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    ARTICLE

    Manifest Disregard Requires Specific Intent

    Andrew Eric Simms

    Feb 06, 2023

    1 min read

    Alternative Dispute Resolution Arbitration Practice Points
    Manifest Disregard Requires Specific Intent
    fizkes via Getty Images

    On December 14, 2021, the Georgia Supreme Court reversed the lower court, held that the arbitrator did not manifest a disregard for the law, and confirmed the arbitration award. The court held that in order to disregard the law, an arbitrator has to know the law and intentionally disregard it, not simply make a legal error. Adventure Motorsports Reinsurance, Ltd. v. Interstate Nat'l Dealer Svcs., 313 Ga. 19, 867 S.E.2d 115 (2021).

    Facts

    Interstate National Dealer Services, Inc. (Interstate) was in the business of selling and servicing motorsports vehicles. It retained Southern Mountain Adventures, LLC, (Southern) to prepare its service contracts and sell them to customers. Interstate reinsured its service contracts with Adventure Motorsports Reinsurance, Ltd. (Reinsurer). To pay for this reinsurance, Interstate charged an additional administrative fee to Southern. Although the purpose of this additional fee was to cover the cost of the reinsurance, Interstate kept a portion of these additional fees for itself. A dispute arose about this practice, and the parties proceeded to arbitration in accordance with their agreement.

    The arbitrator found that Interstate was not permitted to pay itself through fees intended for the services of third parties and that that Interstate had overcharged Reinsurer $400,000 for various administration fees and commissions. The trial court confirmed the award, and Interstate appealed. Interstate cited portions of the contract to support its claim that it was entitled to charge administrative fees and argued that the arbitrator manifestly disregarded the law by ignoring these contractual provisions. The Georgia appellate court agreed and reversed the lower court’s judgment. Reinsurer then appealed to the Georgia Supreme Court.

    Analysis

    The Georgia Supreme Court stated that to succeed on an argument that an arbitrator manifestly disregarded the law, the party opposing confirmation of the award must present concrete evidence that the arbitrator had a specific intent to disregard the applicable law. The court stated an arbitrator who “incorrectly interprets the law has not manifestly disregarded it,” but instead has “simply made a legal mistake.” The court held that here the arbitrator did not intentionally disregard the law, but instead mistakenly interpreted principles of contract construction. It therefore reversed the appellate court decision and confirmed the award. 

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