Reviewing a motion to vacate an arbitration award under a highly deferential standard that does not recognize "manifest disregard of the law" as a valid extra-statutory ground does not constitute a due process violation, according to a federal district court in Texas.

In Halliburton Energy Services, Inc. v. NL Industries, Civ. A. Nos. H-05-4160, H-06-3504, 2008 WL 3165687, (S.D. Tex. Aug. 4, 2008), two arbitration awards were issued in favor of NL Industries (NLI) and against Halliburton. The awards were reduced to a final judgment. Halliburton then moved to set aside the judgment under Fed. R. Civ. P. 59(e), arguing that the Court’s refusal to review the awards for manifest disregard of the law amounted to a violation of Halliburton’s due process rights and "call[ed] into question the correctness of the judgment."

Specifically, Halliburton argued that "requiring a district court to uphold a decision from a quasi-judicial body that ignores or pays no attention to the law is fundamentally unfair and unconstitutional."

The Court denied the motion to set aside the judgment. The Court noted that Halliburton did not argue that a particular point of law was manifestly disregarded by the arbitrator in rendering the two awards. Rather, it argued that the application of a highly deferential standard of review to the awards that does not consider manifest disregard to be a ground for vacatur violated Halliburton’s due process rights.

The Court reminded Halliburton that it had previously considered vacating the awards under the exclusive statutory grounds for vacatur within the Federal Arbitration Act (FAA), 9 U.S.C. § 10, as well as under the more permissive Fifth Circuit formulation that included manifest disregard as a valid extra-statutory ground. See Halliburton Energy Servs., Inc. v. NL Indus., 553 F.Supp.2d 733, 753 (5th Cir. 2008) (using both standards out of "an abundance of caution"). Neither standard warranted vacatur.

Also, the Court observed that Halliburton did not and could not point to any case law supporting the proposition that the statutory deferential review given to arbitration awards violates a party’s due process rights. See, e.g.,Hall St. Assocs. L.L.C. v. Mattel, Inc., 128 S.Ct. 1396, 1405 (2008) (confining judicial review to statutory grounds).

The Court also found that even if Halliburton’s due process argument was legally sound, it was barred from raising the argument for the first time on a Rule 59 motion. A new legal theory not previously presented is not the proper subject matter of a motion to set aside a judgment under Rule 59.