In March 2008 the U.S. Supreme Court ruled in Hall Street Associates, L.L.P. v. Mattel Corp. that if judicial review of an arbitration award is sought under the Federal Arbitration Act, the parties could not supplement by contract the limited grounds for review provided by the FAA. In the wake of this ruling, lower courts have differed as to whether and how “manifest disregard of the law” remains a viable standard of review.
Some decisions, such as Prime Therapeutics LLC v. Omni-Care, Inc. (D. Minn.), have held that after Hall Street courts may no longer vacate an award due to an arbitrator’s “manifest disregard of the law” in a proceeding governed by the FAA. Other decisions, such as Joseph Stevens & Co. v. Cikanek (N.D. Ill.), have held that the “manifest disregard” standard is “cabined entirely” within the review standards provided by the FAA. The Second Circuit Court of Appeals, in Stolt-Nielsen SA v. Animal Feeds International Corp., held that the “manifest disregard” standard survives Hall Street, while the Sixth Circuit in Coffee Beanery, Ltd. v. WW, L.L.C., deemed it imprudent to cease using such a universally recognized principle. Some courts, such as the Supreme Court of California in Cable Connection, Inc. v. DirectTV, Inc., have seized on Hall Street’s disavowal of any decision concerning “other possible avenues” for judicial review of arbitration awards, and held that “manifest disregard of the law” is a standard of review available under state law.
Given the inconsistent interpretations of Hall Street, a party contemplating an arbitration proceeding should consider – at the outset – the judicial forum that will review the outcome of the arbitration, and how best to ensure the breadth of review the party desires