To Arbitrate or Not to Arbitrate: LA Supreme Court Rejects Federal Court Position

Arbitration is a favored method of dispute resolution in the energy and construction sectors, where complex, high-value contracts often generate multimillion-dollar disputes. Understanding the courts' standard of review of arbitration awards directly impacts risk assessment, contract drafting, and dispute resolution strategies. A recent U.S. Fifth Circuit decision reinforces the limited grounds for judicial intervention, a principle that remains central to the effectiveness of arbitration as an efficient alternative to litigation.

In United States Trinity Services, LLC v. Southeast Directional Drilling, LLC, a drilling subcontractor obtained a $1.7 million arbitration award against the general contractor for standby costs incurred on a pipeline installation project. The subcontractor incurred costs when ordered to stop work for causes outside its control, including delayed permits, mud infiltration, and COVID-19. The subcontract contained a provision that called for reimbursement of standby costs. On appeal, the general contractor sought to vacate the award in the U.S. Northern District of Texas, arguing that the arbitration panel failed to properly interpret various contract provisions related to standby costs and exceeded its authority and acted in manifest disregard of Texas law in interpreting the contract.

The Federal Arbitration Act, 9 USC §10 (“FAA”) applies and provides the exclusive grounds to vacate an award: corruption, fraud, evident partiality, misconduct in refusing to postpone the hearing, refusing to hear evidence, or where arbitrators exceeded their powers. The U. S. Fifth Circuit Court of Appeals noted that the FAA was enacted to create a national policy favoring arbitration; the arbitrator’s authority derives from the parties’ contract; and once parties agree to arbitrate, they “bargain for” the arbitrator’s, not the court’s, interpretation of their contract.

The Court instructed that a party challenging an award bears a high burden to show that the arbitrator ignored the contract. It is not sufficient to show the arbitrator erred in interpreting the contract. The question the court asks is “whether the arbitrators construed the contract at all” not “whether they construed it correctly.” A court should not reassess the merits of the arbitrator’s decision. Here, the award recited the pertinent contract terms and the arbitrators’ analysis. This showed the arbitrators considered the contract provisions, thus ending the Court’s inquiry.

The Court rejected the argument that the arbitrators manifestly disregarded the law in interpreting the contract. “Manifest disregard” – a judicially-created concept – is not a freestanding ground for vacatur. It does not serve as a separate basis to establish that arbitrators exceeded their powers. Otherwise, the FAA’s stated grounds for vacatur would be expanded to essentially a “full-bore” judicial review process.*

However, the Circuits are split on the validity of manifest disregard of the law or contract as a basis to vacate an award. See for example, Dewan v. Walia, where the U.S. Fourth Circuit Court of Appeals vacated an award after finding the arbitrator’s contract interpretation ‘untenable.”

Mary Anne Wolf, PE, FCIArb, is an arbitrator, mediator, and attorney in construction, energy, commercial and complex cases.

References:

United States Trinity Services, LLC v. Southeast Directional Drilling, LLC, 2025 WL 1218096 (5^th Cir. 2025).

Dewan v. Walia, 544 Fed Appx 240 (4th Cir. 2013).

* Hall Street Assoc., LLC v. Mattel, 128 S.Ct. 1396 (2008).

Louisiana’s automobile insurance premiums are some of the highest in the United States. With so many other demands on driver’s wallets, it may seem tempting to simply not purchase a liability automobile policy, even if it is required by Louisiana law. Louisiana’s “No Pay, No Play” statute, LA-R.S. 32:866, is intended to fight that temptation. See Progressive Sec. Ins. Co. v. Foster, 1997-2985 (La. 4/23/98), 711 So.2d 675. Below are some key considerations for drivers and insurers on either side of a potential “No Pay, No Play” dispute.

For Drivers

The “No Pay, No Play” statute means just what it seems—if you do not pay for your own liability insurance, you cannot recover under someone else’s liability insurance even if the accident is not your fault … at least to a point.

Specifically, the “No Pay, No Play” statute precludes someone who does not have liability insurance from recovering from another driver’s policy (1) the first $15,000 of bodily injury damages and (2) the first $25,000 of property damage. Of course, if damages do not exceed these amounts, it means the uninsured driver cannot recover his or her damage at all.

