mastrobuono shearson lehman hutton argued january decided march petitioners filed action federal district alleging securities trading account mishandled respondent brokers arbitration panel convened arbitration provision parties contract federal arbitration act faa awarded petitioners punitive damages relief district appeals disallowed punitive damages award contract provision specifies laws state new york govern new york law allows courts arbitrators award punitive damages held arbitral award enforced within scope contract parties pp case governed contract say arbitrability petitioners punitive damages claim faa central purpose ensure private agreements arbitrate enforced according terms volt information sciences board trustees leland stanford junior decisions make clear contracting parties agree include punitive damages claims within issues arbitrated faa ensures agreement enforced according terms even rule state law otherwise exclude claims arbitration see terminix dobson pp appeals misinterpreted parties contract reading provision arbitration provision conflicting although agreement contains express reference punitive damages claims fact intended include page ii claims demonstrated considering separately impact two provisions inquiring meaning taken together process reveals provision unequivocal exclusion punitive damages claims arbitration provision strongly implies arbitral award punitive damages appropriate best way harmonize two read laws state new york encompass substantive principles new york courts apply include special rules limiting authority arbitrators thus provision covers rights duties parties arbitration clause covers arbitration neither provision intrudes upon pp stevens delivered opinion rehnquist scalia kennedy souter ginsburg breyer joined thomas filed dissenting opinion mastrobuono shearson lehman hutton justice stevens delivered opinion new york law allows courts arbitrators award punitive damages dispute arising contract expressly provides shall governed laws state new york panel arbitrators awarded punitive damages district appeals disallowed award question presented whether arbitrators award consistent central purpose federal arbitration act ensure private agreements arbitrate enforced according terms sciences board trustees leland stanford junior petitioners antonio mastrobuono assistant professor medieval literature wife diana mastrobuono artist opened securities trading account respondent shearson lehman hutton shearson executing shearson client agreement respondent nick diminico vice president shearson managed mastrobuonos account closed mastrobuono shearson lehman hutton petitioners filed action district northern district illinois alleging respondents mishandled account claiming damages variety state federal law theories paragraph parties agreement contains arbitration provision provision relying arbitration provision federal arbitration act faa respondents filed motion stay proceedings compel arbitration pursuant rules national association securities dealers district granted motion panel three arbitrators convened conducting hearings illinois panel ruled favor petitioners arbitration proceedings respondents argued arbitrators authority award punitive damages nevertheless panel award included punitive damages addition compensatory damages respondents paid compensatory portion award filed motion district vacate award punitive damages district granted motion supp nd appeals seventh circuit affirmed courts relied provision paragraph parties agreement specifies contract shall governed new york law new york appeals decided new york power award punitive damages limited judicial tribunals may exercised arbitrators garrity lyle stuart district seventh circuit held panel arbitrators power award punitive damages case granted certiorari courts appeals expressed differing views mastrobuono shearson lehman hutton whether contractual provision may preclude arbitral award punitive damages otherwise proper compare barbier shearson lehman hutton pierson dean witter reynolds bonar dean witter reynolds raytheon automated business systems lee chica reverse ii earlier term upheld enforceability predispute arbitration agreement governed alabama law even though alabama statute provides arbitration agreements unenforceable terminix dobson writing justice breyer observed congress passed faa overcome courts refusals enforce agreements arbitrate slip see also volt information sciences board trustees leland stanford junior dean witter reynolds byrd determining faa applied parties arbitration agreement readily concluded federal statute alabama statutory prohibition slip petitioners seek similar disposition case us today seventh circuit interpreted mastrobuono shearson lehman hutton contract incorporate new york law including garrity rule arbitrators may award punitive damages petitioners ask us hold faa new york prohibition arbitral awards punitive damages state law vestige ancient judicial hostility arbitration see slip quoting bernhardt polygraphic america frankfurter concurring petitioners rely southland keating perry thomas held faa two california statutes purported require judicial resolution certain disputes southland explained faa declared national policy favoring arbitration actually withdrew power require judicial forum resolution claims contracting parties agreed resolve arbitration respondents answer provision contract evidences parties express agreement punitive damages awarded arbitration dispute arising contract thus claim case distinguishable southland perry parties presumably desired unlimited arbitration state law stood way regardless whether faa garrity decision contracts expressly incorporating new york law respondents argue parties may agree bound garrity may agree forgo arbitration altogether words contract says punitive damages end matter courts bound interpret contracts accordance expressed intentions parties even effect intentions limit arbitration mastrobuono shearson lehman hutton previously held faa policy operate without regard wishes contracting parties volt information sciences board trustees leland stanford junior california appeal construed contractual provision mean parties intended california rules arbitration rather faa rules govern resolution dispute noting california rules manifestly designed encourage resort arbitral process generally foster ed federal policy favoring arbitration