Auto Equity Loans of Delaware, LLC v. Baird, 232 A.3d 1293

Three Pennsylvania residents traveled to Auto Equity Loans of Delaware (AEL) in Wilmington, signed high-interest car-loan agreements, and agreed to arbitration in Delaware under the Federal Arbitration Act; each contract contained a Delaware choice-of-law clause.
Borrowers later demanded arbitration in Delaware, claiming the loans were usurious under Pennsylvania law (and asserting other consumer claims).
The arbitrator applied Pennsylvania substantive law—relying on several post‑2012 cases—and awarded damages to the borrowers.
AEL sought vacatur in the Delaware Court of Common Pleas, arguing the arbitrator manifestly disregarded the law by failing to apply the contracts’ Delaware choice-of-law clause; the trial court vacated two awards.
The Delaware Superior Court reversed and reinstated the vacated awards, finding some record support for the arbitrator’s choice of law and emphasizing the narrow standard for vacatur of arbitration awards.
The Delaware Supreme Court affirmed the Superior Court: although the arbitrator’s choice-of-law analysis was debatable, AEL did not meet the heavy burden to show the arbitrator manifestly disregarded the law or exceeded his powers.

Issue	Plaintiff's Argument (AEL)	Defendant's Argument (Borrowers)	Held
Whether the arbitrator manifestly disregarded the law by applying Pennsylvania law	Arbitrator ignored Delaware choice-of-law clause, failed proper Restatement analysis, and relied on inapposite cases	Arbitrator had precedent and authority supporting application of Pennsylvania law in similar facts	No—arbitrator did not manifestly disregard the law; record showed some support for his choice and no willful flouting
Whether the awards should be vacated under FAA §10 as exceeding the arbitrator's powers	Applying the wrong law exceeded powers and warrants vacatur	Legal error or disagreement is insufficient; FAA vacatur standards are narrow	No—AEL failed to show the three-part manifest-disregard test (knew, appreciated, willfully flouted)
Whether the contractual Delaware choice-of-law clause was dispositive	The clause controls and forecloses application of Pennsylvania usury law	A choice-of-law clause can yield to another state's fundamental public policy (e.g., usury) under the Restatement	Held that the clause was not automatically dispositive; the Restatement/public-policy considerations could support the arbitrator's decision
Whether mere legal error justifies vacatur	Legal error here equaled manifest disregard warranting vacatur	Mere error or misreading of cases does not meet the manifest-disregard standard	Mere legal error is insufficient; must show conscious refusal to apply controlling law, which AEL did not prove

SPX Corp. v. Garda USA, Inc., 94 A.3d 745 (Del. 2014) (describes narrow standard for judicial review of arbitration and articulates manifest-disregard framework)
Hall St. Assocs. v. Mattel, Inc., 552 U.S. 576 (2008) (holding FAA §§10–11 provide exclusive statutory grounds for vacatur/modification and noting debate over "manifest disregard")
Duferco Int’l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383 (2d Cir. 2003) (definition of manifest disregard as conscious ignorance of a clearly defined governing legal principle)
Kaneff v. Delaware Title Loans, 587 F.3d 616 (3d Cir. 2009) (Third Circuit decision referenced by the arbitrator and considered relevant to choice-of-law disputes in similar fact patterns)
Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d 349 (5th Cir. 2009) (circuit court view rejecting manifest-disregard as an independent nonstatutory ground for vacatur)
Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277 (9th Cir. 2009) (circuit court treating manifest-disregard as shorthand for statutory FAA §10(a)(4) grounds)