Manifest Disregard of The Law and Class Arbitrations

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Posted on: Jul 23 2025

In Light & Wonder, Inc. v. Mohawk Gaming Enters. LLC, 2025 N.Y. Slip Op. 51070(U) (Sup. Ct., N.Y. County July 2, 2025 (here), the Supreme Court, New York County, Commercial Division, upheld an arbitrator’s class certification award. The decision centered on whether the arbitrator exceeded his authority or manifestly disregarded the law by certifying a class without individually analyzing the arbitration clauses of absent class members. Light & Wonder argued that the arbitrator violated U.S. Supreme Court precedents (Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) and Lamps Plus, Inc. v. Varela, 587 U.S. 176 (2019)), which emphasize that consent for class arbitration must be explicit. However, the court found these cases did not address class certification involving absent class members, and thus did not provide “well-defined, explicit, and clearly applicable” law to bind the arbitrator. The motion court concluded that the arbitrator acted within his authority and followed the AAA rules, and that minor contract variations did not preclude class treatment. Thus, Light & Wonder’s motion to vacate the award was denied.

The Applicable Law

Under Section 10(a) of the Federal Arbitration Act (“FAA”), a court will vacate an arbitral award for the following reasons: (1) the award was procured by corruption, fraud, or undue means; (2) there was evident partiality or corruption in the arbitrators . . . ; (3) the arbitrators were guilty of misconduct in refusing to postpone the hearing, or in refusing to hear evidence pertinent and material to the controversy, or of any other misbehavior by which the rights of any party have been prejudiced; or (4) the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.[1]

Apart from Section 10(a) of the FAA, courts have vacated arbitral awards when an arbitrator manifestly disregards the law.[2] Importantly, the doctrine does not apply to the facts.[3]

Application of the doctrine is limited.[4] It is a doctrine of last resort.[5] It requires more than a simple error in law or a failure by the arbitrators to understand or apply it; and, it is more than an erroneous interpretation of the law.[6] The doctrine is “limited to the rare occurrences of apparent egregious impropriety on the part of the arbitrators.”[7]

To modify or vacate an award on the ground of manifest disregard of the law, a court must find both that (1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case.[8] Essentially, the movant must show that the arbitrator “willfully flouted the governing law by refusing to apply it.”[9]

The petitioner bears a heavy burden when invoking the doctrine. As one district court observed, the manifest disregard standard is so difficult to satisfy that it “will be of little solace to those parties who, having willingly chosen to submit to inarticulated arbitration, are mystified by the result; for a party seeking vacatur on the basis of manifest disregard of the law ‘must clear a high hurdle.’”[10]

[Eds. Note: On many occasions, this Blog has examined the grounds upon which an arbitration award may be vacated under the FAA and the manifest disregard of the law doctrine. To find such articles, please see the Blog tile on our website and search for “FAA”, “vacatur”, and “manifest disregard of the law” or any other issue that may be of interest you.]

Light & Wonder, Inc. v. Mohawk Gaming Enters. LLC

Background

Light & Wonder concerned the lease by plaintiffs Light & Wonder, Inc. (f/k/a Scientific Games Corporation) and LNW Gaming, Inc. (f/k/a SG Gaming, Inc.) (together, “LNW”) of automatic card shufflers to defendant Mohawk Gaming Enterprises LLC (“Mohawk”), which used them in its casino.

On November 9, 2020, Mohawk filed a class arbitration claim with the American Arbitration Association (“AAA”) alleging antitrust violations against LNW on behalf of itself and all other similarly situated consumers. Among other things, plaintiffs alleged that LNW charged consumers (i.e., casinos) supracompetitive prices for inferior products.

Mohawk maintained that the agreement with LNW allowed its claims to be brought in arbitration as a class action. In this regard, the arbitration clause provided: “The parties agree that any and all controversies, disputes or claims of any nature arising directly or indirectly out of or in connection with this Agreement (including without limitation claims relating to the validity performance, breach, and/or termination of this Agreement) shall be submitted to binding arbitration for final resolution.”

