# Petition for Writ of Certiorari — Piper Jaffray, Inc. v. Halligan

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1999
- **Citation:** 526 U.S. 1034

## Text

Supreme Court, ue

No.

981172 Jan 2119

OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1998

PIPER JAFFRAY, INC. and MARVIN GEISNESS,
Petitioners,
VS.

IRENE HALLIGAN, as Executrix of the Estate of
THEODORE H. HALLIGAN,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

PETITION FOR WRIT OF CERTIORARI

JILL L. ROSENBERG
Counsel of Record
ROBERT S. WHITMAN
ORRICK, HERRINGTON
& SUTCLIFFE LLP
Attorneys for Petitioners
666 Fifth Avenue
New York, New York 10103
(212) 506-5000

i
QUESTION PRESENTED

Whether judicial review of arbitration awards under a
standard allowing vacatur based on arbitrators’ “manifest
disregard of the law or the evidence or both” is consistent with
the strong federal policy favoring arbitration, as embodied in
the Federal Arbitration Act, 9 U.S.C. §§ 1, ef seg.

|

il
CORPORATE DISCLOSURE STATEMENT

Pursuant to Supreme Court Rule 29.6, Petitioner Piper
Jaffray, Inc. (which is now known as U.S. Bancorp Piper Jaffray
Inc.) hereby discloses that its corporate parent is U.S. Bancorp,
which is a publicly traded corporation. Petitioner has no
nonwholly owned subsidiaries.

TABLE OF CONTENTS

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Corporate Disclosure Statement ..............
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Reasons for Granting the Wnt .................-..

I. The Court Of Appeals Announced A New
Standard Of Judicial Review Of Arbitral Awards
That Conflicts With The Decisions Of Every
SE GS GPE PROUD 2 oo cence necess

A. The “Manifest Disregard of the Law”
reel C tL oun 6 x's 6.2 6:9

B. The Court of Appeals Departed From the
Unanimous View of Other Courts and
Created a Split in the Circuits ..........

II. The Issues Presented By This Case Are Of Great
ccc ei eee bw ive ¥ ses tnvees ecw ee.

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TABLE OF CITED AUTHORITIES

Page
Cases:
Anderson v. Bessemer City, 470 U.S. 564 (1985) ..... 7, 15,17
Baravati v. Josephthal, Lyon & Ross, Inc., 28 F.3d 704
eas SEE ca Ge aes cuss brea es atic se heed 5
Barnes v. Logan, 122 F.3d 820 (9th Cir. 1997), cert.
denied, 118 S. Ct. 1385 (1998) ................. 5
Bernhardt v. Polygraphic Co. of Am., 350 U.S. 198
| GRNETTR alain hn ER ate CT RNS tate ONDA BoD tee 8 6, 17
Burchell v. Marsh, 58 U.S. (17 How.) 344 (1855) .... 6
Cole v. Burns Int'l] Sec. Servs., 105 F.3d 1465 (D.C. Cir.
Pe ova cee e beds haa kee ie 5,8
Denver & Rio Grande W. R.R. v. Union Pac. R.R., 119
Fae ee Cs SOSTE ee bic Sv ons kes koe x
First Options v. Kaplan, 514 U.S. 938 (1995) ....... 4
Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108
ee a eer rer ee ee 13
Gallus Invs., L.P. v. Pudgie’s Famous Chicken, Ltd., 134
Fe SO Os WE nwo cw ccccccvcxccvesens 5

Gianelli Money Purchase Plan and Trust v. ADM Investor
Servs., Inc., 146 F.3d 1309 (11th Cir.), cert. denied,
Cae ey Ra I 6 bon. ka dee ney ee oes cen 5

iat AE Rm AO oe oe SOR

Cited Authorities

Page

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20

PROP ED cc nncdcctoevecsvevesecnstevereew evita 6, 15
Glennon v. Dean Witter Reynolds, Inc., 83 F.3d 132 (6th

Ca GD ca vucauwaendeewessece us suarnneeee 5
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker,

See Fe Teme Ue, BOE vis ccsintvedees dicks 4
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

i, GES UL Os be eek eevvacueerees 6
Moses H. Cone Mem’! Hosp. v. Mercury Constr. Corp.,

og 8 SG ery reer reer 12
National Wrecking Co. v. International Bhd. of

Teamsters, Local 73], 990 F.2d 957

(7th Cir. 1993) ...... were Cre T err ere 8
Prudential-Bache Secs. v. Tanner, 72 F.3d 234 ((st Cir.

i, POPE EPTPT TOT Tee erro ee 5
Pullman-Standard Div. of Pullman, Inc. v. Swint, 456 U.S.

Tio CRORE? inns vcceud eee idee tee 7
Remmey v. PaineWebber, Inc., 32 F.3d 143 (4th Cir.

