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The 10th Circuit Court of Appeals found an accusation of manifest disregard of the law to be unfounded, though the arbitrator's use of applicable abuse of process law made this conclusion a "close call."
In Hicks v. Bank of America, N.A., Nos. 05-1399, 05-1525, 2007 WL 521175 (10th Cir. Feb. 21, 2007), Hicks assumed personal liability on a substantial loan for his business from Bank of America (BOA), though for technical reasons the written and signed note included a greater financial liability than Hicks had actually assumed.
Even though the loan contained an arbitration agreement, when the note was later sold to Cadle Company, Cadle ignored the arbitration clause, and despite knowledge of a BOA letter indicating that Hicks had already fulfilled his obligation, haled Hicks into court for the full amount of the loan.
The arbitrator awarded $400,000 to Hicks for Cadle's abuse of process in attempting to collect in court. Hicks moved to confirm the award in court.
In ruling that the arbitrator had not shown manifest disregard, the Court noted that even though there were legitimate questions about the extent of Hicks liability, there was just enough indication in the "Delphic" decision to indicate a legitimate basis for the award.
More specifically, the Court found the arbitrator had established that Cadle was on notice that Hicks was not liable, that Cadle filed suit in federal district court despite the clear language of the arbitration provision, and that Cadle sent baseless letters to attorneys generals of two states claiming Hicks had committed bank fraud.
Though Cadle's actual liability for abuse of process in attempting to collect from Hicks was a "close call," the Court determined that there was not enough evidence of "manifest disregard" to provide any basis for vacating the award for Hicks.
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