Arbitration Award Must Include Formula for Damage Calculation or Reasoning Behind Damage Amount for Court to Find “Evident Miscalculation”

Damages awarded by an arbitration panel will not be modified unless the award provides a formula for calculating the damages or reasoning behind the damage amount that shows evident miscalculation, the Supreme Court of Vermont ruled.

In Shahi v. Ascend Financial Services, Inc., 898 A.2d 116 (Vt. 2006), Shahi sought modification or vacatur of an arbitration award in his favor, arguing that the National Association of Securities Dealers (“NASD”) arbitration panel either inappropriately calculated damages or disregarded the law of compensatory damages. Shahi had sought damages of over $55,000 and received an arbitration award for under $8,000.

Applying Vermont law, the Court noted that miscalculation of damages must be evident for a court to modify an arbitration award.

The panel did not provide a formula for calculating Shahi’s damages, or any reasoning behind the damage amount. Therefore, the Court referenced Vermont’s strong policy of deferring to arbitration awards and declined to speculate about the panel’s calculation of the award or the formula employed since the calculation method was not evident from the award.

The Court added that, although the award seemed low to Shahi, the size of the award alone was not sufficient to show that the panel manifestly disregarded the law of compensatory damages.

In the alternative, Shahi argued that award should vacated because of the panel’s evident partiality. However, Shahi’s generalized accusations of bias on part of NASD did not meet the evident partiality standard required for vacatur of an arbitration award.