1994), cert. denied, 513 U.S. 1112 (1995) ........ 8
Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974) ... 13

Schwapp v. Town of Avon, 118 F.3d 106
CB6 CA. TORTD eavicnceteveces ¥a8s pes trae 7

Cited Authorities

Shearson/American Express, Inc. v. McMahon, 482 U.S.
8 Pe Oe re re ere are, b

Siegel v. Titan Indus. Corp., 779 F.2d 891
CO Ge OUD Scere d vues sckenhbaeeeones ceees

Sobel v. Hertz, Warner & Co., 469 F.2d 1211 (2d Cir.
SOU vib ues c4aa bude caches baled

Southland Corp. v. Keating, 465 U.S. 1 (1984) ......

Tennant v. Peoria & Pekin Union Ry. Co., 321 U.S. 29
CRUE 66-44 6%4s Ue eek es ee Lee

Trans Chem. Ltd. v. China Nat'l Mach. Import and Export
Corp., 161 F.3d 314 (Sth Cir. 1998) .............

UHC Mgmt. Co. v. Computer Sciences Corp., 148 F.3d
ae Cee, TREE 6.0 46s bee eee

United Paperworkers Int'l Union v. Misco, Inc., 484 U.S.
BOOTED 46 xstnuse ceaacceeeceane eee

United Steelworkers of Am. v. Enterprise Wheel and Car
Conn, S6b US. S55 CUR chines eanvece eases

United Transp. Union Local 1589 v. Suburban Transit
Carp., 51 F.36 S76 GO CH. TOGSD oo cn cvteasscses

U.S. Energy Corp. v. Nukem, Inc., Nos. 96-1532, 97-1332,
1998 WL 738336 (10th Cir. Oct. 22, 1998) .......

Page

11,

16

12

17

12

13

vil

Cited Authorities
Page
Wilko v. Swan, 346 U.S. 427 (1953), overruled on other
grounds, Rodriguez de Quijas v. Shearson/American
Express, Inc., 490 U.S. 477 1. eA eer 4,6, 13
Willemijn Houdstermaatschappij, BV v. Standard
Microsys. Corp., 103 F.3d 9 (2d Cir. 1997) ....... 15, 16
Wright v. Universal Maritime Service Corp., 119 S. Ct.
kt, | PrP errr errr rrr rr re et 17
Statutes:
pik tee BP Ferree re ee ter re i, |
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fit Ted . | re errr rrr rrr rie eer 6
Ete Fadl Gy.” |) Se ee |
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if Take De > eae ee ge arr ere l
SO ULGE. GE GR, CEO ar vt eencwesekecesnces 2

vill

Cited Authorities
Page
Other Authorities:
Civil Rights Act of 1991, Pub. L. No. 102-166, § 118,

Pe BF 8 CROED Sie cas red weseee ova Sieuss 17
H.R. Rep. No. 96, 68th Cong., Ist Sess., 1 (1924) .... 13
Note, Judicial Review of Arbitration Awards on the

Merits, 63 HARVARD L. Rev. 681 (1950) .......... 13
Jose A. Cabranes, Arbitration and U.S. Courts: Balancing

Their Strengths, 70 N.Y. St. Bar J. 22 (Mar./Apr.

Sas Soe a rk caste eee kes daa e ee 14

Sele en ews 4

APPENDIX

Page

Appendix A — Opinion Of The United States Court Of
Appeals For The Second Circuit Dated And Decided
RG FD SOO 5 546 Fe eA e eR ee ee la

Appendix B — Opinion And Order Of The United States
District Court For The Southern District Of New York
ee Se Be Be os ino oo oe boot bed ook hen 18a

Appendix C — Opinion And Order Of The United States
District Court For The Southern District Of New York
es SE ee PE or as eee a a oe eer cet 2la

Appendix D — Opinion And Order Of The United States
District Court For The Southern District Of New
Fe Se Fe Be SOE 8h ros 88ers 27a

Appendix E — Order Of The United States Court Of
Appeals For The Second Circuit Denying Petition For
Rehearing Dated And Filed October 23, 1998 ..... 4la

Appendix F — Relevant Statutes .................. 43a

l

Piper Jaffray, Inc. and Marvin Geisness respectfully
petition for a writ of certiorari to review the judgment of the
United States Court of Appeals for the Second Circuit in this
Case.

OPINIONS BELOW

The opinion of the court of appeals is reported at 148 F.3d
197 (2d Cir. 1998), and is reprinted at la-7a. The district court’s
opinions of April 14, June 10, and June 16, 1997 — respectively,
denying Respondent’s petition to vacate the arbitral award,
granting Petitioners’ cross-petition to confirm the award, and
dismissing Respondent’s Complaint on grounds of res judicata
~ are not reported and are set forth at !8a-40a.

STATEMENT OF JURISDICTION

The judgment of the court of appeals was issued on July 9,
1998. The court denied Petitioners’ petition for rehearing or
suggestion for rehearing in banc by order dated October 23,
1998. See 41a. This petition is being timely filed within 90
days of that order. The jurisdiction of this Court is invoked
under 28 U.S.C. § 1254(1). Respondent first invoked federal
court jurisdiction in the case under 28 U.S.C. §§ 1331 (because
the case involved an alleged violation of a federal Statute) and
1332 (because Respondent is a citizen of the State of New York,
Petitioner Piper Jaffray, Inc. is a citizen of the States of
Minnesota and Delaware, and Petitioner Marvin Geisness is a
citizen of the State of Minnesota).

