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In light of the United States Supreme Court's recent Hall Street decision, the Alabama Supreme Court has held that manifest disregard of the law is no longer a valid ground for vacatur under the Federal Arbitration Act.
In Hereford v. D.R. Horton, Inc., No. 1070396, 2008 WL 4097594 (Ala. Sept. 5, 2008), Hereford contracted with Horton for construction of a home. The contract contained an arbitration agreement. After Hereford occupied the home, she discovered water damage in one of the bedrooms. Horton attempted to repair the damage, but Hereford was unsatisfied with the repairs. Hereford sought and obtained repairs through her homeowners insurance and later sued Horton for failure to make the repairs.
After settlement negotiations broke down, the dispute was submitted to arbitration. The arbitrator issued an award in favor of Horton. Hereford sought vacatur of the award at the circuit court, but the court found the award valid and confirmed it.
On appeal, Hereford argued that the circuit court erred in confirming the award because the arbitrator manifestly disregarded the law in granting a summary judgment award to Horton. Noting that the Federal Arbitration Act governed this construction dispute, the Court held that manifest disregard of the law was no longer a valid ground for vacatur after the United States Supreme Court's recent decision in Hall St. Assocs., L.L.C. v. Mattel, Inc., 128 S.Ct. 1396, 1404 (2008) (holding the statutory grounds for vacatur "exclusive").
The Court observed that the Hall Street decision required the Court to overrule its prior holding that manifest disregard was a valid extra-statutory ground for vacatur in Birmingham News Co. v. Horn, 901 So.2d 27, 50 (Ala. 2004) (previously interpreting the United States Supreme Court's holding in Wilko v. Swan, 346 U.S. 427, 436-37 (1953), as authorizing manifest disregard of the law as a basis for vacatur).
Because Hereford's only argument for vacatur on appeal was that the arbitrator manifestly disregarded of the law, the Court affirmed the award's confirmation.
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