May 20, 2016

May 20, 2016:

Texas Supreme Court holds that under the TAA the grounds for vacatur enumerated in the statute are exclusive and manifest disregard of the law is no longer available as a vacatur ground, thus resolving, as a matter of state law, an issue on which the federal circuit courts of appeals (construing the FAA) are split.  Hoskins v. Hoskins, 497 S.W.3d 490 (Tex. 2016).

The Federal Arbitration Act lists specific grounds for vacatur of an arbitration award.  9 U.S.C. 10(a).  Manifest disregard of law, long used as a common-law basis for challenging an arbitration award, is not among the listed statutory grounds for vacatur.  Following the United States Supreme Court's decision in Hall Street Associates, L.L.C. v. Mattel, 552 U.S. 576, 585 (2008), federal circuit courts of appeal have split on the issue whether manifest disregard of the law is still available as a basis to challenge an arbitration award.  Some circuits, including the Fifth Circuit, have held that manifest disregard of the law is no longer available as a vacatur ground.  Citigroup Global Mkts. Inc. v. Bacon, 562 F.3d 349, 355-58 (5th Cir. 2009).  Other circuits have disagreed, holding that manifest disregard of the law is still available as a judicial gloss on the challenge grounds set forth in section 10 of the FAA.  In Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 671 n.3 (2010), the Supreme Court recognized this conflict in the circuits, but declined to resolve it.  

In Hoskins, the Texas Supreme Court resolved this issue, as a matter of state law, for arbitrations governed by the Texas Arbitration Act.  The TAA, like the FAA, lists specific grounds for vacating an arbitration award and also for modifying or correcting an award.  Tex. Civ. Prac. & Rem. Code 171.088(a), 171.091(a).  Manifest disregard of the law is not among those grounds.  The TAA further provides that "[u]nless grounds are offered for vacating, modifying, or correcting an award under Section 171.088 or 171.091, the court, on application of a party, shall confirm the award."  Id. 171.087 (emphasis added).  In determining that manifest disregard of the law is no longer available as a vacatur ground, the Texas Supreme Court found the TAA statutory language dispositive:  "The statutory text could not be plainer: the trial court 'shall confirm' an award unless vacatur is required under one of the enumerated grounds in section 171.088.  . . .  [T]he TAA leaves no room for courts to expand on those grounds, which do not include an arbitrator's manifest disregard of the law."  497 S.W.3d at 494.  

Justice Willett issued a concurring opinion for the purpose of placing a punctuation mark on the court's ruling.  "Our holding that the TAA's vacatur grounds are exclusive establishes that manifest disregard and, for all practical purposes, all other common-law vacatur doctrines are no longer viable with regard to arbitrations governed by the TAA.  The upshot of today's decision is that we avoid the sort of quagmire that surrounds the TAA's federal counterpart, the Federal Arbitration Act . . . ."  Id. at 498.    

 

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