Antonio Mastrobuono v. Shearson Lehman Hutton, Inc

In Antonio Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995), the Court declined to read (1) a broad arbitration clause and (2) a New York choice-of-law clause as incorporating into the arbitration agreement the New York state law prohibition against an arbitrator awarding punitive damages. (Id. at 115 S.Ct. at 1217-18.) The Court agreed that, in light of Volt, the parties could have included a prohibition against punitive damages in their agreement, id. at 115 S.Ct. at 1216, and the Court searched for evidence in the agreement that the parties had done so, (id. at 115 S.Ct. at 1216-19.) The Court rejected the proffered interpretation of the New York choice-of-law clause as incorporating "New York decisional law, including that State's allocation of power between courts and arbitrators, notwithstanding otherwise-applicable federal law." (Id. at 115 S.Ct. at 1217.) The Court determined that the choice-of-law clause and the broad arbitration clause together, at most, created an ambiguity that would otherwise allow, under the FAA's policy in favor of arbitration, punitive damage awards. (Id. at 115 S.Ct. at 1218.) "We think the best way to harmonize the choice-of-law provision with the arbitration provision is to read 'the laws of the State of New York' to encompass substantive principles that New York courts would apply, but not to include special rules limiting the authority of arbitrators." (Id. at 115 S.Ct. at 1219.)