WSC/2005 LLC v. Trio Ventures Associates (Ct. of Appeals)

Filed:  July 30, 2018

Opinion by:  Adkins, J.

Holding:  Although it is not recognized in the Maryland Uniform Arbitration Act (the “MUAA”), manifest disregard of applicable law is a proper ground to vacate an arbitration award.

Facts:  Plaintiff filed a petition to vacate an arbitration award in the Circuit Court for Montgomery County.  The petition argued that the arbitrator “manifestly disregarded well-established Maryland law in several respects” and that the arbitrator wrongly concluded the Plaintiff breached a contract provision.  Defendant moved to dismiss arguing that the Plaintiff did not allege any of the statutorily permitted vacatur grounds enumerated in the MUAA.

The MUAA governs the arbitration process in Maryland.  Once an arbitrator issues an award, a circuit court shall vacate an award on certain grounds enumerated in the MUAA.  The MUAA also provides that “the court shall not vacate the award or refuse to confirm the award on the ground that a court of law or equity could not or would not grant the same relief.”

Analysis:  The Court reviewed precedent decisions demonstrating that Maryland recognizes manifest disregard of the law as a permissible common-law ground for vacating an arbitration award.  The Court then analyzed whether the General Assembly abrogated the common law in this respect when it adopted the MUAA.

For an abrogation to occur, “the statutory language must indicate an express abrogation or an abrogation by implication by adoption of a statutory scheme that is so clearly contrary to the common law right that the two cannot occupy the same space.”  The Court agreed with Plaintiff that the MUAA does not pronounce an intention to expressly abrogate the common-law vacatur grounds.  The Court also agreed that the list of five grounds upon which a circuit court may vacate an award does not indicate the grounds are exclusive.  Further, the circumstances in which a circuit court cannot vacate an arbitration award under the MUAA do not include common-law vacatur grounds.

While disfavored, abrogation by implication is possible in two situations:  conflict preemption and field preemption.  The Court stated that conflict preemption does not apply because the common-law ground for “vacating an arbitration award will not conflict with any of the statutory grounds or render them nugatory.”  Field preemption occurs if a new enactment repeals and replaces the entirety of the prior law on a comprehensive basis.  Here, the Court stated that the MUAA’s “lack of universal applicability means the General Assembly did not preempt the entire field of arbitration common law.”

The Court then stated that manifest disregard of the law requires a “palpable mistake of law or fact appearing on the face of the award.  A court should look for an error that is readily perceived or obvious; an error that is clear or unquestionable.”  Finding no such mistake, the Court affirmed the Circuit Court’s dismissal.  

The opinion is available in PDF.