to recognize that punitive damages are arbitrable." Whether punitive damages are arbitrable, however, is not an issue in the underlying dispute. Instead, at issue is whether punitive damages are an available remedy where an arbitration agreement is governed by New York law.
The Volt court found that, just as parties can limit the issues which they will arbitrate, so too may they specify the rules under which arbitration will be conducted. Volt, 109 S. Ct. at 1255. Where the parties have agreed to abide by state rules of arbitration, enforcing those rules according to the terms of the agreement is fully consistent with the goals of the FAA. Because the Mastrobuonos agreed to arbitrate their dispute in accordance with the laws of the State of New York, and because the Agreement does not explicitly or by incorporation authorize the award of punitive damages, the remedies available to them are limited by the Garrity rule. This limitation gives effect to the contractual rights and expectations of the parties and does not violate the policies codified in the FAA. Accordingly, the punitive damages awarded the Mastrobuonos are vacated pursuant to 9 U.S.C. § 10. See First Commercial Fin. Group. Inc. v. Baghdoian, 92 C 4145 (N.D. Ill. Jan. 26, 1993) (discussing FAA grounds for vacating an arbitration award).
Subsequent to Shearson and DiMinico's motion to vacate, the Mastrobuonos filed a motion to confirm the arbitration award or, alternatively, to award punitive damages or set a date for trial on the claims for which the imposition of punitive damages is usually allowed. As discussed above, the punitive damages award must be vacated in accordance with the terms of the Agreement's paragraph 13 and the Garrity rule; therefore, Mastrobuonos' motion to confirm must be denied.
In support of their request that this court award punitive damages, the Mastrobuonos contend that if New York law prohibits arbitrators from awarding punitive damages, the court could somehow retain jurisdiction over that remedy. By providing that New York law govern their agreement, the Mastrobuonos agreed that the damages available to them would be those awardable by arbitration under New York law. This was not a waiver by the defendants of their FAA-guaranteed right to compel arbitration of this dispute, including the award of damages, see 9 U.S.C. § 4 (party has right to obtain an order directing that "arbitration proceed in the manner provided for in [the parties'] agreement"), but, instead, was the Mastrobuonos' waiver of their potential right to receive punitive damages. Accordingly, the court cannot, in disregard of the FAA, award damages that are precluded by the parties' privately negotiated arbitration agreement. See Byrd, 470 U.S. at 219.
Furthermore, as to whether the Mastrobuonos may separately litigate the remedy of punitive damages, both Illinois and New York law preclude a separate cause of action solely for punitive damages. See Kemner v. Monsanto, 217 Ill. App. 3d 188, 199, 576 N.E.2d 1146, 1153, 160 Ill. Dec. 192, app. denied, 584 N.E.2d 130 (1991) ("Illinois does not recognize a cause of action for punitive damages alone"); McGrew v. Heinold Commodities, Inc., 147 Ill. App. 3d 104, 110, 497 N.E.2d 424, 429, 100 Ill. Dec. 446 (1986) ("Illinois, like most states, does not recognize a cause of action for punitive damages alone"); Florsheim v. Travelers Indem. Co., 75 Ill. App. 3d 298, 309-10, 393 N.E.2d 1223, 1233, 30 Ill. Dec. 876 (1979) (same); Waltman v. Fahnestock & Co., 792 F. Supp. 31, 33 (E.D. Pa. 1992) (New York does not provide for a separate cause of action for punitive damages); Santos v. Security & Law Enforcement Employees, Council 82, 80 A.D.2d 554, 435 N.Y.S.2d 357, 358 (1981) ("In this state there is no separate cause of action for punitive damages."). Accordingly, the Mastrobuonos' alternative motion to set a date for trial on their "pending claims for punitive damages" must be denied.
For the foregoing reasons, the motion of Shearson and DiMinico to vacate the Mastrobuonos' award of punitive damages is granted.
IT IS SO ORDERED.
CHARLES RONALD NORGLE, SR., Judge
United States District Court
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