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Click here for the full text of this decision FACTS:Valerie Biggs Sarofim, who had no previous investment experience, invested approximately $12.7 million she received from a divorce settlement with Trust Company of the West. Most of the money was invested in a core portfolio, and $2.2 million was invested in admitted junk bonds. Sarofim lost $6 million over the next three years. Combined with withdrawals she took out, Sarofim then had $2.5 million left. Pursuant to the investment agreement, which was governed by California law, Sarofim initiated arbitration proceedings against TCW, claiming breach of fiduciary duty, fraud, unconscionability, constructive fraud, negligent misrepresentation, negligence and breach of contract. After hearing five days of testimony and reviewing more than 200 exhibits, the three-member arbitration panel issued a “reasoned award.” The panel found TCW failed to diversify Sarofim’s investment and failed to educate itself on Sarofim’s needs and objectives, even though Sarofim had no other source of living expenses except the investment money. The panel awarded Sarofim $6.3 million in actual damages. Though the panel denied Sarofim’s request for attorneys’ fees, which were barred by California law and the arbitration agreement, the panel did award Sarofim $2.9 million in punitive damages, saying TCW’s breach of its fiduciary duties justified such an award. Sarofim asked the district court to affirm the award, which it did; the district court denied TCW’s motion to vacate the award. HOLDING:Affirmed. The court notes that under California law, a party may recover punitive damages where it is proven through clear and convincing evidence that a defendant “has been guilty of oppression, fraud, or malice.” The court then notes that TCW argues the arbitration panel manifestly disregarded the California law. To prove manifest disregard, the court explains that where it is not manifest that the arbitrators acted contrary to applicable law, the award should be upheld. Further, where it is manifest that the arbitrators acted contrary to the applicable law, the award should be upheld unless it would result in significant injustice, taking into account all the circumstances of the case, including powers of arbitrators to judge norms appropriate to the relations between parties. The court finds that TCW does not meet the first part of this two-part test. The court assumes without deciding that the arbitration panel “appreciated” the existence of the California punitive damages statute. In so finding, the court rejects TCW’s argument that this court is limited in its consideration to the four corners of the arbitration award; this court can consider all of the available information in its assessment of manifest disregard. The court finds that just because the panel did not use the exact wording of the California statute does not mean that the award does not comply with that law. The court observes here that the panel issued a “reasoned award,” and that TCW did not ask for specific findings of fact or conclusions of law after the award was announced. “Despite the absence of the specific terms, the panel’s award could be construed as finding”malice’ or”fraud’ by clear and convincing evidence . . . . The award explains that the actions of the parties”justify’ the punitive damages award. Although it does not say that TCW committed”despicable conduct’ with”willful and conscious disregard of the rights’ of others, the decision contains enough information to infer these things. . . . The award, along with details in the record, supports an arbitral determination that TCW’s conduct satisfied the requirements of California’s punitive damages statute.” The court then rebuffs TCW’s argument that the award is against public policy of California. The relevant policy of the punitive damages statute is to punish the wrongdoer and to deter others from engaging in similar conduct. The award here satisfies both aims. The court also notes that California policy does not limit punitive damages awards in arbitration, even if they do not comport with statutory and judicial interpretations of proper punitive damages awards. OPINION:Benavides, J.; Garwood, Benavides and Owen, JJ.

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