Robert Lewis Rosen Associates, Inc. (“RLR”) petitioned the United States District Court for the Southern District of New York to vacate an arbitration award issued in favor of William Webb (“Webb”) on the grounds that the arbitrator acted in manifest disregard of the law. See Robert Lewis Rosen Associates Ltd. v. Webb, No. 07-Civ.-11403 (S.D.N.Y. July 7, 2008). RLR had filed a demand for arbitration with the American Arbitration Association seeking recovery of legal fees it incurred while enforcing a previous arbitration award in its favor against Webb. The arbitrator granted Webb’s motion to dismiss RLR’s demand without a hearing on the issue, and RLR moved to vacate. Relying on the Supreme Court’s recent decision in Hall Street Associates, Ltd v. Mattel, Inc., the court held that the doctrine of manifest disregard of the law is no longer a valid basis for overturning arbitration awards. Specifically the court found two aspects of the Hall Street decision dispositive: first, that the statutory grounds set forth in the Federal Arbitration Act (“FAA”) are the exclusive bases upon which courts can modify or vacate arbitration awards and second, that the Supreme Court has never endorsed manifest disregard of the law as an independent basis for vacatur or modification of arbitration awards under the FAA. As such, the court found that Hall Street, while not specifically ruling on this issue, “undercut the rationale for the Second Circuit’s prior adherence to the manifest disregard standard.” Click here to review a copy of the District Court’s decision.
Webb is yet another recent federal court decision examining the scope of the Hall Street decision with respect to the doctrine of manifest disregard of the law. Click here to review another blog post on www.insurereinsure.com to see how other courts have weighed in on this issue.