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Manifest Disregard for the Law

Manifest Disregard for the Law 

A fifth reason for vacating an award in arbitration has emerged from the Supreme Court of the United States and finds its basis in another decision. Although the Court has sanctioned the enforcement of the mandatory arbitration mandated by pre-dispute contracts where statutory enforcement rights exist, such as in employment contracts, the Court has acknowledged that, for manifest violation of the statute, an arbitration award may be vacated. The point is that the ADR arbitration procedure should be enforced and encouraged, but, in accordance with statutory rights and prohibitions, it must provide a reliable and predictable resolution. 

There are few reasons for overturning an arbitration award for manifest disregard of the rules. As one federal court has noted, "it clearly means more than error or misunderstanding with respect to the law," Gov't. India v. Cargill, 867 F.2d,130,1330, 1333 The arbitrators must have known of a governing legal principle in order to vacate an award, but have failed to enforce or disregard it, and the rule ignored by the arbitrators must be clearly described. 

A recent employment contract case in New York State led to a ruling by the Court of Appeals for the Second Circuit ('Court of Appeals') of the United States, which offers further guidance on this basis for the annulment of an arbitration award, Halligan v. Piper Jaffray, Inc., et. Al., F.3d148, 197 Halligan was reportedly wrongfully dismissed by his employer and brought his case to arbitration under the Age Discrimination in Jobs Act, in compliance with his employment contract. It was against him that the arbitration decision went and the case made its way to the Court of Appeals. 

Establishing Manifest Disregard of the Law 

In the Halligan case, the Court of Appeals established a thorough examination of the record in this age discrimination case. The court found that Halligan proved unanimously that he did not willingly retire and that there was no company or performance-related justification for his discharge to be justified. The only logical inference, therefore, is that the age of the claimant was the basis of his discharge. 

There was no disagreement in this case with respect to the relevant statute. The parties decided on the relevant provisions of the law and its prohibition on such employer practices in the arbitration, the trial court, and before the Court of Appeals. There was, however, no written clarification by the arbitrators of the ruling. Although that may have been helpful in determining this case, and while most arbitration parties may like a written judgment if the award is not exactly as expected, a written explanation is not uniformly needed. The rules of the American Arbitration Association, for example, specify that a written judgment justifying the award will be issued if the parties make the request in advance of the arbitration proceedings and the arbitrator's consent. Without a formal opinion, the Court of Appeals in Halligan did not specifically criticize the process of granting an award. However, the Court of Appeals did not, without a written opinion, find any reason for the decision which the court may have imagined would be credible and supportable. The adverse decision was then reversed when the Court of Appeals found that the arbitrators simply disregarded the rule because they did not clarify the law. 


This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.

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BY : Shivani Kinniwadi

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