A Stolt-Nielsen parcel tanker.
The Second Circuit today clarified that "manifest disregard of the law" doesn't provide a non-statutory ground for vacating arbitration awards under the federal Arbitration Act. The phrase instead signifies a "mechanism" for enforcement of arbitration agreements, which by operation of law incorporate the statutory grounds -- such as corruption, evident partiality, and exceeding powers -- that sections 10(a)(3) and 10(a)(4) specify. The gloss thus harmonized "manifest disregard" with the holding that the Arbitration Act states the "exclusive" grounds for vacatur in Hall Street Assocs., L.L.C. v. Mattel, Inc., 128 S. Ct. 1396 (2008).
But more important -- to Blawgletter's way of thinking -- the court turned back an attack on a "clause construction" award by a panel of arbitrators. The claimants in the arbitration proceedings had contracts for parcel tanker shipping services and alleged that Stolt-Nielsen and others conspired to restrain competition for those services, artificially inflating prices as a result. After a Connecticut district court ordered arbitration of the dispute as the contracts required, the claimants asked that the arbitration proceed on a class basis. Respondents resisted but couldn't point to contract language that prohibited class arbitration. The arbitral panel granted class treatment, but on petition of the respondents a district court vacated the award. The Second Circuit disagreed, holding that the arbitrators didn't manifestly disregard applicable law in rendering their award. Stolt-Nielsen SA v. AnimalFeeds Int'l Corp., No. 06-3474-cv (2d Cir. Nov. 4, 2008).
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