On February 8, 2022, the Arbitrator issued a Partial, Final Clause Construction Award regarding the threshold issue of class arbitrability (the “Clause Construction Award”). After examining the applicable U.S. Supreme Court jurisprudence on the matter,^[11] the Arbitrator concluded that the language of the arbitration clause was “exceedingly broad” and permitted class arbitration.

On February 11, 2022, LNW petitioned the court to vacate the Clause Construction Award. Mohawk filed a cross-motion to confirm the Award on March 11, 2022.

The motion court denied LNW’s petition and granted Mohawk’s cross-motion. The motion court’s decision was affirmed on appeal by the Appellate Division, First Department.[12]

Two years after the Arbitrator issued the Clause Construction Award, Mohawk moved for class certification. Mohawk sought to certify a class that consisted of

All persons and entities that directly purchased or leased automatic card shufflers within the United States, its territories and the District of Columbia from any Respondent or any predecessor, subsidiary or affiliate thereof, at any time between April 1, 2009 and December 31, 2022, and that agreed in writing to arbitrate disputes arising from such purchases or leases under the rules of the [AAA].

Two months later, LNW filed its opposition to Mohawk’s class certification motion. LNW argued that it had not agreed to resolve the claims of absent putative class members through class arbitration, invoking the standard articulated in Lamps Plus to support its position. LNW also argued, citing examples, that many of the absent class members’ arbitration clauses did not include the same “strikingly broad” language included in the Mohawk Agreement, and thus those absent class members would not have contemplated class arbitration under the Lamps Plus standard. Finally, LNW argued that the Arbitrator was required to “undertake a clause-by-clause analysis to determine whether the absent class members’ agreements permit[] classwide arbitration,” and upon such a review, LNW said, it would be apparent that the absent class members did not agree to be part of a class.

LNW maintained that at no point following the conclusion of briefing on the motion did the Arbitrator request for review each contract signed by a putative absent class members. Instead, said LNW, on December 9, 2024, the Arbitrator issued an award certifying a proposed opt-out class that substantially adopted Mohawk’s proposed class definition (the “Class Determination Award”).

In the Class Determination Award, the Arbitrator first analyzed Mohawk’s motion pursuant to the factors set forth in Rules 4(a) and (b) of the AAA’s Supplementary Rules for Class Certification (the “AAA Rule 4 Factors”). Applying the AAA Rule 4 Factors, the Arbitrator determined that Mohawk had established numerosity of the class, questions of law or fact that were common to the class, typicality of the claims or defenses of the class, adequacy of class representation, adequacy of class counsel, and the superiority of class arbitration to other available methods for the fair and efficient adjudication of the controversy.

The Arbitrator then addressed the AAA Rule 4 Factor requiring a showing that each class member had entered into an agreement containing a “substantially similar” arbitration clause as compared to the one contained in the agreement signed by the class representative. On this point, the Arbitrator concluded that Mohawk had met this requirement because (1) each class member had agreed to adopt the AAA Arbitration Rules, thus consenting to AAA-administered arbitration, (2) the arbitration clauses signed by all proposed class members encompassed claims in Mohawk’s arbitration demand and covered the same period of time, and (3) “[t]here ha[d] been nothing brought to the Arbitrator’s attention suggesting that anything in any of the class clauses directly preclude[d] class arbitration.”

In reaching this conclusion, the Arbitrator expressly rejected LNW’s reliance on Lamps Plus, observing that its “holding related to the class representative and his arbitration agreement—it had nothing to do with absent class members.” The Arbitrator reasoned that “absent class members are in a different position and have certain unique safeguards [that] the class representative and [LNW] do not,” including, among others, opportunities to opt-out. The Arbitrator also posited that “if one were to turn long-accepted doctrine on its head and require analysis, for example, of 100,000 arbitration contracts of absent class members, that would either grind the process to a complete halt or would render it so unwieldy and expensive as to be completely ineffective.” Finally, pointing to the example arbitration clauses supplied by LNW, the Arbitrator concluded that the “[n]arrow differences” between them provided “no basis for decertifying the class.” The Arbitrator continued, “absent class members are [often] fine with adopting the language of the majority and, if not, they are fully protected by the option to opt out of the class.”[13]

On December 10, 2024, following the issuance of the Class Determination Award, proceedings were stayed for 30 days “to permit the parties to move a court of competent jurisdiction to confirm or vacate the Class Determination Award.” LNW filed a petition to vacate the Class Determination Award on January 9, 2025.

