Friday, February 24, 2006
Conventional wisdom has been (so far as I can tell) that companies like mandatory arbitration because, among other things, the exposure to punitive damages is lessened -- indeed, some people think they're never available. I assume without knowing that in fact punitives are less likely to be awarded in arbitration than in litigation...but sometimes not.
In a case involving unsuccessful pest control, the Eleventh Circuit reinstated, in an unpublished opinion [PDF] an arbitration panel's award against Orkin of $2.25 million in punitive damages (on $750,000 in compensatory damages) after the district court knocked it out; Orkin will also be paying interest and fees.
In a useful reminder to be clear what claims can legally support a punitives verdict, the arbitration panel appears to have been a bit confused about which claims could support a punitives award, originally tying them to a statutory consumer protection provision, but then making more explicit that they were based on gross negligence and fraud.
From the Atlanta Business Journal story:
Black entered Orkin's arbitration process after years of problems, including repeated and severe termite invasions -- more than 25 swarms in seven years -- and Orkin's failure to obtain both the proper legally required permits and inspections for repair work, the original suit said.
The Orlando Sentinel has more about potential effects in the pest control industry and also notes that the civil case evidently triggered a racketeering investigation into the industry in Florida.