April 28, 2011

Shahinian v. Cedars-Sinai Medical Center: Court of Appeal declines to review amount of arbitrator’s punitive damages award

In a prior post we pointed out that there are strong arguments that punitive damage awards issued by arbitrators should be subject to judicial review for constitutional error notwithstanding the general rule against review of arbitration awards for legal error. The California Court of Appeal (Second Appellate District, Division Eight) rejected that argument in a published opinion, re-affirming Rifkind & Sterling, Inc. v. Rifkind (1994) 28 Cal.App.4th 1282 and holding that the amount of punitive damages awarded in a private arbitration is not subject to judicial review for constitutional error because the constitutional limits on punitive damages apply only when a state is imposing punitive damages through a court proceeding, not when a private arbitrator is imposing them in a contractual arbitration proceeding.

The court rejected the argument that judicial confirmation and enforcement of the arbitrator’s punitive damage award is a form of state action that triggers the protections of the Due Process Clause. But the court did not rule out the possibility that, in some cases, a private arbitration award may be so excessive and contrary to public policy that judicial review is appropriate. The court concluded, however, that the punitive damages award in this case, which was only 1.2 times the amount of the compensatory damages award, did not represent an exceptional circumstance in which judicial review is required.

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