STATUTE INVOLVED

The Federal Arbitration Act, 9 U.S.C. §§ 1, et seg. That
Statute is reprinted in its entirety at 43a-54a.

2
STATEMENT OF THE CASE

This case arises out of an arbitration proceeding brought
by Theodore Halligan (“Mr. Halligan”), a former salesperson
of Petitioner Piper Jaffray, Inc., against Piper Jaffray and one
of its employees, Petitioner Marvin Geisness (referred to
collectively hereinafter as “Piper Jaffray” or “Petitioners”). In
1993, Mr. Halligan filed an arbitration claim with the National
Association of Securities Dealers alleging, inter alia, that he
was terminated because of his age in violation of the Age
Discrimination in Employment Act (“ADEA”), 29 U.S.C.
§§ 621, et seg. The arbitration lasted more than two years and
was hotly contested. The hearings themselves, before a panel
of three experienced attorney-arbitrators, lasted 26 days, during
which 25 witnesses were examined and cross-examined (18 for
Mr. Halligan, 9 for Piper Jaffray) and more than 240 exhibits
were introduced. The parties presented opening and closing
arguments and submitted post-hearing briefs. See 29a.

On October 9, 1995, during the pendency of the arbitration
hearings, Mr. Halligan died. His widow and executrix, Irene
Halligan (“Mrs. Halligan” or “Respondent’), continued the
arbitration on the estate’s behalf. On March 19, 1996, the
arbitrators issued a written award denying all of Mr. Halligan’s
claims. Mrs. Halligan filed a petition to vacate the award on
grounds, inter alia, that the arbitrators engaged in “manifest
disregard of the law” in rejecting her husband’s claims. Piper
Jaffray both opposed the petition and cross-moved to confirm.
Mrs. Halligan also commenced a federal court action solely
against Piper Jaffray, alleging a violation of the ADEA based
on her husband’s alleged discharge. Piper Jaffray moved to
dismiss the complaint.

In three separate written opinions issued in April and June
1997, the district court denied Mrs. Halligan’s petition to vacate,

3

granted Piper Jaffray’s motion to confirm, and, having issued
those two decisions, dismissed Mrs. Halligan’s ADEA
complaint, which raised the identical claims that had been
advanced in the arbitration, on grounds of res judicata. On July
9, 1998, a panel of the Second Circuit reversed all three of the
district court’s decisions. The basis of its holding was the court’s
conclusion that the arbitrators, who had ruled in favor of Piper
Jaffray but without issuing a written explanation, had
“manifestly disregarded the law or the evidence or both.” See
16a. The court specifically noted that the arbitrators had been
properly instructed as to the applicable standards of law
governing Mr. Halligan’s age discrimination claim. See 15a.

The court of appeals denied Piper Jaffray’s petition for
rehearing or suggestion for rehearing in banc on October 23,
1998.

REASONS FOR GRANTING THE WRIT

The standard of judicial review announced by the court of
appeals — allowing vacatur of arbitral awards based on the
arbitrators’ “manifest disregard of the law or the evidence or
both” — is unprecedented in the scores of reported federal
appellate decisions reviewing arbitral awards under the FAA,
and creates a regime of judicial review highly destabilizing to
the arbitration process. The court’s approach expands the focus
of the “manifest disregard” standard beyond arbitrators’
conclusions of law and into their findings of fact, albeit without
the deference that characterizes appellate review of fact-finding
by a court or jury. This case presents this Court with the
opportunity to decide whether so intrusive a standard of review
is consistent with the strong national policy favoring arbitration,
as reflected in the FAA, and with the interests of efficiency
and finality that arbitration promotes.

4

THE COURT OF APPEALS ANNOUNCED A NEW

STANDARD OF JUDICIAL REVIEW OF ARBITRAL

AWARDS THAT CONFLICTS WITH THE DECISIONS
OF EVERY OTHER COURT OF APPEALS

A. The “Manifest Disregard of the Law” Standard

In asking the district court to vacate the arbitrators’ award
in this case, Respondent argued, inter alia, that the arbitrators
engaged in “manifest disregard of the law” when they rejected
her husband’s claims. The “manifest disregard of the law”
standard, while not an explicit basis for judicial review under
the FAA, is a clearly recognized ground for vacatur of
arbitrators’ decisions, pre-dating the enactment of the FAA and
consistently adhered to ever since. See First Options v. Kaplan,
514 U.S. 938, 942 (1995) (noting that parties are “bound by
[an] arbitrator’s decision not in ‘manifest disregard’ of the law’’)
(citing Wilko v. Swan, 346 U.S. 427, 436-37 (1953), overruled
on other grounds, Rodriguez de Quijas v. Shearson/American
Express, Inc., 490 U.S. 477 (1989)); Wilko, 346 U.S. at 436-37
(“the interpretations of the law by the arbitrators[,] in contrast
to manifest disregard[,] are not subject, in the federal courts,
to judicial review for error in interpretation’).

