April 27, 2011

Impact of Concepcion on Judicial Review of Arbitration Awards

By Sarah Cole

One other important note from Concepcion — it would appear more clearly following this decision that a separate standard for manifest disregard of the law as a means for reviewing an arbitration award no longer exists. While the circuits have split on this issue, Concepcion suggests that if it exists at all, it must be within Section 10 of the FAA. The key language in Concepcion is as follows: “In contrast, 9 U. S. C. §10 allows a court to vacate an arbitral award only where the award “was procured by corruption, fraud, or undue means”; “there was evident partiality or corruption in the arbitrators”; “the arbitrators were guilty of misconduct in refusing to postpone thehearing . . . or in refusing to hear evidence pertinent and material to the controversy[,] or of any other misbehavior by which the rights of any party have been prejudiced”; or if the “arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award . . . was not made.” The AAA rules do authorize judicial review of certification decisions, but this review is unlikely to have much effect given these limitations; review under §10 focuses on misconduct rather than mistake.” The italics on the word only came from the Court’s opinion. Although the Court seemed to be wavering a bit on this issue in Stolt-Nielsen (where they said if manifest disregard was still a good rule, the arbitrators in Stolt-Nielsen did manifestly disregard the law), here, the Court seems to be interested in articulating clearer limits for judicial review of arbitration awards.

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Comments

  • Paul Kirgis says:

    I wonder whether the Section 10 ground of “exceeding powers” is likely to become the new favorite method for seeking judicial review. That’s what the Court employed in Stolt-Nielsen, and one reading of Hall Street (and perhaps Concepcion?) is that manifest disregard has always been nothing more than an application of “exceeding powers.” Since manifest disregard never really worked anyway, it might just be wiser for advocates to junk it and concoct arguments for why the arbitrators exceeded their powers, i.e., rely on Stolt-Nielsen to assert that arbitrators may not substitute their policy judgments for the law.

  • Kristen Blankley says:

    I agree with Sarah and Paul on the issues of “exceeding powers.” I made an argument a few years back about this section, urging contract drafters to consider carefully the powers given to the arbitrator as a method of potentially securing greater judicial review of any resulting award under the “exceeding powers” subsection of FAA 10. I wonder what the effect of the decision will be for contract drafters given the limitations on judicial review.

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