What Happens When the Arbitrator Falls Asleep During Your Arbitration?

An arbitration award in the amount of $1.5M was recently enforced by a federal court despite claims the arbitrator slept through significant portions of the hearing.  Morgan Stanley, the party against whom the award was issued, sought to vacate the award  before the US District Court for the Western District of North Carolina.  In enforcing the award, the Court held ”this court must evaluate only whether the arbitrator did his job, not whether he did it well or whether the court agrees with his conclusions."

The underlying facts foretell a cautionary tale over the limitations upon the ability of parties to challenge arbitration awards.  The dispute was administered through JAMS, or the Judicial Arbitration and Mediation Services.  The claims arose in the context of age and gender discrimination claims under employment law, but the result would be equally applicable to any arbitrable claim and resulting award.  A former employee of Morgan Stanley claimed he had been wrongfully terminated based the firms newly adopted diversity, equity, inclusion initiative.  The employee sought to recover $300k for emotional distress and $2.1M in punitive damages against his former employer.  The dispute was heard by a single arbitrator appointed by JAMS and the evidentiary hearings were conducted in October of 2021 and February of 2022.

Morgan Stanley claimed the arbitrator fell asleep during “critical portions” of witness testimony during five separate days of hearings.  Notably, it was claimed the arbitrator slept through significant portions of the former employees supervisor.  Central to the courts decision, was the failure of counsel for Morgan Stanley to object during the hearing, or otherwise contemporaneously document the arbitrators sleeping through testimony.  In upholding the award,  the court noted that counsel for Morgan Stanley submitted nothing other than a self-serving affidavit to support the allegations against the arbitrator.  In April of 2023, more than a year after the last day of hearings, the arbitrator entered an award against Morgan Stanley, granting the ex-employee $370k in compensation, $250k in punitive damages, and $1M in attorneys fees and costs. 

In February of 2025, three years after the close of the arbitration hearings, the federal court confirmed the arbitration award.  In doing so, the court rejected Morgan Stanley's arguments the arbitrator displayed a “manifest disregard for the law” when issuing the award.  More specifically, the court found that sleeping through critical portions of testimony, did not show bias, prejudice, or establish the arbitrator exceeded his authority when granting punitive damages. In refusing to vacate the award,  the judge concluded “it is not for this court - sitting in review of an arbitration award … to second-guess application of the law” by the arbitrator.

There are many lessons to be taken away from this situation. First, it is critical for parties to contemporaneously object to and document misconduct on the part of arbitrators and not reserve objections until receiving the award.  Of course, this approach is subject to the age-old adage “that if you shoot at the king, you better not miss.”  Second, the basis to challenge arbitration awards are extremely limited, with the “manifest disregard of the law” standard being the most widely accepted, but nearly impossible to prevail upon. Finally, arbitration does not provide the fast, economical, efficient method of dispute resolution for which it was created and continues to be touted to achieve.  [See "Arbitration is Becoming Litigation “Light”, posted February 21, 2024].