Under this common law standard, judicial vacatur of awards
is permitted only where the arbitrators consciously disregarded
an applicable rule of /aw, in that they were made aware of the
rule but chose not to apply it. The Second Circuit’s prior
articulation of the standard is both typical and widely followed:
“The error must have been obvious and capable of being readily
and instantly perceived by the average person qualified to serve
as an arbitrator.” Merrill Lynch, Pierce, Fenner & Smith, Inc.
v. Bobker, 808 F.2d 930, 933 (2d Cir. 1986). Every other court

5

of appeals has adopted the same or a substantially similar
approach. See, e.g., Prudential-Bache Secs. v. Tanner, 72 F.3d
234, 237-38 (1st Cir. 1995); United Transp. Union Local 1589
v. Suburban Transit Corp., 51 F.3d 376, 379 (3d Cir. 1995);
Gallus Invs., L.P. v. Pudgie’s Famous Chicken, Ltd., 134 F.3d
231, 233-34 (4th Cir. 1998); Trans Chem. Ltd. v. China Nat'l
Mach. Import and Export Corp., 161 F.3d 314, 314 (Sth Cir.
1998); Glennon v. Dean Witter Reynolds, Inc., 83 F.3d 132,
135-36 (6th Cir. 1996); Baravati v. Josephthal, Lyon & Ross,
Inc., 28 F.3d 704, 706 (7th Cir. 1994); UHC Mgmt. Co. v.
Computer Sciences Corp., 148 F.3d 992, 998 (8th Cir. 1998);
Barnes v. Logan, 122 F.3d 820, 821-22 (9th Cir. 1997), cert.
denied, 118 S. Ct. 1385 (1998); U.S. Energy Corp. v. Nukem,
Inc., Nos. 96-1532, 97-1332, 1998 WL 738336, *2-3 (10th Cir.
Oct. 22, 1998); Gianelli Money Purchase Plan and Trust v.
ADM Investor Servs., Inc., 146 F.3d 1309, 1312 (11th Cir.),
cert. denied, 119 S. Ct. 540 (1998); Cole v. Burns Int'l Sec.
Servs., 105 F.3d 1465, 1487 (D.C. Cir. 1997).

The rationale behind this deferential approach lies in the
judicial, and ultimately legislative, encouragement of
arbitration as an alternative to litigation. As this Court declared
in 1855:

Arbitrators are judges chosen by the parties to decide
the matters submitted to them, finally and without
appeal.... If the award is within the submission,
and contains the honest decision of the arbitrators,
after a full and fair hearing of the parties, a court of
equity will not set it aside for error, either in law or
fact. A contrary course would be a substitution of
the judgment of the chancellor in place of the judges
chosen by the parties, and would make an award
the commencement, not the end, of litigation.

6

Burchell v. Marsh, 58 U.S. (17 How.) 344, 349 (1855). This
Court, accordingly, has long made clear that courts reviewing
arbitral awards “are not authorized to reconsider the merits of
an award even though the parties may allege that the award
rests on errors of fact,” nor do they “sit to hear claims of factual
or legal error by an arbitrator as an appellate court does in
reviewing decisions of lower courts.” United Paperworkers Int'l
Union v. Misco, Inc., 484 U.S. 29, 36, 38 (1987); see also Gilmer
v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32 n.4 (1991)
(“judicial scrutiny of arbitration awards necessarily is limited”)
(quoting Shearson, 482 U.S. at 232); Bernhardt v. Polygraphic
Co. of Am., 350 U.S. 198, 203 (1956) (“judicial review of an
[arbitration] award is more limited than judicial review of a
trial”’).'

An essential aspect of this approach to judicial review has
been that the courts consider only whether there has been
manifest disregard “of the law” and not “of the evidence.”
Because arbitration shifts only the forum for the resolution of
a dispute, not the substantive law, see, e.g., Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628
(1985) (“By agreeing to arbitrate a statutory claim, a party does
not forgo the substantive rights afforded by the statute; it only

1. The “manifest disregard” standard thus mirrors the extremely
narrow Statutory bases for judicial review contained in the FAA. Under
section 10 of the statute, an award may be vacated only if it was “procured
by corruption, fraud, or undue means”; if there was bias on the part of
the arbitrators; if the arbitrators engaged in misconduct that prejudiced
the rights of the parties, such as refusing to postpone the hearing for
good cause; or if the arbitrators exceeded their powers. See 9 U.S.C.
§ 10(a). Under section 11, the court may modify an award if it reflects a
material miscalculation of figures or a material mistake in its description
of any person, thing or property; if the award is based on a matter not
submitted to the arbitrators or “not affecting the merits of the decision”;
or if it is “imperfect in matter of form not affecting the merits of the
controversy.” /d. § 11.

