A NEW YORK trial court recently, in Sawtelle v. Waddell & Reed, Index No. 115056/01, (Sup. Ct. N.Y. Cty. June 10, 2002), confirmed an arbitration panel’s award of $25 million in punitive damages against a financial services company, which was found to have wrongly interfered with a former employee’s efforts to attract clients to his new employer’s firm.
The award was confirmed even though the ratio between punitive damages and compensatory damages was nearly 13 to 1. Finding an absence of “state action” in judicial confirmation of a private arbitration award, the Sawtelle court rejected the applicability of U.S. Supreme Court case law holding that the Fourteenth Amendment’s Due Process Clause places limits on what jury can do in the way of punishing defendants in civil litigation. Accordingly, the court held that because the award was proper under the state statute at issue (the Connecticut unfair trade practices law), it should be confirmed insofar as it was not “wholly irrational” or in “manifest disregard of the law”.
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