Volvo Trucks North America, Inc. v. Dolphin Line, Inc.

Citations: 50 So. 3d 1050; 2010 Ala. LEXIS 68; 2010 WL 1641017Docket: 1081277 and 1081713

Court: Supreme Court of Alabama; April 23, 2010; Alabama; State Supreme Court

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Volvo Trucks North America, Inc. is appealing an arbitration award in favor of Dolphin Line, Inc., which the court affirms. Dolphin initially sued Volvo Trucks, Volvo Group North America, Inc., and Kenworth of Mobile, Inc. in April 2006, claiming breach of contract, misrepresentation, unjust enrichment, and promissory estoppel after the defendants failed to repurchase vehicles as agreed. Kenworth sought to stay the action and compel arbitration under the Federal Arbitration Act, which the trial court denied. The Alabama Court of Appeals reversed this decision, compelling arbitration. An agreement titled 'Post Dispute Arbitration Agreement' was formed on April 25, 2008, stipulating arbitration of disputes under Alabama law. The arbitration took place on November 18-19, 2008, with Kenworth not participating due to a prior settlement with Dolphin. The arbitrator awarded Dolphin $1,245,348 on May 28, 2009. Subsequently, Volvo Trucks and Volvo Group filed appeals and motions to vacate the award, arguing it conflicted with Alabama law. The trial court denied these motions, stating that "manifest disregard of the law" was not a valid basis for review. Volvo Trucks filed a second notice of appeal on September 3, 2009.

Section 6-6-14 of the Alabama Arbitration Act states that an arbitration award made in substantial compliance with the Act is conclusive and cannot be contested for form or irregularity unless there is evidence of fraud, partiality, or corruption. Volvo Trucks contends that arbitration awards governed by the AAA can also be vacated if an arbitrator acts with manifest disregard of the law, arguing that the trial court erred in dismissing this claim regarding Volvo Group’s post-judgment motion. Citing the case Birmingham News, Volvo Trucks points out that the appellant did not allege fraud, partiality, or corruption but instead argued for review under FAA standards, including manifest disregard of the law. 

The court emphasized that while limited grounds in 6-6-14 might govern judicial review for post-dispute arbitration agreements, they are insufficient for the diverse commercial disputes currently sent to arbitration in Alabama. Therefore, the court adopted the FAA standards for reviewing arbitration awards, asserting that they encompass the grounds in 6-6-14. The Birmingham News decision acknowledged manifest disregard of the law as a valid ground for review, aligning with the stance of several other state courts. However, this position was later challenged by the U.S. Supreme Court in Hall Street Associates, which rejected manifest disregard as a valid ground under the FAA. The Alabama court reiterated in Hereford v. D.R. Horton, Inc. that Hall Street Associates clarified that manifest disregard is not an additional ground for relief from an arbitrator’s decision.

The Court has overruled its previous ruling in Birmingham News, clarifying that, following Hall Street Associates, "manifest disregard of the law" is not a valid basis for vacating, modifying, or correcting an arbitrator's award under the Federal Arbitration Act (FAA). The Supremacy Clause necessitates this change, and the Court asserts that any prior language regarding manifest disregard in its decisions concerning federal arbitration law is also overruled. Volvo Trucks argues that the Court's overruling only pertains to FAA-governed awards and that the manifest disregard standard might still apply to awards governed by the American Arbitration Association (AAA). However, the Court disagrees, emphasizing that its Birmingham News decision was explicitly based on the FAA and that the statutory grounds for judicial review under § 6-6-14 (such as fraud, partiality, or corruption) do not allow for the broader standard of manifest disregard for either FAA or AAA governed awards. The Court also found that prior cases cited by Volvo Trucks (Jenks v. Harris, H. S. Homes, and Sanderson Group) involved FAA governed awards and do not support the idea that AAA governed awards can be vacated on the basis of manifest disregard. Overall, the standards in § 6-6-14 are exclusive, and the Court lacks the authority to expand them.

Volvo Trucks has not demonstrated that the courts possess the authority to set aside an arbitration award based on manifest disregard of the law under the AAA, as the cases it cites do not pertain to post-dispute arbitration agreements solely governed by the AAA. The statute's language in section 6-6-14 indicates that the grounds for reviewing an arbitration award are exclusive and do not include manifest disregard of the law. This understanding is supported by a prior court statement in Birmingham News, which implies that the statutory grounds are narrowly defined. Consequently, since manifest disregard of the law is central to Volvo Trucks's arguments on appeal, those arguments need not be addressed. The trial court's entry of the arbitration award is affirmed as a final judgment under Rule 71C, Ala. R. Civ. P. The court confirms that it is unclear if Volvo North America, Inc. and Volvo Group are the same entity; however, it assumes they are for the purposes of these appeals, given that Volvo Group participated in the arbitration and the arbitrator referred to 'Volvo Group North America, Inc.' The notices of appeal list 'Volvo Trucks North America, Inc.' as the appellant, while the briefs and motions refer to 'Volvo' or 'Volvo Group North America, Inc.'