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The Kentucky Court of Appeals refused to vacate an arbitration award in favor of a horse breeder who failed to disclose a horse’s joint surgery, finding that the arbitrator did not manifestly disregard the law and did not violate any public policy to maintain the integrity of Kentucky’s thoroughbred industry.
In Moore v. Landes, No. 2005-CA-002237-MR, 2006 WL 2919064 (Ky. Ct. App. Oct. 13, 2006), Moore bought a racehorse from Landes at a thoroughbred auction in Maryland. Landes failed to disclose a prior joint surgery on the colt even though the parties’ contract required disclosure. When Moore discovered the surgery, Landes offered the remedy specified in the contract – namely, rescission of the sale and reimbursement for any related expenses. Instead of accepting the specified remedy, Moore kept the horse and sued Landes for fraud.
Pursuant to the contract, the dispute was submitted to veterinary arbitration. The arbitrator found for Landes, concluding that Moore had confirmed the sale by refusing the specified remedy of rescission. The arbitrator also found that Moore failed to prove fraud.
Moore filed a motion to vacate the award, arguing that the arbitrator acted in manifest disregard of the law and contrary to Kentucky’s public policy of maintaining the integrity of the thoroughbred industry.
On appeal, the Court upheld the arbitration award. First, the Court found that the arbitrator correctly applied the law at issue, so there was no manifest disregard of the law. Second, while recognizing that the protection of the thoroughbred industry was important, the Court found that “nothing in the case before us causes us to believe the industry is in peril.” Instead, the Court found that the type of joint surgeries at issue were common in the industry and were addressed by the contract’s provision for rescission. The practice of hiring veterinarians to screen for joint surgeries before purchasing a horse, as Moore did, adds an extra layer of protection to the process.
A court’s authority to vacate an arbitration award as contrary to public policy is very narrow. To come within the public policy exception, an award must run contrary to an explicit, well-defined public policy that can be “ascertained by reference to the laws and legal precedents and not from the general considerations of supposed public interests.” When parties raise only general public policy considerations, there is no basis for vacating an arbitration award. Some states have declined to adopt a public policy exception to the confirmation of arbitration awards. See K.R. Swerdfeger Constr. v. UNM Board of Regents, 142 P.3d 962 (N.M. Ct. App. 2006).
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