In Steiner v. Meyerson, 1995 Del. Ch. LEXIS 95 (Aug. 16, 1995), former Delaware Court of Chancery Chancellor William T. Allen famously described claims of corporate waste as "rarest of all — and indeed, like Nessie, possibly non-existent." Perhaps equally rare are decisions vacating an arbitral award. Both the Federal Arbitration Act and the Delaware Uniform Arbitration Act provide for limited judicial review of arbitral decisions and awards, leaving the losing party to an arbitration very little room to argue the award should be vacated. One of the grounds often cited by disgruntled parties as a reason for vacating an award is that the arbitrator exceeded or imperfectly executed his or her powers by issuing an incorrect decision. In keeping with the public policy of limiting judicial review of arbitral awards, however, courts have construed those grounds narrowly, requiring more than a mere disagreement with the arbitrator's interpretation of the law. Instead, courts have uniformly held that to exceed or imperfectly execute his or her powers, the arbitrator must act with "manifest disregard" for the law. As such, most petitions to vacate an arbitral award relying on an arbitrator "imperfectly executing his powers" will fail, and it is the rare case in which an arbitral award is vacated because of manifest disregard for the law.
In Garda USA v. SPX, C.A. No. 7115-VCL (Del. Ch. June 4, 2013), that rare case occurred. In a bench ruling, the Court of Chancery granted the plaintiffs' motion for summary judgment and entered an order vacating the arbitrator's award on the grounds that the arbitrator "manifestly disregarded controlling contractual language and, consequently, so imperfectly executed its powers that a final and definite award on the subject matter submitted was not made." Not only was this the first time a Delaware court had vacated an award on these specific grounds, but the court applied for the first time a three-part test to analyze the request.
