864 F.3d 1080
10th Cir.2017Background
- Guadalupe Duran was admitted to a New Mexico nursing home; after falls and surgery she died. Her granddaughter Lovato sued for wrongful death.
- Duran’s daughter signed an Admission Agreement containing an Arbitration Agreement specifying arbitration "governed by and interpreted under the Federal Arbitration Act" and referencing the National Arbitration Forum (NAF) Code.
- A federal court compelled arbitration; a single arbitrator conducted a four-day arbitration and awarded Lovato $475,000 in compensatory damages.
- After post-arbitration briefing, the arbitrator awarded additional $245,462.75 (costs, half of arbitrator’s fees, pre- and post-judgment interest), applying New Mexico law via the NM Uniform Arbitration Act (NMUAA) and the NAF Code.
- THI moved to vacate or modify the award in district court, challenging only the costs and interest award; the district court confirmed the award. THI appealed arguing the arbitrator exceeded his authority and manifestly disregarded the law by applying NMUAA remedies despite the Arbitration Agreement’s FAA choice-of-law clause.
Issues
| Issue | Plaintiff's Argument (Lovato) | Defendant's Argument (THI) | Held |
|---|---|---|---|
| Whether the arbitrator exceeded his powers under 9 U.S.C. § 10(a)(4) by applying NMUAA/NAF-authorized remedies (costs & interest) despite the Agreement’s FAA clause | Arbitrator reasonably construed the Agreement, which delegates scope issues to the arbitrator and references the NAF Code permitting remedies and fees; parties’ silence and counsel responses indicated assent to NMUAA application | The Agreement expressly states it is governed by the FAA, which does not authorize the asserted remedies; applying NMUAA contradicts the Agreement and exceeded arbitrator’s authority | Court affirmed: arbitrator did not exceed powers; award had at least some contractual basis (delegation + NAF reference) |
| Whether the arbitrator manifestly disregarded the law by awarding costs and interest | Lovato: arbitrator followed a permissible construction (NMUAA/NAF incorporation); no willful inattentiveness to governing law | THI: arbitrator knew FAA governed and nonetheless applied conflicting state law remedies, warranting vacatur for manifest disregard | Court affirmed: no evidence of willful inattentiveness or explicit disregard; manifest-disregard exception not established |
| Whether FAA preemption barred application of NMUAA remedies | Lovato: FAA does not affirmatively prohibit state-law remedies; state law applies unless it conflicts with FAA; here no conflict | THI: FAA designation should control and preempt state-law remedial rules authorizing costs/interest | Court: FAA does not conflict with NMUAA here; NMUAA/NAF incorporation did not undermine FAA policies; state law remedies could be applied |
Key Cases Cited
- Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013) (extremely limited grounds for vacating arbitration awards)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (arbitrators’ constructions of agreements are afforded deference)
- United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29 (1987) (arbitrator may not ignore plain contractual language; courts will not overturn mere errors)
- Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) (limits on judicial expansion of FAA review grounds)
- Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp., 559 U.S. 662 (2010) (serious error insufficient for vacatur)
- Dominion Video Satellite, Inc. v. Echostar Satellite L.L.C., 430 F.3d 1269 (10th Cir. 2005) (manifest-disregard standard requires showing arbitrators knew the law and explicitly disregarded it)