Punitive Damages in New York Arbitration: Who is Really Being Punished - Barbier v. Shearson Lehman Hutton, Inc.

Promotion of settlement to reduce litigation is a well-established policy goal in our federal court system.2 However, when parties cannot resolve all of their disputes in alternative dispute resolution, this policy goal is undermined. In arbitration governed by the law of the state of New York, parties are generally unable to resolve all of their disputes in arbitration when punitive damages would be warranted. In most cases, the parties\u27 dispute cannot be fully resolved where punitive damages would be available because an arbiter is not free to award punitive damages in arbitration under New York law. This is particularly troublesome because the law of the state of New York is often chosen to govern agreements in a number of industries. For example, New York law is routinely incorporated into investment agreements because New York is the world\u27s nerve center for that industry. This Casenote will explore the ramifications of the New York approach to punitive damages in arbitration and will propose an approach which may be more in-line with the policy goals of our judicial system