As discussed earlier in this chapter, the federal and state statutes provide for "review" of arbitration awards by the district courts for possible vacation, modification, or correction by reason of an alleged "error" on the part of the arbitrator. However, what is the scope of that review? Frequently, arbitration awards are conclusory — without findings and conclusions, or even reasoning. Usually there is no transcript or recording of the hearing.

With respect to the FAA, the U.S. Supreme Court resolved much of this question in Oxford Health Plans LLC v. Sutter.317 The Court held that when an issue was within the scope of the arbitrator's authority (here, resolving whether the arbitration agreement authorizes class arbitration), if the decision of arbitrator is based on the text of the arbitration clause — "arguably construing the contract" — his decision will be affirmed, even in case of "grave error."

§ 17.8.1—Vacation, Modification, Or Correction Of Punitive Damage Award

The Colorado statute prohibiting an arbitrator from awarding punitive damages does not apply to federal causes of action and probably not when the FAA applies. See § 16.6.2. What is the scope of review by the district court?

In BMW of North America v. Gore, the U.S. Supreme Court, applying the due process clause, imposed limitations on the amount of punitive damages that could be awarded in arbitration under the FAA.318 When due process is applicable, the scope of review is generally de novo. In Davis v. Prudential Securities, Inc.319 the Eleventh Circuit held that "the state action element of a due process claim is absent in private arbitration cases," and hence refused to apply it to BMW limitations.320 Other decisions have held that a court should review punitive damage awards, although not necessarily on the due process analysis of the BMW decision.321 Rather, the analysis was in terms of whether the arbitrator acted capriciously or in manifest disregard of the law.

If the court reviews the award of punitive damages — either under the due process analysis of BMW, under state statute providing for punitive damages, or under common law — what does the court review? The ratio of punitive damages to compensatory damages? Whether the facts found by the arbitrator justify the punitive damage award, or from the entire record, if the hearing was recorded? What is permissible under the narrow grounds for review under the FAA and Colorado statutes?

Any reader confronted with the issue is referred to Garcia and Liquori, "Should Courts Review Arbitration Awards of Punitive Damages? Intrusion or Introspection," Conflict Management (Summer 2005) (ABA Section of Litigation).

§ 17.8.2—District Court Review Of Arbitrators' Decisions And Orders

District court review of an arbitrator's award is discussed in this Chapters 17 and Chapter 18. Awards implicitly reflect certain other decisions of the arbitrator. For...

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