SW Legal studies in Business

Arbitrators May Award Punitive Damages and Attorney Fees

Appeals court held that the decision of an arbitration panel in awarding $20 million in punitive damages was not in manifest disregard of California law, so it would be allowed to stand.

Topic Alternate Dispute Resolution
Key Words

Arbitration; Award; Punitive Damages

C A S E   S U M M A R Y

Bosack and his wife Lerner (B&L) were founders of Cisco Systems. They employed Soward as their investment manager. The three of them formed several limited partnerships with Soward as general partner. Later, B&L began to suspect Soward had breached his fiduciary duties in managing their assets; they removed Soward as general partner. He demanded arbitration of the dispute, which occurred. The arbitration panel found that B&L breached their fiduciary duties to Soward by failing to provide him with an accounting and distribution and by improperly taking control of the assets of the limited partnerships. The panel found that B&L acted “with malice and oppression,” and awarded Soward punitive damages of $20 million, plus his interest in the partnerships, and attorney fees and related costs. B&L challenged the award in federal district court, but it was upheld. B&L appealed.


Affirmed. The award was not in manifest disregard of California law, so will stand. Arbitrators did not exceed their powers. They can require an accounting and distribution of partnership interests. Arbitrators can award punitive damages and attorney fees. Arbitrators need not give their reasoning to support an award. The award was not in manifest disregard of the law as would be needed to justify vacating the award.

Citation In the Matter of the Arbitration Between Bosack v. Soward, ---F.3d--- (2009 WL 3416227, 9th Cir., 2009)

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