Arbitration

7th Circuit Reminds District Court: Manifest Disregard of the Law Is Not Grounds for Vacating an Arbitration Award

November 10, 2011

One of the risks of electing to resolve a dispute in arbitration is that, apart from a few narrow exceptions, the decision of the arbitrator is non-appealable.  This can be very hard on the losing party, who believes the arbitrator completely misapplied the law or, in the terminology of the courts, “manifestly disregarded” the law. Affymax believed it was faced with such a situation when an arbitration panel ruled in favor of Otho-McNeil-Janssen on certain issues in a complicated patent dispute.  Affymax challenged the panel’s decision, and the federal district court reversed part of the arbitration panel’s award. Wrong, said Chief Judge Easterbrook of the 7th Circuit Court of Appeals in Affymax, Inc. v. Ortho-McNeil-Janssen Pharmaceuticals, Inc., decided on October 3, 2011:  “Manifest disregard of the law” is not a ground on which a court may reject an arbitrator’s award.  The First Circuit, where I practice, has made this clear as well.  See Ramos-Santiago v. United Parcel Service, 524 F.3d 120, 124 n.3 (1st Cir. 2008) (“manifest disregard of the law is not a valid ground for vacating or modifying an arbitral award in cases brought under the Federal Arbitration Act”).

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