Alternative Dispute Resolution Process  --- This month's item.

Even manifest disregard of the law isn’t reason to reverse an arbitration decision in Georgia, the state’s highest court decided, because it’s not one of four express grounds listed in the state arbitration code.

The four statutory grounds are 1) corruption, fraud or misconduct in procuring the award; 2) partiality of an arbitrator; 3) the arbitrator overstepping his authority or failing to make a final and definite award; and 4) failure to follow the arbitration code.

Manifest disregard is recognized in a number of other states and federal courts as a rarely used basis for judicial override of an arbitrator’s judgment. Federal courts, applying a similar federal arbitration code, have held that manifest disregard of the law is implicitly a basis for vacatur. However, a five-justice majority of the Supreme Court of Georgia said doing the same in Georgia would be an unwarranted intrusion by the judiciary into the legislative arena. Progressive Data Systems Inc. v. Jefferson Randolph Corp., No. S01G1765 (July 15, 2002).

As a practical matter, however, even jurisdictions that do recognize manifest disregard as a basis for vacatur almost never apply it.  Most arbitration opinions are so short there is no record of how the arbitrator reached a decision.

Furthermore, in commercial disputes, it has been commonplace that arbitrators are not expected to decide the case the way that courts do. There are lots of cases that give arbitrators the power to award punitive damages, even in cases where courts would not.