The primary interest of amici is the orderly and consistent review of arbitral awards by courts in the United States when a party seeks vacatur under Section 10 of the FAA. Amici believe that the decision of the United States Court of Appeals for the Fourth Circuit in Dewan v. Walia, – F. App’x – , 2013 WL 5781207 (4th Cir. Oct. 28, 2013), applying the manifest disregard doctrine as an independent basis for vacatur and relying on an expansive view of that doctrine to vacate the arbitral award in this case, is contrary to this Court’s arbitration precedents and deepens the existing circuit divide on the proper bases for vacatur. This is a highly opportune moment for this Court to clarify whether manifest disregard is a proper basis for vacatur of arbitral awards rendered in the United States and, if so, how that doctrine should be understood. Otherwise, vacatur proceedings will be defined by a patchwork of different analyses across the circuits. This is detrimental for commerce and for the future of arbitration proceedings, whether domestic or international, seated in the United States. For these reasons and those elaborated further below, amici strongly believe that the Petition for a Writ of Certiorari (the “Petition”) should be granted.

INTRODUCTION AND SUMMARY OF ARGUMENT

This Court has repeatedly affirmed that arbitral determinations are entitled to judicial deference and may be disturbed only in specific and exceptional circumstances. See, e.g., First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942 (1995) (“the court will set [the arbitrator’s] decision aside only in very unusual circumstances”). Those circumstances are set forth in the FAA, which establishes an “emphatic federal policy” in favor of arbitration. 9 U.S.C. § 1 et seq.; Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 636 (1985). FAA Section 10 provides that courts may vacate arbitral awards on one of four grounds: (1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators; (3) where the arbitrators were guilty of misconduct or other misbehavior; or (4) where the arbitrators exceeded their powers. 9 U.S.C. § 10. The Court has acknowledged that these grounds are designed to permit vacatur only in cases of “extreme” or “outrageous” arbitral misconduct. Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 586 (2008).

Despite the clear statutory language of FAA Section 10, parties unhappy with the outcome of their arbitration often test the limits of that language by seeking to vacate arbitral awards based on alleged “legal” errors by the arbitrator. Some courts have permitted such challenges by relying on a fifth, judicially-created ground for vacatur that is not found in the FAA: “manifest disregard of the law.” Typically formulated as permitting vacatur where the arbitrator knew of a controlling legal principle but rejected or ignored it, “manifest disregard of the law” is frequently relied upon by litigants to challenge awards rendered in both domestic arbitrations and in nondomestic or “international” arbitrations seated in the United States, as in Walia here.

In its 2008 decision in Hall Street, this Court rejected the creation of additional, non-statutory grounds for vacatur. 552 U.S. at 583. It made clear that the grounds listed in Section 10 of the FAA are the exclusive grounds available to vacate an arbitral award. Id. After Hall Street, some courts eliminated “manifest disregard of the law” from the grounds available to vacate an arbitral award. Other courts, including the Fourth Circuit in this case, have continued to rely on manifest disregard as an independent, non-statutory ground for vacatur. Still other courts have retained the concept of manifest disregard, but have re-characterized it as shorthand for one or more of the statutory grounds for vacatur, typically sections 10(a)(3) (arbitral misconduct) or 10(a)(4) (excess of authority) of the FAA.

The circuits acknowledge the divisions among them on the availability and meaning of manifest disregard. See, e.g., Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d 349, 355-56 (5th Cir. 2009) (describing the positions of the various circuits after Hall Street). They also profess some confusion about the Supreme Court precedents on the matter. See, e.g., Comedy Club, Inc. v. Improv West Assocs., 553 F.3d 1277, 1290 (9th Cir. 2009) (“We cannot say that Hall Street Associates is ‘clearly irreconcilable’ with Kyocera and thus we are bound by our prior precedent.”) (internal citations omitted); Agility Pub. Warehousing Co. K.S.C. v. Supreme Foodservice GmbH, 495 F. App’x 149, 153 n.2 (2d Cir. 2012) (“In Stolt-Nielsen … the Supreme Court expressly declined to decide whether an arbitral award may be vacated under this standard. As such, we are bound to follow our precedents that recognize manifest disregard of the law as a permissible ground for vacatur of an arbitral award.”) (internal citations omitted).

Even more problematically, some circuits have applied an expansive formulation of manifest disregard that undermines the U.S. policy against judicial interference with arbitral awards and the principles on which Section 10 of the FAA are based. The Fourth Circuit’s decision in this case is a striking example. In Walia, the appellate court vacated an arbitral award rendered in favor of a Canadian employee based not on specific arbitral misconduct of the sort targeted by the FAA’s four statutory grounds for vacatur, but simply because it disagreed with the arbitrator’s interpretation of the contract at hand. Regardless of whether manifest disregard should exist at all as an independent ground for vacatur, it should not be used to second-guess the arbitrator’s interpretation of a contract, as the Fourth Circuit used it here. The Fourth Circuit’s formulation of manifest disregard invites a judicial “appeal” from what was purportedly a final and binding arbitral award. This creates great uncertainty about the doctrine’s scope and fosters expansive and often frivolous judicial challenges that undermine the advantages that are associated with arbitration and that underpin this Court’s consistently pro-arbitration jurisprudence.

Walia therefore presents a particularly apt opportunity for this Court to address the proper interpretation of manifest disregard. Even while applying manifest disregard as it did, the Fourth Circuit in Walia itself described the fate of that standard in the Supreme Court as “uncertain[].” Walia, 2013 WL 5781207, at *5 n.5. The Court’s guidance is imperative to resolve the division among the circuits and bring clarity and uniformity to the review of arbitral awards rendered in the United States.

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