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A federal district court in Missouri rejected an employer’s argument that an arbitrator manifestly disregarded the law in deciding an employment case, instead holding that the employer’s appeal showed nothing more than disagreement with the outcome of the arbitration.
In Terminix Intern. Co., L.P. v. Ferrario, No. 4:06CV879 HEA, 2006 WL 2546814 (E.D. Mo. Aug. 31, 2006), Terminix, a pest control company, filed an arbitration claim against Ferrario and Williams, two former employees, when they attempted to buy their own pest control business. Terminix alleged that the employee’s attempt to buy the business violated their noncompete agreement and fiduciary duties.
The arbitrator ruled in favor of the employees, finding that Ferrario and Williams had no fiduciary duty to disclose the prospective purchase to Terminix because they were not high level employees. The arbitrator also found that the employees did not violate the noncompete agreement because the small size of the company took it out of competition with nation-wide Terminix.
Terminix moved to vacate the award, arguing that the arbitrator’s decision manifestly disregarded the law.
In considering Terminix’s motion, the Court explained that manifest disregard of the law exists when the arbitrator clearly identifies the applicable law and then ignores it. Merely misapplying the law is insufficient to demonstrate manifest disregard. In this case, the arbitrator recognized the applicable law with respect to fiduciary duty and noncompete agreements, but did not ignore it. Instead, the arbitrator, in a reasoned award, applied the law and found against Terminix. Terminix’s appeal sought nothing more than a factual review of the arbitrator’s decision, which the Court is forbidden from doing.
Since Terminix was unable to show that the arbitrator deliberately ignored any applicable law, the court denied its motion to vacate.
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