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Failing to address whether "manifest disregard of the law" remains a valid ground for vacatur or modification of arbitration awards, a New York Supreme Court has confirmed an award of attorney fees for a wrongfully discharged investment bank employee.
In Bear Stearns & Co., Inc. v. Fulco, No. 603973/07, 2008 WL 4489926 (N.Y. Sup. Ct. Sept. 23, 2008), Fulco was hired by Bear Stearns. During the course of employment, Fulco signed an arbitration agreement covering all employment-related claims. Fulco later alleged that he was wrongfully terminated by Bear Stearns and demanded arbitration of the claim.
During closing arguments at arbitration, Bear Stearns argued that attorney fees were unavailable under the law. However, anticipating that Fulco would ask for such fees, Bear Stearns submitted their own fee request. Fulco then asked for attorney fees during his closing arguments. Bear Stearns responded by attempting to withdraw its fee request, arguing that this withdrawal divested the panel of authority to award such fees to either party. See Matza v. Oshman Helfenstein & Matza , 823 N.Y.S.2d 47, 48-49 (N.Y. App. Div. 2006).
The panel awarded attorney fees to Fulco and denied Bear Stearns's request to withdraw its demand for attorney fees. According to the panel, Bear Stearns's failure to withdraw its request gave the panel the authority to award those fees to Fulco.
After the panel denied Bear Stearns' request for reconsideration, Bear Stearns filed a court action to vacate or modify the award. Bear Stearns argued that the panel exceeded its powers and engaged in manifest disregard of the law. Fulco moved to confirm.
Interestingly, the Court did not address whether manifest disregard of the law remains a viable ground for vacatur after the United States Supreme Court's decision in Hall Street Associates, LLC v. Mattel, Inc., 128 S.Ct. 1396, 1404 (2008).
Instead, the Court decided that the panel did not ignore any clearly applicable principle that could constitute manifest disregard of the law. Because each party submitted the demand for fees in their submissions, the Court found that the facts clearly supported the availability of such an award to both parties.
Furthermore, the Court distinguished Matza as involving an arbitration agreement that invoked the more restrictive rules on attorney fee awards than are contained in New York law. Because Fulco's agreement with Bear Stearns clearly invoked the Federal Arbitration Act, which contains no such limitation, the Court could not find manifest disregard of the law.
Alternatively, the Court did note that the broad language in the parties' arbitration agreement here encompassing "all controversies" suggested the intent to make attorney fees awards available.
Accordingly, the Court found that the panel did not engage in manifest disregard of law, observed that a basis for the award amount could be ascertained from the facts, and confirmed the award.
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