Idea Nuova, Inc. moved in the U.S. District Court for the Southern District of New York to vacate or modify an arbitration award issued in favor of GM Licensing Group, Inc. The bases for Idea Nuova's motion included, among other things, that the arbitrator had acted in manifest disregard of the law.
In denying Idea Nuova's motion to vacate or modify, and granting GM's cross-motion for confirmation, the Court noted that manifest disregard of the law is still a valid basis upon which a party may challenge an arbitral award, finding that it "survives" the U.S. Supreme Court's decision in Hall Street Assocs., L.L.C. v. Mattel, Inc., 128 S.Ct. 1396 (2008), "primarily as a 'judicial gloss on the specific grounds for vacatur enumerated in section 10 of the FAA." Notably, the District Court reached this conclusion by relying upon the Second Circuit's recent decision in Stolt-Nielsen SA v. AnimalFeeds Int'l Corp., 548 F.3d 85 (2d Cir. 2008), for which certiorari was granted by the U.S. Supreme Court on June 15th. The Second Circuit found in Stolt-Nielsen that, despite Hall Street, the law with regard to challenging arbitral awards based upon manifest disregard of the law has not changed--that is, an award can be vacated or modified if a party proves that an arbitrator "knew of a relevant legal principle, appreciated that this principle controlled the outcome of the disputed issue, and nonetheless flouted the governing law by refusing to apply it." 548 F.3d at 95.
It will be interesting to see whether the Supreme Court reviews this prong of the Stolt-Nielsen decision.