## Facts

- Theodore Halligan worked for Piper Jaffray, Inc. as an institutional equity salesman beginning in 1973.
- As a condition of employment, Halligan signed a NASD Form U-4 agreeing to arbitrate future disputes.
- Halligan alleged that after a change in corporate leadership in 1988, Piper forced him out in December 1992 because of age despite strong performance.
- In October 1993, Halligan filed claims in NASD arbitration, including an Age Discrimination in Employment Act (ADEA) claim.
- During arbitration, Halligan’s health deteriorated; by stipulation, the panel struck his re-direct testimony and continued the proceeding.
- Halligan introduced substantial evidence supporting age discrimination and contesting Piper’s asserted non-discriminatory reasons.
- The NASD panel issued an unexplained “bare” award denying all claims and granting relief to Piper and Halligan’s sales partner.
- Halligan died during or shortly after the arbitration; Irene Halligan, as executrix, continued the matter.

## Issues

1. Whether the arbitration award should be vacated under the Federal Arbitration Act because the arbitrators acted in manifest disregard of governing ADEA law.
2. Whether, if the award is vacated, a later federal complaint dismissed on res judicata grounds must be reinstated.

## Decision

- The Second Circuit reversed the district court orders refusing to vacate and confirming the arbitration award.
- The court vacated the award, concluding the arbitrators manifestly disregarded the law applicable to the ADEA claim.
- The court reversed the dismissal of the executrix’s subsequent federal complaint because vacatur eliminated any res judicata basis tied to confirmation of the award.

## Legal Principles

- An arbitration award may be vacated for “manifest disregard of the law” where arbitrators knew the controlling legal rule and intentionally disregarded it; the standard is narrow and requires more than ordinary legal error.
- For ADEA claims, the burden-shifting framework applies: a claimant may prove discrimination through a prima facie case, employer articulation of a legitimate reason, and proof that the reason is pretext and age was determinative.
- Arbitrators are not required to issue reasoned awards, but when the evidentiary record strongly supports a statutory claim and the award is unexplained, the lack of reasoning may support an inference that the panel ignored governing law.
- Vacatur of an arbitration award removes the foundation for res judicata based on that award and its confirmation.

## Conclusion

The Second Circuit held that the NASD panel’s unexplained rejection of a strongly supported ADEA claim justified vacatur for manifest disregard of the law, and it reinstated the later federal action because the vacated award could not bar the suit through res judicata.


Halligan v. Piper Jaffray, Inc., 148 F.3d 197 (2d Cir. 1998)