Originally from: Stockholm International Arbitration Review

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THE FUTURE OF MANIFEST DISREGARD

Christopher R. Drahozal

“In unrestricted submissions ... the interpretations of the law by the arbitrators in contrast to manifest disregard are not subject, in the federal courts, to judicial review for error in interpretation.”

The above-quoted language, from the United States Supreme Court’s now overruled decision in Wilko v. Swan, has been regularly cited as authority for courts to review arbitration awards for manifest disregard of the law. The (almost) universal definition of manifest disregard is that a party seeking vacatur of an award must show that “the arbitrators appreciated the existence and applicability of a controlling legal rule but intentionally decided not to apply it.” Until recently, every federal circuit had recognized some form of manifest disregard review, even though manifest disregard is not expressly listed as a ground for vacating awards in the Federal Arbitration Act (FAA).5 A number of state courts, too, had construed their state arbitration acts as providing for manifest disregard review.

But the continued existence of manifest disregard of the law as a ground for vacating awards has come under repeated question since the Supreme Court’s decision in Hall Street Associates, L.L.C. v. Mattel, Inc.7 The federal courts of appeals have taken varying positions on the issue, as described in the Fifth Circuit’s opinion in Citigroup Global Markets Inc. v. Bacon,8 which is reprinted in this issue.

In this comment, I provide context for the Citigroup decision and offer some thoughts on the future of review for manifest disregard of the law in U.S. courts.