SDNY Retains Restrictive View of "Manifest Disregard of Law" as a Basis for Vacating Maritime Award

February 2002

LeRoy Lambert


As arbitration becomes more common in areas of the law traditionally left to the courts, such as employment and consumer law, courts that have not previously had to deal with petitions to vacate awards under the Federal Arbitration Act have issued decisions regarding the non-statutory ground of "manifest disregard of law." New York is the traditional site of maritime arbitrations in the United States, and the United States District Court for the Southern District of New York is the court most likely to hear and decide motions to vacate such awards. Recent court decisions involving awards in other areas of law, and even one purely commercial dispute, Westerbeke Corp. v. Daihatsu Motor Co., 162 F.Supp.2d 278 (S.D.N.Y. 2001)(Judge Marrero)(appeal pending), have caused maritime lawyers in New York to wonder whether judges in the Southern District of New York may now be more inclined to vacate an award in a typical maritime dispute.

The answer so far for maritime cases seems to be: "No." See, e.g., Page International Ltd. v. Adam Maritime Corp., 53 F.Supp.2d 591 (S.D.N.Y. 1999)(Judge Berman); Duferco, S.A. v. Ocean Wide Shipping Corp., 2001 AMC 536 (S.D.N.Y. 2000)(Judge Berman); Possehl v. Shanghai Hai Xing Shipping, 2001 U.S.Dist. LEXIS 2169 (S.D.N.Y. 2001)(Judge Sweet). Zorra Transp., Inc. v. Seaboard Trading & Shipping, 2001 U.S. Dist. LEXIS 4923 (S.D.N.Y. 2001)(Judge Jones); E.I. du Pont de Nemours & Co. v. JO Tankers B.V., 172 F.Supp.2d 405 (S.D.N.Y. 2002)(Judge Koeltl); and Stolt Tankers, Inc. v. Marcus Oil & Chem., 2001 U.S. Dist. LEXIS 19750 (S.D.N.Y. 2001)(Judge Chin); Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 01 CV 6438, slip. op. (S.D.N.Y. Feb. 11, 2002(Judge Swain). In each cited case, the court refused to vacate the award.

Adhering to precedent, the judges reaffirmed that the court's role in deciding whether to vacate an award was quite limited "in order to avoid undermining the two goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation." In particular, the non-statutory ground of "manifest disregard of law" remains a "high hurdle" to overcome. There must be "something beyond and different from a mere error of law or failure on the part of arbitrators to understand and apply the law."

Accordingly, it remains difficult to persuade a court to vacate a maritime arbitration award on the basis of "manifest disregard of law." As a result, the decision of maritime arbitrators in New York in any given dispute will most likely be the final word on the dispute.