A unanimous Second Circuit Panel in Jefferies LLC v. Gegenheimer, No. 20-2273-cv (2d Cir. Jun. 3, 2021) (summary order), denies a “manifest disregard” challenge to a FINRA Award, finding that none of the elements of this “doctrine of last resort” are present.
“First, Gegenheimer argues that the arbitration panel manifestly disregarded New York’s so-called exclusive remedy rule…. Even assuming the exclusive remedy rule applies here, Gegenheimer has failed to meet his burden of establishing manifest disregard, because the arbitration panel had at least a ‘colorable justification’ for finding the liquidated damages provision enforceable.”
The Court also found that the Arbitrators’ failure to render an explained Award did not constitute manifest disregard of the law: “Even where explanation for an award is deficient or non-existent, we will confirm it if a justifiable ground for the decision can be inferred from the facts of the case,” quoting T.Co Metals, LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329, 339 (2d Cir. 2010.
Last, the Court rejects Gegenheimer’s contention that the arbitration panel manifestly disregarded New York law on restrictive covenants in employment contracts: “Here too Gegenheimer fails to carry his burden of establishing manifest disregard. To start, Gegenheimer did not present the panel with any cases involving pre-employment non-compete agreements. Thus, it cannot be said that the panel was aware of law that was ‘clearly applicable to th[is] case” (emphasis in original).
(ed: *No surprises here; in our view, manifest disregard is on life support in this Circuit. **An Alert h/t to SAA Editorial Board member David Robbins, Esq., of Kaufmann Gildin & Robbins LLP, for alerting us to this decision.)
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