The U.S. Supreme Court in Hall Street Associates, L.L.C. v. Mattel, Inc. held that Sections 10 and 11 of the Federal Arbitration Act (FAA) provide the exclusive regimes for review of arbitration awards and that these regimes cannot be supplemented by contract. 128 S.Ct. 1396 (2008).
The arbitration provision at issue in Hall Street provided, in pertinent part:
The Court shall vacate, modify or correct any award: (i) where the arbitrator’s findings of facts are not supported by substantial evidence, or (ii) where the arbitrator’s conclusions of law are erroneous.
Despite the Supreme Court’s pronouncement in Hall Street, the question lingers as to whether “manifest disregard for the law” constitutes a viable basis for vacatur of an arbitration award under the FAA. The Second, Fourth, Sixth and Ninth Circuits continue to recognize “manifest disregard” as a basis for vacatur under the FAA, with the Second Circuit describing “manifest disregard” as “judicial gloss” on the enumerated grounds for vacatur. See Schwartz v. Merrill Lynch & Co., 665 F.3d 444 (2d Cir. 2011).
Following Hall Street was the much-discussed Texas Supreme Court decision in Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84 (Tex. 2011). In Nafta Traders, the arbitration provision provided that the “arbitrator does not have authority (i) to render a decision which contains a reversible error of state or federal law, or (ii) to apply a cause of action or remedy not expressly provided for under existing state or federal law.” Id. at 88.
The Texas...
