitration award.
This case involves a $1.25 million arbitration award that Jupiter Medical Center was ordered to pay to the Visiting Nurse Association of Florida arising out of a contract dispute where Jupiter Medical Center contends the underlying contract being enforced was an illegal agreement to provide kickbacks and preferential referrals to the home care provider. In its petition, Jupiter Medical Center argues that it is exceptionally important that the Supreme Court accept its Petition for Certiorari as “if allowed to stand, the decision below would leave courts with no choice but to enforce arbitral awards that require illegal conduct- such as price-fixing, market splitting, patient steering, race discrimination and the like.” A separate amicus brief filed by the International Association of Defense Counsel and the Florida Hospital Association strongly advocates the Court’s consideration of the pending petition, as “the right vehicle” to address the remaining conflict among the federal circuits as to whether judicially created grounds for vacating arbitration awards under the FAA remain viable. The First, Fifth, Eighth, and Eleventh Circuits have held that no judicially created grounds for vacatur survive Hall Street. The Third and Sixth Circuits have interpreted Hall Street narrowly, but have not expressly precluded vacatur on judicially created grounds. The Seventh Circuit has held that a court can overturn an arbitral award on public policy grounds where the award directs parties to violate the law. The Fourth Circuit has held that “manifest disregard” survives Hall Street and the Second and Ninth Circuits have held that “manifest disregard” constitutes a judicial interpretation of the district court’s powers under Section10(a)(4) of the FAA to vacate an award where the arbitrator “exceeded [his] powers,” and therefore remains a valid ground for vacating an arbitration award.
Arbitration is rapidly becoming the preferred and sometimes mandatory mechanism for resolving disputes concerning cross-border transactions, employment agreements, business-to-business agreements, government contracts, and consumer contracts. Further guidance is warranted on whether the Court’s holding in Hall Street forecloses a court’s refusal to enforce an arbitration award based upon the well-established common law principle that courts will not enforce illegal contracts.