Is “Manifest Disregard of Facts” Grounds to Vacate Arbitration Award?

By Leslie King O’Neal

9th Circuit Says “Manifest Disregard of Facts” Can Be Grounds to Vacate

Attorneys’ Fee Award Contrary to Parties’ Earlier Stipulation

In the VIP Mortgage case the arbitrator awarded attorneys’ fees that included time spent on earlier settled counterclaims, although the parties stipulated each side would bear their own fees and costs for those claims. The stipulation occurred over a year before the attorneys’ fee award. The arbitrator awarded Gates damages, attorneys’ fees and liquidated damages. VIP Mortgage objected to Gates’ attorney’s fees, but it did not remind the arbitrator of the prior stipulation.

Ignoring Stipulation Not “Manifest Disregard of Facts”

The 9^th Circuit recognizes manifest disregard of facts as “a narrow basis for vacatur where the facts are ‘so firmly established that an arbitrator cannot fail to recognize them without manifestly disregarding the law.’”

The 9^th Circuit noted that the arbitrator may have forgotten about the earlier stipulation and neither party reminded her of it in their briefings on attorneys’ fees.  It found the attorney’s fees claim was an ancillary matter with no bearing on the overall case result. Therefore, the court found the arbitrator did not ignore a legally dispositive fact to orchestrate a desired outcome and affirmed the award.

Are FAA’s Grounds to Vacate Awards Exclusive?

The VIP Mortgage case makes the muddy waters surrounding FAA §10 even murkier. The Federal Arbitration Act §10[iii] lists four grounds for vacating an arbitration award.[iv]  In Hall Street Associates, LLC v. Mattel, Inc.,[v] SCOTUS found the FAA grounds were the exclusive grounds to vacate arbitration awards, stating[vi] “We hold the statutory grounds are exclusive.”  In Hall Street the parties’ contract provided additional grounds for vacating the award, which SCOTUS held invalid. This holding seems to preclude any other grounds for vacating arbitration awards. Unfortunately, this is not the case in all Circuits.

SCOTUS Muddies Waters Regarding “Manifest Disregard of Law”

FAA §10 does not include “manifest disregard of facts” or “manifest disregard of the law” as grounds for vacatur. However, Hall Street did not specifically state that awards could not be vacated for “manifest disregard of law.” This has allowed some courts to continue to use “manifest disregard” as grounds to vacate. Unfortunately, SCOTUS has declined the opportunity to clarify the law and instead has muddied the waters. In Stolt-Nielsen S.A. v. Animal Feeds International Corp.[vii] the Court stated, “We do not decide whether  ‘manifest disregard’ survives our decision in Hall Street Associates, L. L. C. v. Mattel, [citation omitted] as an independent ground for review or as a judicial gloss on the enumerated grounds for vacatur set forth at 9 U. S. C. §10.”[viii]

Circuits Split on “Manifest Disregard of Law” as Grounds to Vacate

SCOTUS’s lack of clarity has allowed the circuits to split on whether “manifest disregard of law” is a valid ground to vacate arbitration awards .Four circuits reject “manifest disregard” as grounds to vacate.[ix] Four circuits allow it.[x] Four circuits are undecided.[xi] Whether this is grounds to vacate depends on the Circuit where the arbitration award was issued.

Recent Cases Show Circuit Split

Two recent cases from the 5^th and 8^th Circuits exemplify the split. Last year the 5^th Circuit denied “manifest disregard of law” as grounds to vacate an award, upholding the arbitrators’ contract interpretation “however good, bad or ugly.”[xii]

Effect of “Manifest Disregard of Law”

However, in another recent case, Zeidman v. Lindell Management[xiii] the 8^th Circuit vacated an arbitration award, stating: “Likewise, an arbitration award may be vacated if it evidences “manifest disregard for law” — if the panel based its decision on ‘some body of thought, or feeling, or policy, or law that is outside the contract.’”[xiv]

SCOTUS Declines Opportunity to Clarify Law

Unfortunately, the U.S. Supreme Court denied certiorari in the Zeidman case. Many arbitrators and commentators hoped SCOTUS would use that case to clarify Hall Street and resolve the circuit split on “manifest disregard of law” as grounds to vacate.

Muddled Law Creates Uncertainty

The Circuit split and SCOTUS’s failure to clarify Hall Street create uncertainty for lawyers considering filing motions to vacate arbitration awards. “Manifest disregard of the law” and “manifest disregard of undisputed facts” may be grounds to vacate in eight of the twelve federal Circuits.

Takeaways

• Check the applicable law in the Circuit where the motion to vacate will be filed before citing “manifest disregard of law” as grounds.
• Review the arbitration record and remind arbitrators of any stipulations of fact made during the proceedings.

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[i] 9 U.S.C. §10.

[ii] VIP Mortgage, Inc. v. Gates (Case No: 2:24-cv-02865)(9^th Cir. December 22, 2025). https://law.justia.com/cases/federal/appellate-courts/ca9/24-7624/24-7624-2025-12-22.html

[iii] 9 U.S.C. §§ 1-16

[iv](1) the award was procured by corruption, fraud, or undue means; (2) there was evident partiality or corruption in the arbitrators, or either of them; (3) the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

[v] 552 U.S. 516 (2008).

[vi] Id.

[vii] 559 U.S. 662 (2010).

[viii] 559 U.S. 662, 672, note 3.

[ix] 5^th Circuit, 7^th Circuit, 8^th Circuit, 11^th Circuit.

[x] 2d Circuit, 4^th Circuit, 6^th Circuit, 9^th Circuit.

[xi] 1^st Circuit, 3d Circuit, 10^th Circuit, D.C. Circuit. See Joshua Daniel Jones and Elizabeth C. Wheeler, Manifest Disregard as Grounds for Vacatur after Hall Street, ABA Litigation Section, Alternative Dispute Resolution Committee (March 28, 2025) https://www.bressler.com/publication-manifest-disregard-as-grounds-for-vacatur-after-hall-street

[xii] 135 F.4^th 303 (5^th Cir. 2025).

[xiii] 145 F.4^th 820 (8^th Cir. 2025).

[xiv] Id. Citing CenterPoint Energy Res. Corp. v. Gas Workers Union, Loc. No. 340, 9020 F.3d 1163, 1167 (8th Cir. 2019), quoting Ethyl Corp. v. United Steelworkers of Am., 768 F.2d 180, 185 (7th Cir. 1985).