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A federal district court in Connecticut upheld an arbitration panel's damages award over objection that the arbitrators manifestly disregarded the law.
In Four Seasons Software, LLC v. ICICI Infotech, Inc., No. 3:05cv171 (SRU), 2006 WL 3791386,(D. Conn. Dec. 22, 2006), Four Seasons agreed to develop software in partnership with ICICI. In the wake of a dispute over project delays and expenses, ICICI refused to provide Four Seasons with the source code. Four Seasons sued in state to obtain the source code, but the Court stayed that action pending arbitration.
An arbitration panel awarded Four Seasons $2,040,000 in damages. ICICI filed a motion to vacate the award, arguing that the arbitration award exhibited manifest disregard of the law.
The Court found that the arbitration panel did not act in manifest disregard of the law because the panel was aware of the governing legal standard and did not ignore or refuse to apply the law. Instead, as the Court explained, the panel's decision demonstrated that the arbitrators "conducted a reasoned, careful analysis, and attempted to apply the governing legal standard to the evidence to calculate the damages award."
The Court further explained that legal error does not constitute manifest disregard of the law, while noting that the arbitration panel "provided much more than 'a barely colorable justification' for its damages award." Since there was no manifest disregard of the law, the Court confirmed the award.
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