7

submits to their resolution in an arbitral, rather than a judicial,
forum.”), the very legitimacy of arbitration would be
undermined if arbitrators were allowed to create their own law
or to decline to apply law of which they were made aware.
The “manifest disregard” standard ensures that courts serve as
a watchdog over the arbitrators’ legal conclusions (even though
subject to a great degree of deference).

There is no corresponding rationale for judicial patrolling
of arbitrators’ factual findings. Reviewing courts have no
special competence in that area; if anything, the opposite is
true, since it is the arbitrators, as triers of fact, who see and
hear the witnesses and have the unique ability to make the
credibility judgments so essential to informed fact-finding. See
generally Anderson v. Bessemer City, 470 U.S. 564, 575 (1985)
(“only the [factfinder] can be aware of the variations in
demeanor and tone of voice that bear so heavily on the listener’s
understanding of and belief in what is said”).

This rationale has particular force in employment
discrimination actions such as this case. As noted above, Mr.
Halligan alleged that his employment with Piper Jaffray was
terminated because of his age, in violation of the ADEA. While
it is a relatively straightforward task to state the principles of
law governing ADEA claims (and the court of appeals noted
that the arbitrators had been properly instructed as to those
principles here), it is quite another thing to apply them to
specific factual circumstances and decide whether a given
claimant has proven intentional discrimination by a
preponderance of the evidence. That exercise is the unique
province of fact-finders, who see and listen to the witnesses.
See generally Pullman-Standard Div. of Pullman, Inc. v. Swint,
456 U.S. 273, 289 (1982) (“discriminatory intent is a finding
of fact to be made by the trial court”); Schwapp v. Town of
Avon, 118 F.3d 106, 110 (2d Cir. 1997) (summary disposition

8

disfavored in employment discrimination cases because “the
employer’s intent is in question”). As the D.C. Circuit has
observed, the vast majority of employment discrimination
claims “are entirely factual in nature and involve well-settled
legal principles,” a state of affairs that creates “no adverse
impact on the arbitration process” precisely because judicial
review of awards is limited to correcting errors of law and not
fact. See Cole v. Burns Int'l Sec. Servs., 105 F.3d 1465, 1487
(D.C. Cir. 1997).

B. The Court of Appeals Departed From the Unanimous
View of Other Courts and Created a Split in the Circuits

The federal courts of appeals until now have been
unanimous in following an approach that confines review under
the “manifest disregard” standard to errors of Jaw. They have
thus held that, while courts can and must pay close attention to
the /ega/ underpinnings of arbitral awards, they do not sit to
review the wisdom or accuracy of arbitrators’ factual findings.
See, e.g., Cole, 105 F.3d at 1487; Remmey v. PaineWebber,
Inc., 32 F.3d 143, 150 (4th Cir. 1994) (no manifest disregard
where “the arbitrators had substantial conflicting testimony
which could support a decision for either of the parties . .
[and] the arbitrators may well have chosen to credit evidence
presented by defendants”), cert. denied, 513 U.S. 1112 (1995);
National Wrecking Co. v. International Bhd. of Teamsters,
Local 731, 990 F.2d 957, 961 (7th Cir. 1993) (courts must
enforce awards “even in the face of erroneous findings of fact
or misinterpretations of law”) (citation omitted); Denver & Rio
Grande W. R.R. v. Union Pac. R.R., 119 F.3d 847, 849 (10th
Cir. 1997) (“Errors in .. . the arbitrator’s factual findings...
do not justify review or reversal on the merits of the
controversy.”). The Second Circuit had previously adhered to
this position as well. See Siegel v. Titan Indus. Corp., 779 F.2d
891, 892-93 (2d Cir. 1985) (“the fact that an arbitrator

9

erroneously decided the facts” is “not a ground for vacating an
arbitrator’s award”) (citation omitted).

In this case, however, the Second Circuit conspicuously
departed from that unanimity (and from its own prior rule). It
altered the existing standard of judicial review to allow
consideration of not only whether the arbitrators engaged in
manifest disregard of the Jaw, but whether they disregarded
the law “or the evidence or both.” In explaining its decision to
vacate the arbitrators’ award, the court said, in pertinent part,
“we are inclined to hold that [the arbitrators] ignored the law
or the evidence or both,” 16a, later adding, “we are left with
the firm belief that the arbitrators here manifestly disregarded
the law or the evidence or both,” 17a.

This new approach — of reaching beyond the arbitrators’
conclusions to examine the relative strengths of each party’s
position on the facts — is apparent not only in the words the
court chose to explain its conclusions, but also in the analysis
it used to reach that result. The court’s opinion demonstrates
inescapably that its decision was based entirely on its
disagreement with the arbitrators’ weighing of the evidence,
not on any perceived refusal by the arbitrators to apply the law.
Thus, the court justified its decision with repeated references
to what it perceived as the strength of Respondent’s case on
the facts and the concomitant weaknesses in Petitioners’. It said,
for example:

¢ “During the arbitration hearings, Halligan
presented the arbitrators with very strong

evidence of age-based discrimination.”

