Raytheon Co. v. Automated Business Systems, Inc.
United States Court of Appeals for the First Circuit
882 F.2d 6 (1989)
Federal common law permits the award of punitive damages in commercial arbitration cases.
Automated Business Systems (Automated) (defendant) contracted with Raytheon Company (Raytheon) (plaintiff) to distribute Raytheon equipment. Eventually the parties fell out. Automated charged Raytheon with fraud and deceit and invoked the contract's open-ended arbitration clause. The arbitration panel sided with Automated and ordered Raytheon to pay both compensatory and punitive damages. Raytheon appealed the punitive-damages award to a federal district court, which affirmed the arbiter's judgment. Raytheon then appealed to the First Circuit.
Does federal common law permit the award of punitive damages in commercial arbitration cases?