The Fifth Circuit Court of Appeals has rejected an aggrieved party's challenge to an arbitration award based on "manifest disregard of the law," holding that, even if manifest disregard remains a valid ground for vacatur under the Federal Arbitration Act (FAA), it could not be found to apply to this particular award.

In Rogers v. KBR Technical Services, Inc., No. 08-20036, 2008 WL 2337184 (5th Cir. June 9, 2008), Rogers entered into an employment contract for work in Afghanistan with KBR. As part of the contract, Rogers agreed to submit all employment-related disputes to arbitration under the Halliburton Dispute Resolution Program (HDRP).

During his employment, Rogers allegedly left his camp without permission and was terminated. Rogers later filed a lawsuit against KBR, alleging various employment-related claims. KBR moved to compel arbitration. The district court granted the motion. The arbitrator later ruled against Rogers on all but two wage claims. KBR moved to confirm the award. Rogers moved to vacate it. The district court confirmed the award, and after his motions to reconsider were denied, Rogers appealed.

On appeal, the Court first decided that the arbitrator did not manifestly disregard the law or exceed his powers by applying American Arbitration Association (AAA) rules to Rogers’ dispute. The HDRP indicated that disputes would be governed by the rules in effect at the time the demand for arbitration was filed, and the AAA rules were not in the HDRP at the time the arbitration agreement was first entered. However, evidence indicated that by the time KBR actually demanded arbitration, the HDRP specifically incorporated the AAA rules. Therefore, the Court found that the arbitrator’s application of the AAA rules was rationally inferable from the agreement and did not amount to manifest disregard or an exceeding of powers.

Second, the Court determined that the arbitrator had not manifestly disregarded the law when he refused to grant Rogers a default judgment based on KBR's failure to timely submit an answering statement. While the applicable rules did bar the arbitrator from considering KBR's untimely answer, the rules did not mandate an entry of default judgment against the party that did not timely answer. Instead, the arbitrator simply did not consider the answer's contents in rendering his decision.

Third, the Court decided that the arbitrator did not manifestly disregard the law by finding that KBR did not breach its contract by not providing Rogers with an Afghan visa. Such accommodation, said the Court, was only legally required if Rogers had not been provided military transport in and out of the country. Because KBR provided Rogers this transportation, his presence in Afghanistan was legal and complied with the terms of his contract.

Fourth, the Court determined that the arbitrator's failure to provide a reasoned award on Rogers's personal injury and false advertising claims did not violate the arbitration agreement, because Rogers was unable to cite any such request by him during the initiation of proceedings as required under the rules.

Finally, the Court determined that the district court did not err in denying Rogers's motions for reconsideration. It noted that the new evidence Rogers asserted during reconsideration should have been made in his initial motion to vacate instead of in a post-judgment motion after confirmation. By not raising these grounds in the motion to vacate, the Court found them waived upon his petition for reconsideration.

Because the Court decided that the arbitrator had not, in fact, manifestly disregarded the law in rendering the award, it found it did not need to consider whether non-statutory grounds for vacatur – such as manifest disregard of the law – remain good law after Hall Street. However, the Court noted in dicta that the United States Supreme Court "recently held that the provisions of the FAA are the exclusive grounds for expedited vacatur and modification of an arbitration award." Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. ___, 128 S.Ct. 1396, 1403, n.5 (2008) (citing 9 U.S.C. §§ 10 & 11 as exclusive grounds for vacatur and modification, respectively).

Some conflicting post-Hall Street decisions in the courts of the Fifth Circuit exist as to the continued validity of manifest disregard as a ground for vacatur under the FAA. Compare Halliburton Energy Servs., Inc. v. NL Inds., 553 F.Supp.2d 733, 753 (S.D. Tex. 2008) ("[T]his court analyzes the parties' arguments using ‘manifest disregard’ as both a summary of some of the statutory grounds and as an additional ground for vacatur."), with Redish v. Yellow Transp., Inc., No. 3-07-CV-1065-O, 2008 WL 2572658, at *4 (N.D. Tex. June 24, 2008) (finding that Hall Street held that the FAA's statutory grounds for vacatur were exclusive and parties could not expand the scope of review for manifest disregard of the law).