Manifest Disregard of the Law Lives in New York State Court

Judicial review of arbitration awards is extremely limited. One judicially created grounds for vacating arbitration awards is where the arbitrators acted in "manifest disregard of the law." This situation arises where a court finds “both that (1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case.”  Sci. Games Corp. v Mohawk Gaming Enterprises LLC, 217 AD3d 556, 557 [1st Dept 2023].  As the Court in Mohawk Gaming explained, "[b]ecause the parties ‘bargained for the arbitrator's construction of their agreement,’ an arbitral decision ‘even arguably construing or applying the contract’ must stand, regardless of a court's view of its (de)merits.” 

The issue in Mohawk Gaming was whether the arbitrator was correct in determining that the parties' agreement to arbitrate at the the American Arbitration Association allowed for class arbitrations.  The Court held that the arbitrator did not manifestly disregard the applicable law by reasoning that “the plain meaning of the words of the arbitration clause unambiguously permitted class arbitrations.  As the arbitrator noted, [one of the parties] intentionally broadened the standard AAA arbitration clause in five different ways—to “any,” the parties added “any and all”; to “controversies, disputes or claims,” they added, “of any nature”; “arising directly or indirectly”; “including without limitation”; “arising out of”; or “in connection with”—because it wanted the Arbitration Clause to cover every type of dispute, controversy, or claim that could conceivably be related—directly or indirectly—to the Agreement.” Id.  Accordingly, the Court held that the arbitrator arguably interpreted the arbitration agreement and thus it would not overturn the arbitrator's decision.

This case from June 2023 reaffirms the continuing deference courts will show to arbitral decisions.  It also shows that parties can craft arbitration agreements to meet their needs and that they should assume that any doubts regarding the scope of the arbitration agreement will be resolved in