4a (emphasis added).

Ale Saver

=

10

* “Quite simply, Halligan presented
overwhelming evidence that Piper’s conduct
after Tad Piper became CEO was motivated by
age discrimination.”

15a (emphasis added).

* “Halligan presented powerful evidence of his
performance, in the form of quantitative sales
rankings and relevant witness testimony.”

15a (emphasis added).

* “[T]he circumstantial evidence surrounding his
departure .. . is consistent only with a finding
that Halligan was pushed out of his job.”

15a (emphasis added). In addition, the court presented the facts
in a manner that frequently overlooked Petitioners’ version of
events. On the few occasions when it did acknowledge the
facts supporting the award, its statements were dismissive and
laced with qualifications or disclaimers. See, e.g., 5a (“All Piper
personnel denied having made such [age-based] statements,
although their testimony was occasionally inconsistent or
ambiguous.”); 6a (twice describing Piper Jaffray as merely
“discount({ing]” Mr. Halligan’s evidence rather than as
presenting evidence of its own).

Moreover, the court of appeals specifically acknowledged
that the arbitrators had been properly advised as to the /egal
standards applicable to Respondent’s claim of age
discrimination. See 15a. The only possible reading of the
court’s opinion, therefore, is that it created and applied a
standard of heightened inquiry into the factual! underpinnings
of arbitral awards. Indeed, despite the parties’ straightforward

11

legal contentions before the arbitrators, there was intense factual
disagreement on virtually every material point, including
matters as rudimentary as whether Mr. Halligan was fired or
voluntarily retired. See 15a. Because of this conflicting
testimony, the arbitrators were left to decide matters that turned
on their assessment of the witnesses’ credibility.

Yet the Second Circuit, believing that the arbitrators
resolved those factual issues incorrectly, used that disagreement
as the basis for vacatur under a “manifest disregard” analysis,
thereby assuming for itself a task of fact-finding that has
heretofcre been the exclusive province of the arbitrators. Its
approach was not even as deferential as a court’s review of
jury verdicts, in that it resolved every material factual dispute
in a manner opposed to, rather than in favor of, the arbitrators’
award. Cf. Tennant v. Peoria & Pekin Union Ry. Co., 321 U.S.
29, 35 (1944) (reviewing court must defer to jury’s verdict and
resolve all factual inferences in favor of it). In so expanding
the “manifest disregard” standard, the court placed itself at odds
with every other court of appeals that has applied that standard
to date.

THE ISSUES PRESENTED BY THIS CASE ARE OF
GREAT IMPORTANCE

By articulating a new “manifest disregard of the evidence”
standard, the court of appeals called into question the entire,
previously well settled area of judicial review of arbitration
awards. The decision’s effects will ripple throughout a//
arbitrations — not only in employment cases, not only in cases
raising statutory claims for relief, and not only in the securities
industry. This case is thus of national significance and warrants
issuance of a writ of certiorari.

12

In the collective bargaining arena, review of arbitration
awards is severely limited in order to foster the national policy
favoring “private settlement of labor disputes without the
intervention of government.” United Paperworkers Int'l Union
v. Misco, Inc., 484 U.S. 29, 37 (1987). As this Court has
explained:

Because the parties have contracted to have disputes
settled by an arbitrator chosen by them rather than
by a judge, it is the arbitrator’s view of the facts
and of the meaning of the contract that they have
agreed to accept. Courts thus do not sit to hear claims
of factual or legal error by an arbitrator as an
appellate court does in reviewing decisions of lower
courts.

Id. at 37-38. This is especially true with respect to arbitral fact-
finding, which is almost entirely insulated from judicial second-
guessing. See id. at 39 (“improvident, even silly, factfinding”
is “hardly a sufficient basis for disregarding what the agent
appointed by the parties determined to be the historical facts’).

Until now, the same approach has applied outside collective
bargaining, where the rationale for limited judicial review is
not the goal of labor peace but the strong national policy
favoring arbitration, as embodied in the FAA.’ This Court has
repeatedly observed that the FAA “establishes a ‘federal policy
favoring arbitration.’ ” Shearson/American Express, Inc. v.
McMahon, 482 U.S. 220, 226 (1987) (quoting Moses H. Cone
Mem '| Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983));
see also Southland Corp. v. Keating, 465 U.S. 1, 10 (1984) (in
enacting the FAA, “Congress declared a national policy

2. This Court in Misco noted the similarity between judicial review
under the FAA and judicial review in the collective-bargaining arena.
See 484 U.S. at 40-41.

——

13

favoring arbitration”); Scherk v. Alberto-Culver Co., 417 U.S.
506, 510-11 (1974) (FAA was enacted in part “to allow parties
to avoid ‘the costliness and delays of litigation’) (quoting
H.R. Rep. No. 96, 68th Cong., Ist Sess., 1, 2 (1924)).

