THE MANIFEST DISREGARD OF THE LAW RULE IN FLORIDA – GOING, GOING … BUT NOT GONE

The doctrine of “manifest disregard of the law” has always been a narrow ground for setting aside an arbitration award in Florida.  The proof has required not only that the arbitrator applied the wrong legal standard, but that he or she did so deliberately; i.e., that the arbitrator was aware that there was a settled principle of law that controlled the dispute but intentionally chose to ignore it.  See Brown v. ITT Consumer Financial Corp., 211 F.3d 1217, 1223 (11th Cir.2000); Wachovia Securities, LLC v. Vogel, 918 So.2d 1004, 1007-1008 (Fla. 2d DCA 2006) (applying federal law under the Federal Arbitration Act).

Then Hall Street[1] came along.  While Hall Street involved an effort to expand the grounds for review for challenging an adverse arbitration award, in the course of holding that such an attempt was impermissible under the FAA, the Supreme Court made several comments seeming to imply that the only grounds for vacating an arbitration award were those specifically enumerated in Section 10 of the FAA itself.  FollowingHall Street, several federal circuit courts have addressed that issue.  Some held that “manifest disregard” survived Hall Street because that rule was shorthand for certain grounds set forth in Section 10; others concluded that “manifest disregard” was no longer a viable legal doctrine.  In 2010, the Eleventh Circuit considered the issue and sided with the circuits holding that Hall Street precluded further application of the “manifest disregard of the law” rule.  Frazier v. Citifinancial Corporation, LLC, 604 F. 3d 1313 (11thCir.2010).

Although Hall Street construed only the FAA and left open the possibility that a state arbitration code could still permit application of the “manifest disregard” rule, Florida’s Arbitration Code is very limited in supplying grounds for vacating an arbitration award.  Not only does it list grounds for vacatur which are similar to those of the FAA, but it contains the specific admonition not found in the FAA that “the fact that the relief was such that it could not or would not be granted by a court of law or equity is not ground for vacating or refusing to confirm the award.” Fla. Stat. § 682.13(1).  Thus, the Florida Supreme Court has held that “To allow judicial review of the merits of an arbitration award for any reasons other than those stated in section 682.13(1) would undermine the purpose of settling disputes through arbitration.”  Schnurmacher Holding, Inc. v. Noriega, 542 So. 2d 1327, 1329 (Fla. 1989).

Accordingly, it appears that the “manifest disregard of the law” doctrine is dead in Florida, whether raised under the FAA or under the Florida Arbitration Code, unless the U.S. Supreme Court eventually holds otherwise, right?

Not so fast.

Florida courts have concluded that they have jurisdiction to entertain motions to vacate pursuant to the FAA as well as motions to confirm.  A.G. Edwards & Sons, Inc. v. Petrucci, 525 So.2d 918, 920-21 (Fla. 2d DCA 1988).  In doing so, they apply federal law, because the Federal Arbitration Act supersedes Florida law where interstate commerce is involved. United Servs. Gen. Life Co. v. Bauer, 568 So.2d 1321, 1322 (Fla. 2d DCA 1990). However, Florida courts will not necessarily adopt theEleventh Circuit interpretation of federal law.  Mora v. Abraham Chevrolet-Tampa, Inc., 913 So.2d 32, 35 (Fla. 2005) (“in the realm of federal statutory law, decisions of federal circuit courts are persuasive, but we are bound only by decisions of the United States Supreme Court”); Raymond James Fin. Servs., Inc. v. Saldukas, 851 So.2d 853, 856 (Fla. 2d DCA 2003), approved, 896 So.2d 707 (Fla.2005) (“this court is not bound by decisions of the Eleventh Circuit on issues of federal law”).  As Frazier v. Citifinancial Corporation, LLC, supra, makes clear, there is a split in the circuits regarding the continued existence of the “manifest disregard” doctrine after Hall Street which has not yet been resolved by the U.S. Supreme Court.  Moreover, there are no Florida appellate court decisions as of yet that have ruled on the correct interpretation of Hall Street with respect to this issue.

Presumably an aggrieved party will eventually move to vacate an arbitration award covered by the FAA in a Florida court instead of a federal court in order to avoid the Eleventh Circuit rule on “manifest disregard.”  It will be interesting to see if Florida courts will adopt the Eleventh Circuit approach to “manifest disregard” – by no means a sure thing – or whether they will adopt a different approach.  Until then, while “manifest disregard of the law” may be on life support in Florida, it is not yet entirely dead.[2]


[1] Hall Street Assoc., L.L.C. v. Mattel, Inc., 552 U.S. 576, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008).

[2] As an arbitrator, the author must confess to having mixed feelings about the Eleventh Circuit disallowance of non-statutory grounds for vacatur like “manifest disregard of the law.”  On the one hand, no arbitrator is fond of the threat of having one of his or her awards set aside.  One the other hand, it is difficult to keep a straight face while assuring parties that arbitral finality is so important that an award should not be overturned even when the arbitrator has blatantly and intentionally ignored settled law to a party’s prejudice.

DOUBLE JEOPARDY IN LABOR ARBITRATIONS