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An arbitrator does not manifestly disregard the law when the party challenging the award does not present evidence that the arbitrator ignored testimony and the award reasonably reflects the contracting parties’ intent, a federal court in Missouri held.
In Value St. Louis Associates, L.P. v. STL 300 N. 4th, LLC, No. 4:05CV01207ERW, 2006 WL 2349623 (E.D. Mo. Aug. 11, 2006), Value, the tenant, made improvements on property leased from STL. The parties’ agreement provided that a demolition fund would be established in the fortieth year of the lease, and Value would deposit 1/36th of the cost of demolition into the fund each year.
The agreement also stated that demolition costs would be determined in the fortieth year and every eighth year after. Both parties obtained estimates of the cost of demolition, but the parties disputed whether the cost of asbestos removal should be included in demolition cost.
An arbitrator held that the cost of asbestos removal should be included in the demolition cost, and Value petitioned the court to partially vacate the award, arguing that the arbitrator did not have the authority to decide the asbestos issue.
Value also argued that the arbitrator manifestly disregarded the law in including the asbestos removal cost because the arbitrator did not consider the parties’ intent when they entered into lease. The lease did not address asbestos removal, and asbestos was a commonly used construction material when the parties entered into the lease.
The Court disagreed with Value’s arguments and confirmed the award. First, the Court noted that the arbitrator had the authority to decide the asbestos issue because whether the cost of demolition included asbestos removal fell within the broad issue of demolition costs that were submitted to the arbitrator.
Second, the Court held that the arbitrator did not manifestly disregard the law. Although Value claimed that the arbitrator did not consider testimony that the parties did not intend to include the cost of asbestos removal, Value offered no evidence to support this accusation.
Additionally, the parties’ agreement called for determining the “then estimated cost of demolishing the improvements,” language that could reasonably be interpreted to encompass costs that the parties did not know would exist when they signed the agreement forty years ago.
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