Just as permissive judicial review of collective-bargaining
arbitration awards would be inconsistent with the national
policy favoring arbitration as a means of promoting industrial
harmony, so too is judicial review under a “manifest disregard
of the evidence” standard sharply at odds with the pro-
arbitration objective of the FAA. Rather than signaling the end
of a dispute, an arbitral award that is subject to virtually de
novo scrutiny for factual errors will in reality be just the
beginning. “[P]lenary review by a court of the merits [of an
arbitration award] would make meaningless the provisions that
the arbitrator’s decision is final, for in reality it would almost
never be final.” United Steelworkers of Am. v. Enterprise Wheel
and Car Corp., 363 U.S. 593, 599 (1960). An article cited by
this Court in Wilko — the case in which this Court first explicitly
acknowledged the “manifest disregard of the law” standard and
which involved a statutory claim for relief — made the point
this way:

A practice of liberal review thus tends to increase
the workload of the courts; not only will cases be
transferred from arbitral to judicial tribunals, but
also the parties will tend to resort to the courts
originally because they will wish to avoid the extra
step of an arbitration proceeding.

Note, Judicial Review of Arbitration Awards on the Merits, 63
HARVARD L. Rev. 681, 681-82 (1950) (cited in Wilko, 346 US.
at 437 n.24); see also Folkways Music Publishers, Inc. v. Weiss,
989 F.2d 108, 111 (2d Cir. 1993) (narrow judicial review
preserves the “twin goals of arbitration”: “settling disputes

14

efficiently and avoiding long and expensive litigation.”); Jose
A. Cabranes, Arbitration and U.S. Courts: Balancing Their
Strengths, 70 N.Y. St. Bar J. 22, 23 (Mar./Apr. 1998)
(“Everyone understands that the many advantages of arbitration
would quickly evaporate if arbitration proceedings were treated
as mere pre-trial hearings-warm-ups for the parties’ day in
court.”).

The facts of this case perhaps best illustrate the deleterious
effects of the Second Circuit’s ruling. All of arbitration’s
supposed advantages over litigation — expedition, efficiency,
informality — appear hollow in light of this decision. After 26
hearing days, dozens of witnesses and hundreds of exhibits,
the court of appeals has effectively ordered the parties to start
over and try this case anew. Indeed, the parties are now back
before the district court, preparing to begin discovery with
respect to the follow-up complaint brought by Respondent’s
estate through his widow-executrix.’

Moreover, the factual errors identified by the court of
appeals were not on matters that were uncontested at the
arbitration or otherwise “provable” one way or the other. Here,
the errors related to the ultimate factual issue: whether
Petitioners intentionally discriminated against Mr. Halligan.
While there was evidence on this record that, if believed, could
have led a reasonable factfinder to conclude that Petitioners
had done so, there was also abundant evidence in this vigorously
contested arbitration that both contradicted Respondent's
position on every point and that affirmatively supported
Petitioners. Against this background, the court’s application

3. The follow-up complaint asserts the identical claims as were
asserted in the arbitration proceedings, albeit against Petitioner Piper
Jaffray only. On December 24, 1998, Piper Jaffray served a motion to
dismiss the complaint on various grounds or alternatively to compel
arbitration. That motion has not yet been decided.

7 a Ui th near et oD Bice As 2 eis naan DF ek

15

of the new “manifest disregard of the evidence” standard leads
to a patently absurd result — suggesting as it does that the
evidence in this case was susceptible of only one interpretation,
and that the three experienced attorney-arbitrators who actually
saw and heard the witnesses somehow erred grievously in
coming out the other way. Cf. Anderson v. Bessemer City, 470
U.S. 564, 573-74 (1985) (“If the district court’s account of the
evidence is plausible in light of the record viewed in its entirety,
the court of appeals may not reverse it even though convinced
that had it been sitting as the trier of fact, it would have weighed
the evidence differently.”).

More broadly, the court’s decision leaves parties,
arbitrators, and district judges uncertain about the extent to
which arbitral factfinding will be insulated from judicial
se _nd-guessing. The “manifest disregard of the evidence”
standard will become an invitation for every losing party in
every arbitration to seek judicial review, in the hope that the
reviewing court will conduct its own assessment of the relative
strengths of each party’s factual presentation. So long as the
party seeking vacatur can convince that court that it presented
“powerful” evidence or made “a very strong showing” (the
characterizations used by the Second Circuit here), the finality
of the arbitral award will be lost, and with it the purported
savings in time and resources that are widely viewed as the
advantages of arbitration over litigation. See Gilmer, 500 U.S.
at 26, 31 (by agreeing to arbitrate, the parties “trade[ ] the
procedures and opportunity for review of the courtroom for
the simplicity, informality, and expedition of arbitration”)
(emphasis added).

