Why Vacating an Arbitration Award Is So Hard: Lessons from Loans on Fine Art LLC v. Peck
Arbitration is often praised for efficiency, finality, and the promise of avoiding prolonged litigation. But another pillar is just as important — deference. Courts reviewing arbitration awards apply one of the narrowest standards known to American law, with vacatur permitted only in exceptional situations. A recent decision from the Southern District of New York, Loans on Fine Art LLC v. Peck, provides a textbook example of just how steep that uphill climb can be.
At its core, the case involved a $7.19 million JAMS arbitration award issued in favor of a group of art-finance parties against various entities affiliated with Ian S. Peck. When the winning side petitioned for confirmation, the Peck Parties cross-moved to vacate. Their objections were numerous, but their arguments shared a common problem — they had already been made before the arbitrator and the magistrate judge. And that misstep set the tone for the result.
The district court’s ruling confirms three essential truths about arbitration practice: courts are deferential, recycled objections do not work, and attempts to reargue the merits will not gain traction. For litigators, businesses, and arbitration users, the opinion serves as a reminder that strategic thinking in arbitration must occur early and comprehensively. Once the award is issued, opportunities to challenge it are exceedingly limited.
The Context: A High-Value Award and the Predictable Vacatur Challenge
After a full JAMS arbitration, the arbitrator issued a substantial award — over $7.19 million — in favor of the petitioners. The Peck Parties responded by challenging the decision under FAA § 10(a)(1) and (a)(3), arguing both “corruption, fraud, or undue means” and misconduct in refusing to hear evidence. They also raised a “manifest disregard of the law” argument, contending that the arbitrator ignored contractual principles, evidentiary burdens, and damages rules.
These objections were not new. They had been argued before the arbitrator and again before Magistrate Judge Jennifer Willis, who issued a detailed Report and Recommendation advising that the award be confirmed. Judge Rearden adopted the R&R in full, emphasizing a central point: objections must be specific, fresh, and aimed at the magistrate judge’s actual analysis. The Peck Parties’ objections were not.
A Fundamental Lesson: Recycled Arguments Trigger Only Clear-Error Review
Under federal procedure, specific objections to a magistrate judge’s recommendation trigger de novo review. But objections that simply restate prior arguments receive only clear-error review — a standard that strongly favors confirmation.
Judge Rearden noted that the Peck Parties “largely recycle arguments” previously presented, making their objections insufficient to warrant de novo review. Courts routinely reject such “rehashing,” explaining that it undermines the judicial efficiency the Federal Magistrates Act was designed to promote.
This proves a critical point for litigators: a vacatur petition must do more than disagree with the arbitrator or repeat prior submissions. It must identify a precise error in the magistrate judge’s analysis. Otherwise, the substantive objections will be reviewed under a standard that rarely results in vacatur.
FAA § 10(a): The Almost-Nonexistent Basis for Vacatur
Vacating an arbitration award under FAA § 10(a) is extremely rare. Courts repeatedly emphasize that judicial review of arbitration awards is “almost nonexistent,” and this case illustrates why.
To succeed under § 10(a)(1) or § 10(a)(3), a party must show:
• Corruption, fraud, or undue means,
• Arbitrator misconduct in refusing to hear pertinent evidence, or
• Other misbehavior that prejudices a party’s rights.
The Peck Parties argued that the arbitrator ignored evidence and relied on an allegedly improper appraisal. But the district court agreed with Judge Willis: the arbitrator heard evidence, weighed credibility, and made findings. That the losing party disagreed with the outcome did not transform those findings into misconduct.
As the court explained, mere disagreement with an arbitrator's weighing of evidence is insufficient. Arbitrators are entitled to broad discretion, and their evaluation of expert testimony, credibility, and damages methodologies receives significant deference.
Once the court determined these were, at best, disagreements with the arbitrator’s fact-finding, the challenge under § 10(a) fell away.
Manifest Disregard: The “Doctrine of Last Resort”
The Peck Parties also invoked “manifest disregard of the law,” a theory the Second Circuit still recognizes but reserves for “exceedingly rare” situations. To vacate on this basis, a party must show:
The law was clear,
The arbitrator knew it, and
The arbitrator willfully ignored it.
Not misunderstood it. Not misapplied it. Willfully disregarded it.
Judge Rearden found no such circumstances. The arbitrator was aware of the law on merger clauses, damages burdens, and the rule against awarding more than the benefit of the bargain. He simply applied the law differently than the losing party preferred. That is not manifest disregard.
Once again, the arbitrator’s reasoning had at least a “barely colorable justification,” which is all the law requires.
The Court’s Final Actions: Confirmation, Interest, and Enforcement
Because the vacatur challenge failed, confirmation followed automatically. The FAA requires confirmation unless an award is vacated, modified, or corrected. The court not only confirmed the award but also addressed interest.
This part of the ruling provides additional value for practitioners:
Post-award, pre-judgment interest (New York law)
• Mandatory
• Nine percent per annum
• Runs from the date of the arbitral award
Post-judgment interest (28 U.S.C. § 1961)
• Also mandatory
• Calculated using the federal Treasury rate
These provisions significantly increase the value of an award and incentivize prompt satisfaction of arbitral judgments.
Practical Takeaways for Litigators and Parties Using Arbitration
This decision underscores several lessons:
1. Vacatur is not a second chance to litigate the case.
Courts defer heavily to arbitrators’ factual findings, credibility determinations, and damages rulings.
2. Objections must be precise and new.
Recycling arguments that have already been rejected is a near-certain way to trigger clear-error review and lose.
3. Manifest disregard is almost impossible to prove.
Disagreement with the arbitrator’s analysis is not enough.
4. Arbitration clauses and strategy must anticipate finality.
Because judicial review is so limited, parties must present their strongest case in arbitration — not rely on post-award challenges.
How Nationwide ADR Helps Parties Navigate Arbitration’s Finality
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