LNW sought to vacate the Class Determination Award primarily on the basis that the Arbitrator erroneously certified a class of all LNW customers with arbitration clauses in their licensing agreements with LNW without reviewing whether those agreements contained a consent to arbitrate on a class basis. LNW maintained that the Arbitrator should have engaged in an analysis guided by the United States Supreme Court’s decisions in Stolt-Nielsen and Lamps Plus to assess whether absent class members consented to arbitration. Had he done so, LNW argued, the Arbitrator would not have found an evidentiary basis to conclude that LNW and each absent class member agreed to class proceedings.

Given the Arbitrator’s failure to follow Lamps Plus and its progeny and to analyze the arbitration clauses in the contracts of absent class members, LNW argued that there were three bases under which the motion court should vacate the Class Determination Award: (1) the Arbitrator exceeded his contractual authority by imposing his own policy justifications for class-wide arbitration instead of interpreting the relevant absent class members’ agreements; (2) by failing to follow Stolt-Nielsen and Lamps Plus, the Arbitrator disregarded well-established law governing class arbitration; and (3) the Arbitrator was required, but failed, to consider the absent class members’ contracts in order to determine whether class certification was appropriate under the AAA Rule 4 Factors.

In response, Mohawk argued that LNW could not demonstrate that the Arbitrator’s analysis of the AAA Rule 4 Factors, which included his rejection of the applicability of Lamps Plus and its progeny, was erroneous because nothing in those cases ever considered the issue of absent class members in its analysis or otherwise suggested that their holdings applied at the class certification stage. Mohawk separately asserted that none of the grounds for vacatur advanced by LNW under Section 10(a)(4) of the FAA had merit.

The Motion Court’s Decision

The motion court denied LNW’s motion to vacate and granted Mohawk’s cross-motion to confirm the Class Determination Award. The motion court concluded that LNW failed to establish any grounds to vacate the Class Determination Award.

As an initial matter, the motion court held that there was “no basis to conclude … that the Arbitrator manifestly disregarded the law in rendering the Class Determination Award.”[14] After presenting “[a] thorough review of” Stolt-Nielsen and Lamps Plus, the motion court reasoned that “it [was] not so clear [either case] … applied to the Arbitrator’s class certification analysis.”[15] “[W]hen construed together,” said the motion court, these decisions “establish that (1) consent to submit a dispute to class arbitration must be discerned from the plain terms of the parties’ arbitration agreement, and (2) such consent cannot be presumed from the arbitration agreement’s silence or ambiguity on the issue.”[16] “But critically,” said the motion court, “neither Stolt-Nielsen nor Lamps Plus addressed or otherwise extended the issue of consent to class arbitration in the context of certifying a class for arbitration.”[17] “Recognizing this silence,” explained the motion court, “the Arbitrator grappled with LNW’s contention that the legal principles in Lamps Plus should be interpreted as governing his analysis at the class certification stage. He, in turn, clearly laid out his reasoning for why they did not, including a review of the central holdings in Lamps Plus, policy arguments, and an analysis of analogous case law and arbitration awards.”[18]

Noting that “[r]easonable minds [could] certainly differ as to whether the Arbitrator’s determination was the correct conclusion to draw from the holdings of Stolt-Nielsen and Lamps Plus,” the motion court found that there was nothing in the record to conclude “that his analysis and conclusion ignored ‘well defined, explicit, and clearly applicable’ case law so as to constitute a manifest disregard of the law.”[19] On the law, the motion court concluded that “given Stolt-Nielsen and Lamps Plus’s silence on the issue of class certification, there was a notable lack of clearly defined and explicitly applicable law to guide the Arbitrator’s class certification analysis.”[20] “Therefore,” concluded the motion court, “the Arbitrator’s decision not to follow Lamps Plus and progeny as part of his class-certification analysis [was] not a basis to vacate the … Class Determination Award.”[21]

