South-Western Legal Studies in Business

Punitive Damage Award Not Restricted by Due Process Considerations
Description Connecticut high court held that it would not intervene in a claim that an arbitration award improperly awarded excessive punitive damages. There was no clear violation of public policy and since arbitration is not a state action, due process is not involved.
Topic Alternate Dispute Resolution
Key Words Arbitration; Punitive Damages; Due Process
C A S E   S U M M A R Y
Facts Plaintiffs owned Subway sandwich store franchises. They sued DeLuca, the major owner of the franchise operation, for improper interference in the election of the board of directors. As the franchise contract required, the matter went to an arbitration panel. It held that defendant violated the Connecticut Unfair Trade Practices Act. It awarded no compensatory damages, but awarded $300,000 in punitive damages. Defendant moved to vacate the award as a violation of public policy for excessive punitive damages. The trial court upheld the arbitration award. Defendant appealed.

Affirmed. The scope of submission to arbitration was unrestricted, so the resulting award is not subject to review even for errors of law, so long as the award conforms to the submission. The courts can review an award to determine if there has been a violation of public policy. The state does not have a well-defined public policy against the award of excessive punitive damages. An arbitration award is not converted into a state action by the trial court confirmation of the award, thus, the award of punitive damages does not bring the due process clause into play regardless of how excessive the award may be.

Citation Hadelman v. DeLuca, 876 A.2d 1136 (Sup. Ct., Conn., 2005)

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