Of course, some exceptions exist. For example, the statute does not apply (meaning, it does reduce the plaintiff driver’s recovery) if the other driver is cited for operating his or her vehicle while intoxicated and is convicted or pleads nolo contendere; if the other driver intentionally causes the accident; if the other driver flees the scene; or if the other driver is in furtherance of the commission of a felony. However, the off-chance that a driver falls into an exception should not outweigh the obligation to comply with Louisiana law.

For Insurers

Generally, liability insurers should assert the “No Pay, No Play” affirmative defense when it appears a plaintiff driver lacks liability insurance. However, insurers should also keep in mind that this defense also has limitations.

For instance, the “No Pay, No Play” statute is not necessarily a total bar to a plaintiff’s recovery. If damages exceed $15,000 for bodily injury and/or $25,000 for property damage, payment may still be owed for these excess damages.

Secondly, the party asserting the “No Pay, No Play” affirmative defense—usually a defendant insurer—bears the burden of establishing that the plaintiff driver lacked insurance coverage on the vehicle he or she was operating at the time of the incident.

This burden can sometimes present difficult issues. For instance, in Johnson v. Henderson, 2004-1723 (La.App. 4 Cir. 3/16/05), 899 So.2d 626, the plaintiff was operating a vehicle he did not own. The defendant failed to yield and struck the plaintiff’s car. The defendant and his insurer asserted the affirmative defense under “No Pay, No Play.”

The facts of the case suggest the vehicle that the plaintiff was operating was not insured, but plaintiff paid his “premiums” to the owners of the vehicle, had an ostensibly valid insurance card, and believed he was insured. The court found that the defendants failed to carry their burden of establishing a lack of coverage. As a result, the insurer owed the plaintiff the full amount of his damages—a total of $5,855.00 that would otherwise have been precluded under the statute.

The “No Pay, No Play” issue is easily avoided: Louisiana drivers should get the insurance required by the statute. Failure to do so runs the risk of discounting (and potentially barring) recovery for accidents that are not the driver’s fault.

In South Alexander Development I, LLC v. Markel American Insurance Co., the U.S. District Court for the Middle District of Louisiana granted an insurer’s motion for summary judgment finding that the insured’s failure to cooperate violated the policy’s coverage terms and voided coverage.

The dispute arose from a commercial first-party property loss following Hurricane Ida. The insurer moved quickly to adjust the claim by retaining an independent adjuster and engineers to evaluate the damage to and value of the insured property. It also asked the insured to produce documentation needed to complete the adjustment, including records of installation costs, monthly revenues, and repair estimates. The insured did not respond.

Additionally, the insurer sent numerous emails over the course of the claim requesting information about (1) the costs the insured had incurred; (2) documentation supporting the income loss claim, along with quotes, estimates, and proposals for repairs; and (3) the scope of work for testing and repairs. However, most of these requests went unanswered.

Based on this evidence, the court determined that the insured violated the terms of the policy because it failed to cooperate with the insurer’s investigation. Most notably, the insured obtained repair estimates and proposals from its own contractor and withheld them from the insurer until after suit was filed. The insured also never submitted a completed proof of loss, even though the policy required submission of such a document that included estimates and “other reasonable information” the insurer needed to settle the loss. These acts showed the insured failed to “cooperate with [the insurer] in performing all acts required by this policy.”

The insurer showed that it pursued the information diligently and that the insured’s breach was both material and prejudicial. The court found (1) the insurer had documented repeated, specific requests for nearly a year, (2) the withheld documents went directly to quantifying the loss, and (3) the insured’s noncompliance deprived the insurer of its right to investigate the insured’s claim.

As a result, the court granted summary judgment finding no genuine issue of material fact relating to the insured’s breach of the policy’s cooperation clause. The insured was precluded from bringing a breach of insurance contract claim and therefore, without a valid contractual claim, the insured also could not pursue a bad faith claim against the insurer.

References:

South Alexander Development I, LLC v. Markel American Insurance Co., CV 23-1436-JWD-SDJ, 2026 WL 1819120 (M.D. La. June 24, 2026).