Turning to whether the Arbitrator exceeded his authority under the FAA or manifestly disregarded any contracts in granting class certification, the motion court held that “he did not”.[22] Looking at the record, the motion court concluded that “[t]here [was] plainly no basis to conclude he exceeded his authority under the Mohawk Agreement, the AAA Rules, or the other absent class members’ agreements.”[23]

Finally, the motion court held that the fact “[t]hat the Arbitrator did not consider each of the absent class members’ contracts to assess whether they also contemplated class arbitration [did] not alter this conclusion or otherwise warrant a determination that the Arbitrator manifestly disregarded [the] contract.”[24] The motion court agreed with the Arbitrator that AAA Rule 4(a)(6) only required that “each class member has entered into an agreement containing an arbitration clause which is substantially similar to that signed by the class representative(s) and each of the other class members.”[25] Applying the rule, the motion court found that there was nothing improper with the Arbitrator “considering the examples [of the arbitration agreement] submitted by LNW” and finding that “the differences” between the agreements “that had been identified were ‘narrow’ and did not preclude certification.”[26] “[N]othing in the Arbitrator’s analysis,” concluded the motion court, ‘contradict[ed] an express and unambiguous term of [a] contract’ or ‘depart[ed] from the terms of [any] agreement’ so that it was ‘not even arguably derived from the contract.’”[27]

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

[1] 9 U.S.C. § 10(a)(1)-(4).

[2] Duferco Intl. Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 388 (2d Cir. 2003); Goldman v. Architectural Iron Co., 306 F.3d 1214, 1216 (2d Cir. 2002) (citing, DiRussa v. Dean Witter Reynolds Inc., 121 F.3d 818, 821 (2d Cir. 1997)). See also Matter of Daesang Corp. v. NutraSweet, 167 A.D.3d 1, 15-16 (1st Dept. 2018) (citing, Wien & Malkin LLP v. Helmsley-Spear, Inc., 6 N.Y.3d 471, 480-81 (2006)), lv. denied, 32 N.Y.3d 915 (2019)).

[3] Wein, 6 N.Y.3d at 483.

[4] Matter of Arbitration No. AAA13-161-0511-85 Under Grain Arbitration Rules, 867 F.2d 130, 133 (2d Cir. 1989).

[5] Duferco, 333 F.3d at 389.

[6] Id.

[7] Daesang, 167 A.D.3d 1, 15-16.

[8] Wallace v. Buttar, 378 F3d 182, 189 (2d Cir. 2004) (quoting, Banco de Seguros del Estado v. Mutual Mar. Off., Inc., 344 F.3d 255, 263 (2d Cir 2003)). See also Wien, 6 N.Y.3d at 480-81 (footnotes omitted).

[9] Westerbeke Corp. v. Daihatsu Motor Co., 304 F.3d 200, 217 (2d Cir. 2002).

[10] Goldman Sachs Execution & Clearing, L.P. v. Official Unsecured Creditors’ Comm. of Bayou Grp., 758 F. Supp. 2d 222, 225 (S.D.N.Y. 2010).

[11] Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013), and Lamps Plus, Inc. v. Varela, 587 U.S. 176 (2019).

[12] Matter of Scientific Games Corp. v. Mohawk Gaming Enters. LLC, 217 A.D.3d 556 (1st Dept. 2023). This Blog examined the motion court’s decision and the First Department’s affirmance, here.

[13] Citing Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 810-11 (1985).

[14] Slip Op. at *3.

[15] Id. at *4.

[16] Id. at *5.

[17] Id.

[18] Id.

[19] Id. (citations omitted)

[20] Id. (citation omitted).

[21] Id.

[22] Id.

[23] Id. at *6.

[24] Id.

[25] Id.

[26] Id.

[27] Id. (citations omitted).

Tagged with: Arbitration, Arbitration Agreement, Arbitration Award, Class Arbitration, FAA, Manifest Disregard of The Law, Vacating Arbitration Award, Vacatur