Additionally, the court’s decision markedly departs
from the well established judicial reluctance to require that
arbitrators prepare written decisions. See, e.g., Willemijn
Houdstermaatschappij, BV v. Standard Microsys. Corp., 103

I

16

F.3d 9, 13 (2d Cir. 1997) (in the absence of a written opinion,
“we must confirm the arbitrators’ decision ‘if a ground for [it]
can be inferred from the facts of case,’ ” even if that ground is
“based on an error of fact or an error of law’’) (citation omitted);
Sobel v. Hertz, Warner & Co., 469 F.2d 1211, 1215 (2d Cir.
1972) (“forcing arbitrators to explain their award even when
grounds for it can be gleaned from the record will unjustifiably
diminish whatever efficiency the process now achieves’).
While the Second Circuit in this case did not hold that the lack
of a written opinion is a per se basis for vacatur, the logic of its
decision virtually compels that conclusion. It stated:

At least in the circumstances here, we believe that
when a reviewing court is inclined to hold that an
arbitration panel manifestly disregarded the law, the
failure of the arbitrators to explain the award can
be taken into account. Having done so, we are left
with the firm belief that the arbitrators here
manifestly disregarded the law or the evidence or
both.

16a-17a; see also 17a (“the absence of explanation may
reinforce the reviewing court’s confidence that the arbitrators
engaged in manifest disregard”).

Other than the rare case where the evidence can be
realistically interpreted in only one way, an arbitrator’s failure
to issue a written decision can, on the authority of the Second
Circuit’s decision, be cited as a factor warranting vacatur, at
least where the court is otherwise “inclined” to vacate. Thus,
despite its assurances to the contrary, see 17a, the court of
appeals made clear, in implication if not in words, that
arbitrators who decline to issue opinions, especially in closely
contested arbitrations, do so at their peril.

17

In a further weakening of arbitration’s structural
advantages, the court’s decision creates a regime of judicial
review for arbitration that is more searching and intrusive than
appellate review of factfinding by a jury or trial judge. In the
context of jury verdicts, for example, courts must accord great
deference to the verdict and resolve all factual inferences in
favor of the verdict. See, e.g., Tennant v. Peoria & Pekin Union
Ry. Co., 321 U.S. 29, 35 (1944). The same deferential approach
is true of appellate court review of a district court’s factual
findings. See Anderson, 470 U.S. at 573. Yet despite the rule
that “judicial review of an [arbitration] award is more limited
than judicial review of a trial,” Bernhardt v. Polygraphic Co.
of Am., 350 U.S. 198, 203 (1956), the court of appeals’s decision
harbingers precisely the opposite result. With the license of
the “manifest disregard of the evidence” standard, a reviewing
court could give arbitral awards virtually no deference at all,
choosing instead to vacate for no reason other than that it would
have resolved the facts differently.

The decision thus turns on its head the federal policy
favoring arbitration, which this Court reaffirmed earlier this
Term. See Wright v. Universal Maritime Service Corp., 119 S.
Ct. 391, 394-95 (1998). Notwithstanding both the FAA and
more recent congressional proclamations of support for and
encouragement of arbitration as an alternative to litigation, see
Civil Rights Act of 1991, Pub. L. No. 102-166, § 118, 105 Stat.
1071 (1991) (“Where appropriate and to the extent authorized
by law, the use of alternative dispute resolution including . . .
arbitration is encouraged to resolve disputes arising under the
Acts or provisions of Federal law amended by this title,”
including the ADEA), the Second Circuit’s decision leads courts
in the opposite direction.

These effects will be felt regardless of the context in which
the arbitration occurs. While this case involves a plaintiff who

18

submitted his claim to arbitration in the first instance, nothing
in either the language or the reasoning of the Second Circuit’s
decision limits its newly announced rule to those
circumstances.‘ Absent a decision from this Court, the Second
Circuit’s approach threatens the finality of arbitration awards
in all contexts — in employment cases and non-employment
cases; in cases raising statutory claims and those raising
common law claims; in cases with pre-dispute arbitration
agreements or post-dispute agreements; and perhaps even in
the context of awards rendered pursuant to collective bargaining
agreements.

Such a transformation of settled law, if it is to occur at all,
should be announced by Congress or this Court. This case
accordingly warrants issuance of a writ of certiorari.

4. The Second Circuit spent a great deal of its opinion addressing
issues pertaining to mandatory pre-dispute arbitration agreements, such
as the form U-4 Mr. Halligan executed in this case. See 9a-14a. It
ultimately concluded, however, that Mr. Halligan’s claim would have
been subject to a valid motion to compel arbitration had he attempted to
litigate it. See 9a, n.2. Because Mr. Halligan did not in fact seek to
litigate his claim, but rather proceeded directly to arbitration, the court’s
lengthy discussion of this issue is dicta, and there is nothing in the opinion
to suggest that its holding as to the applicable standard of review is
limited to the context of mandatory pre-dispute agreements.

: |

19
CONCLUSION

For the foregoing reasons, the petition for a writ of
certiorari should be granted.

Respectfully submitted,

JILL L. ROSENBERG
Counsel of Record
ROBERT S. WHITMAN
ORRICK, HERRINGTON
& SUTCLIFFE LLP
Attorneys for Petitioners
666 Fifth Avenue

New York, New York 10103
(212) 506-5000

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386018_1179%3A1. Public record. Not legal advice.