Credit Suisse Securities (USA) LLC v. Investment Hunter LLC, C.A. No. 5107-VCN (Del. Ch. May 27, 2010), read opinion here which affirmed an arbitration award that granted $1 million in punitive damages.
Because New York law applies to this case, I will give it a relatively short shrift. The bottom line in this case is that the Court of Chancery upheld an arbitration award that included punitive damages even though New York substantive law does not allow arbitrators to impose punitive damages.
The reasoning of the Court was that the arbitration was conducted under FINRA rules which do allow arbitrators to impose punitive damages. See footnotes 35 and 38. The "take away" from this case is that a contract must specifically prohibit punitive damages as opposed to simply referring to a choice of law, which may be in conflict with rules under which an arbitration is conducted.