United States: Door Closes On Common-Law Grounds For Vacating Arbitration Awards

On May 20, 2016, the Texas Supreme Court ruled in Hoskins v. Colonel Clifton Hoskins and Hoskins, Inc., No. 15-0046, that, for the first time, the Texas Arbitration Act provides the exclusive grounds for vacatur of an arbitration award. Hoskins decided a split between circuit courts over whether parties could assert common-law grounds – e.g., manifest disregard of the law, gross mistake, violation of public policy – in addition to the statutory grounds listed in section 171.088 of the Texas Arbitration Act (TAA). The Supreme Court ruled that the language of the TAA was clear, holding: "a party may avoid confirmation only by demonstrating a ground expressly listed in section 171.088."

The Supreme Court noted that its holding did not conflict with its ruling in Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 97 (Tex. 2011). In that case, the Court held that a confirmation award could be reviewed for errors of law if the arbitration agreement specifically limited the arbitrator's authority. Under this language, the arbitrator would be exceeding his or her authority by rendering a decision that contained reversible errors. An arbitrator exceeding his or her powers can be a basis for vacating an award under the TAA. But without such language in the arbitration provision limiting the arbitrator's authority, an incorrect or unsupported legal decision by the arbitrator – no matter how bad – cannot be the basis for vacating the arbitration award.

Although Hoskins dealt only with the common-law defense of manifest disregard of the law, Justice Willett wrote a concurrence to hammer home the significance and broad scope of the court's ruling: "Our holding that the TAA's vacatur grounds are exclusive establishes that manifest disregard and, for all practical purposes, all other common-law vacatur doctrines are no longer viable with regard to arbitrations governed by the TAA."

There should be no more uncertainty as to whether the TAA's vacatur grounds are exclusive. They are. No common-law grounds for vacating arbitration awards are valid. In Justice Willett's words, there is "no smuggling common law through the back door."

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