concluded interpretation entirely consistent federal policy ensure enforceability according terms private agreements arbitrate referring holdings southland perry struck state laws limiting arbitrability added follow faa prevents enforcement agreements arbitrate different rules set forth act indeed result quite inimical faa primary purpose ensuring private agreements arbitrate enforced according terms arbitration act matter consent coercion parties generally free structure arbitration agreements see fit may limit contract issues arbitrate see mitsubishi soler may specify contract rules arbitration conducted volt mastrobuono shearson lehman hutton ii shearson client agreement petitioners executed contains paragraphs two relevant provisions agreement found paragraph first sentence paragraph provides part entire agreement shall mastrobuono shearson lehman hutton governed laws state new york app pet cert second sentence provides controversy arising transactions parties shall settled arbitration accordance rules national association securities dealers nasd boards directors new york stock exchange american stock exchange ibid agreement contains express reference claims punitive damages ascertain whether paragraph expresses intent include exclude claims first address impact two relevant provisions considered separately move important inquiry meaning two provisions taken together see restatement second contracts writing interpreted whole provision viewed isolation may reasonably read merely substitute analysis otherwise determine law apply disputes arising contractual relationship thus similar contract without provision signed new york performed new york presumably laws state new york apply even though contract expressly state event nothing contract possibly constitute evidence intent exclude punitive damages claims accordingly punitive damages allowed absence contractual intent contrary faa garrity rule see supra even reference laws state new york substitute ordinary analysis respondents urge includes caveat detached federal law provision might preclude award punitive damages new york allows courts though mastrobuono shearson lehman hutton arbitrators enter awards see garrity words provision might include new york substantive rights obligations state allocation power alternative tribunals respondents argument persuasive new york law means new york decisional law including state allocation power courts arbitrators notwithstanding federal law demonstrated provision need read broadly unequivocal exclusion punitive damages claims arbitration provision second sentence paragraph improve respondents argument contrary read separately clause strongly implies arbitral award punitive damages appropriate explicitly authorizes arbitration accordance nasd rules panel mastrobuono shearson lehman hutton arbitrators fact proceeded set rules nasd code arbitration procedure indicates arbitrators may award damages relief nasd code arbitration procedure clear authorization punitive damages provision appears broad enough least contemplate remedy moreover seventh circuit noted manual provided nasd arbitrators contains provision punitive damages issue punitive damages may arise great frequency arbitrations parties arbitration informed arbitrators consider punitive damages remedy mastrobuono shearson lehman hutton although neither clause arbitration clause separately considered expresses intent preclude award punitive damages respondents argue fair reading entire paragraph leads conclusion theory even new york law ambiguous even arbitration accordance nasd rules indicates punitive damages permissible juxtaposition two clauses suggests contract incorporates new york law relating arbitration disagree clause introduces ambiguity arbitration agreement otherwise allow punitive damages awards pointed volt interprets provisions agreement covered faa due regard must given federal policy favoring arbitration ambiguities scope arbitration clause resolved favor arbitration see also moses cone memorial hospital mercury constr mastrobuono shearson lehman hutton moreover respondents overcome rule contract interpretation construe ambiguous language interest party drafted see fire ins schnackenberg graff billet restatement second contracts seckinger respondents drafted ambiguous document claim benefit doubt reason rule protect party choose language unintended unfair result rationale facts case practical matter seems unlikely petitioners actually aware new york bifurcated approach punitive damages idea signing agreement arbitrate disputes might giving important substantive right face mastrobuono shearson lehman hutton doubt unwilling impute intent petitioners finally respondents reading two clauses violates another cardinal principle contract construction document read give effect provisions render consistent see halas crimmins contracting city new york fifth avenue constr app div restatement second contracts comment id think best way harmonize provision arbitration provision read laws state new york encompass substantive principles new york courts apply include special rules limiting authority arbitrators thus provision covers rights duties parties arbitration clause covers arbitration neither sentence intrudes upon contrast respondents reading sets two clauses conflict one another one foreclosing punitive damages allowing interpretation untenable hold appeals misinterpreted parties agreement arbitral award enforced within scope contract judgment appeals therefore reversed ordered footnotes mastrobuono shearson lehman hutton paragraph client agreement provides agreement shall inure benefit shearson successors assigns shall binding undersigned petitioners heirs executors administrators assigns shall governed laws state new york unless unenforceable due federal state law controversy arising relating accounts transactions officers directors agents employees agreement breach thereof shall settled arbitration accordance rules effect national association securities dealers boards directors new york stock exchange american stock exchange may elect make election registered mail addressed main office within days demand make election may make election judgment upon award rendered arbitrators may entered jurisdiction thereof agreement arbitrate apply future disputes arising certain federal securities laws extent determined matter law compelled arbitrate claims app pet cert related point