In a case implicating judicial review of arbitration awards under the Federal Arbitration Act (“FAA”), a Michigan company has petitioned the Supreme Court to settle the question of whether the doctrine of manifest disregard of law remains viable after the Court’s ruling in Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. __, 128 S. Ct. 1396 (2008). The petition and reply brief in The Coffee Beanery, LTD., et al., v. WW, LLC, et al., can be viewed here and here.

The petition was bolstered during the summer by the publication of several academic articles recognizing the circuit courts’ divergence on the remaining viability of manifest disregard under § 10 of the FAA. See reply brief, pages 1-2. In fact, one article stated that the Court’s guidance was needed to settle the question left unanswered in Hall Street, “once and for all.” Richard C. Reuben, Building the Civilization of Arbitration: Personal Autonomy and Vacatur after Hall Street, 113 Penn. St. L. Rev. 1103, 1145-46 (2009).

The question arose from an arbitration award to The Coffee Beanery company. The respondents filed suit in federal district court asking for review of the arbitration award under § 10 of the FAA, and the district court affirmed the award.

One issue on appeal was whether § 10 provided judicial review of the arbitration award by means of the manifest disregard of law doctrine. The Sixth Circuit began by noting that review of an arbitrator’s decision under the FAA is one of the narrowest standards of judicial review created by statute. Under § 10, an arbitration award is reviewable only under certain enumerated grounds including where: (1) the award was procured by corruption, fraud, or undue means; (2) arbitrators evidenced partiality or corruption; (3) the arbitrators were guilty of misconduct; and (4) the arbitrators exceeded their power.

Although the Sixth Circuit acknowledged that the Supreme Court in Hall Street had rejected a reading of the FAA allowing vacation of arbitration awards for reasons other than those specified in § 10, the court nevertheless concluded that Hall Street had not explicitly rejected the long-standing judicial doctrine of manifest disregard of law. Describing the doctrine as a “universally recognized principle,” and citing cases from other circuits applying manifest disregard review (albeit pre-Hall Street), the court concluded that manifest disregard review continues unabated. The court then reversed, holding that the arbitrator issued the award to Coffee Beanery under an erroneous interpretation of Maryland franchise law.

The petition argues that the Supreme Court’s review is needed to resolve a “deep, square conflict” over the viability of manifest disregard as a ground for vacating arbitration awards; that decisions applying manifest disregard are in “substantial tension” if not “outright conflict” with Hall Street; and that allowing manifest disregard review erodes the core arbitration benefits of finality and efficiency. The petition also contends that normal vehicle problems hampering certiorari review are not present in Coffee Beanery.

The Coffee Beanery briefs were distributed on September 9, 2009, and according to the Court’s conferencing schedule, the case should be decided on September 29, 2009.