We like cases like HDI Global SE v. Phillips 66 Co., No. 20-1743-
cv (2d Cir. Mar. 24, 2021) (summary order), because they can be summed up nicely by liberally quoting the Opinion.
The issues? “A litigant seeking to vacate an arbitration award based on alleged manifest disregard of the law bears a heavy burden, as awards are vacated on grounds of manifest disregard only in those exceedingly rare instances where some egregious impropriety on the part of the arbitrator is apparent. This Court will uphold an arbitration award if the arbitrator’s decision has ‘a barely colorable justification.’ See Telenor Mobile Commc’ns AS v. Storm LLC, 584 F.3d 396, 407 (2d Cir. 2009) (internal quotation marks omitted).”
What constitutes “manifest disregard”? An arbitration award manifestly disregards the parties’ agreement: “if it ‘ignor[es] the clear meaning of contract terms.’ Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys “R” Us, Inc., 126 F.3d 15, 25 (2d Cir. 1997). An arbitration award manifestly disregards the law if ‘(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.’ Porzig v. Dresdner, Kleinwort, Benson, N. Am. LLC, 497 F.3d 133, 139 (2d Cir. 2007) (internal quotation marks omitted).
On appeal, HDI argues that the arbitration award manifestly disregards the Policy because it applies the End Use Exception to the Pollution Exclusion even when Tosco lacks evidence of an end-use.” And the holding? “HDI’s issue appears to be with the arbitration panel’s definition of an end-use in its June 11, 2013 order as ‘the full range of end uses of the completed product (M[t]BE treated gasoline), . . . includ[ing] the full range of functions that arise out of those end uses.’ App’x at 184. HDI argued to the arbitration panel, as it does here, that this definition of an end-use arguably encompasses all liability covered by the Pollution Exclusion. In response, the arbitration panel emphasized that the end-use requirement was only one of three requirements necessary for the End Use Exception to apply. Even if we disagreed with the arbitration panel’s reading of the Policy, that would be insufficient to vacate the award. See Alghanim & Sons, 126 F.3d at 25 (‘We will not overturn the arbitrator’s award merely because we do not concur with the arbitrator’s reading of the agreement’).”
(ed: Summing up: in this Circuit, manifest disregard may still be available as a basis for challenging an award, but it’s very hard to prove.)
(Re-posted from the weekly Securities Arbitration Alert dated 8 April 2021.)
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