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A federal court in New York refused to vacate an arbitration award for manifest disregard of the law when the arbitrators' findings could be justified by at least some evidence.
In Merrill Lynch, Pierce, Fenner & Smith Inc. v. Savino, No. 06 Civ. 868(LAP), 2007 WL 895767 (S.D.N.Y. Mar. 23, 2007), Merrill Lynch fired Savino and other co-defendants (employees) after accusations were made that the employees violated "market timing" policies. The employees brought claims against Merrill Lynch, alleging that they had been defamed. An arbitration panel issued an award in favor of the employees.
Merrill Lynch sought to have the award vacated, arguing that the arbitrator manifestly disregarded the law and that the award violated public policy.
In refusing to vacate the award, the Court first noted that when an arbitration panel does not offer a clear explanation of the basis of the award, a court must accept any "barely colorable justification" it can discern.
The Court noted that the employees presented sufficient evidence to justify the arbitrators' finding of defamation and the finding that that the qualified privilege claimed by Merrill Lynch was not applicable in this situation.
Additionally, the Court held that the public policy of "not allowing wrongdoers to benefit from their wrongs" is not a widely recognized, explicit public policy and therefore insufficient to support vacatur of the arbitration award on public policy grounds.
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