Federal Court Rejects Manifest Disregard As Ground For Vacatur And Holds That The Award Must Be Unsealed

In Kaki v. Tenet Healthcare Corporation, a Michigan federal district court has taken an emphatic position regarding an arbitration decision in favor of physicians claiming that a health care system and its hospitals retaliated against them “for complaints they made regarding patient safety and Medicare/Medicaid fraud.”

First, the court rejected the defendants’ argument that the arbitration could be vacated as being in manifest disregard of the law. Reviewing case law since the United States Supreme Court decision in Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576,
582, 584 (2008), the court held that, in the Sixth Circuit, “the most that published decisions have said of manifest disregard is that its continuing applicability ‘is an open question.'” Here, the district court determined that “[o]n balance, the weight of authority in and out of the Sixth Circuit points to manifest disregard no longer being a viable option in the wake of Hall Street, despite the fact that our Court of Appeals has not had occasion to formally decide the issue.”

Second, the court rejected the defendants’ claim that the award should be sealed. As the court held, “[a]lthough ‘arbitration hearings normally proceed outside of the public sphere,’ courts, including those in the Sixth Circuit, typically find that ‘this veil of secrecy is lifted once the parties turn to federal court to confirm, vacate, or modify an arbitration award.’”

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