respondents argue meaningful distinction substance remedy entitlement prevail law entitlement specific form damages see brief respondents rely distinction pass upon persuasiveness dissent makes much similarity clause one volt took incorporate california statute allowing stay arbitration pending resolution related litigation volt however interpret contract de novo instead deferred california construction state law interpretation private contracts ordinarily question state law sit review present case contrast review federal interpretation contract interpretation accords decisionmaker arguably entitled deference arbitrator see supra contract also authorizes petitioners election arbitration governed rules new york stock exchange american stock exchange instead nasd app mastrobuono shearson lehman hutton pet cert neither set alternative rules purports limit arbitrator discretion award punitive damages moreover even doubt ability arbitrator award punitive damages exchanges rules contract expressly allows petitioners claimants case choose nasd rules panel arbitrators case fact proceeded nasd rules solicitor general reminds us one nasd rule us namely rule nasd rules fair practice reads agreement member customer shall include condition limits ability party file claim arbitration limits ability arbitrators make award brief et al confine analysis plain language arbitration clause little trouble concluding mastrobuono shearson lehman hutton contract clause bound parties settle disputes arbitration conducted according rules allow form equitable remedy relief sufficiently broad encompass award punitive damages inasmuch agreements arbitrate generously construed mitsubishi motors soler seem sensible interpret disputes remedy relief phrases indicate minimum intention resolve arbitration dispute otherwise settled allow chosen dispute resolvers award varieties forms damages relief empowered award since courts empowered award punitive damages respect certain types claims arbitrators equally empowered raytheon automated business systems arbitration act establishes matter federal law doubts concerning scope arbitrable issues mastrobuono shearson lehman hutton resolved favor arbitration whether problem hand construction contract language allegation waiver delay like defense arbitrability moses cone cite precedent illinois forum state place contract executed new york state designated contract clause parties suggest state law arguably relevant controversy drafters second restatement justified rule follows one party chooses terms contract likely provide carefully protection interests party also likely party reason know uncertainties meaning indeed may leave meaning deliberately obscure intending decide later date meaning assert cases doubt therefore long factors decisive substantial reason preferring meaning party restatement second contracts comment mastrobuono shearson lehman hutton volt information sciences board trustees leland stanford junior university held federal arbitration act faa simply requires courts enforce private contracts arbitrate normal contracts according terms holding led us enforce provision incorporated state procedural rule concerning arbitration proceedings provision reasonably distinguished one volt dissent mastrobuono shearson lehman hutton concluded even faa preempted state statute applied parties clause contract issue demonstrated parties agreed governed statute rejecting volt position faa imposes policy precluded enforcement statute permitting california courts stay arbitration proceedings concluded act simply requires courts enforce privately negotiated agreements arbitrate like contracts accordance terms result interpreted clause make applicable state rules governing conduct arbitration even specific rule hampers delays arbitration rejected argument clause construed incorporating substantive law dismissed claim faa mastrobuono shearson lehman hutton preempted contract provisions might hinder arbitration held volt concluded faa force arbitration parties enter contracts involving interstate commerce instead faa requires arbitration proceed manner provided parties agreement although construe ambiguities concerning scope arbitrability favor arbitration see moses cone memorial hospital mercury construction remain mindful contract parties intentions control mitsubishi motors soler thus parties intend state procedure shall govern federal courts must enforce understanding federal policy favoring arbitration certain set procedural rules federal policy simply ensure enforceability according terms private agreements arbitrate volt mastrobuono shearson lehman hutton majority claims incorporation new york law need read broadly include substantive procedural law choice new york law unequivocal exclusion punitive damages claims ante rejected arguments volt garrity rule sort state rule governing conduct arbitration volt requires federal courts enforce parties may limit contract issues arbitrate may specify contract rules arbitration conducted citation omitted sure majority might correct garrity rule concerning state allocation power alternative tribunals ante although garrity appears describe substantive new york law nonetheless volt makes distinction rules serve distribute authority courts arbitrators majority finds unenforceable types rules majority finds enforceable indeed california rule volt considered one allocates authority arbitrators courts mastrobuono shearson lehman hutton permits california courts stay arbitration pending resolution related litigation see volt ii award shall contain names parties name counsel summary issues including type security product controversy damages relief requested damages relief awarded statement issues resolved names arbitrators dates claim filed award rendered number dates hearing sessions location hearings signatures arbitrators concurring award nasd code arbitration procedure mastrobuono shearson lehman hutton majority also purports find clear expression parties agreement availability punitive damages manual provided nasd arbitrators ante paragraph client agreement nowhere mentions manual mentions rules effect nasd manual fit either part description neither nasd set rules first manual apparently official nasd document manual promulgated adopted nasd instead apparently compiled members securities industry conference arbitration sica supplement uniform code arbitration parties clearly adopt paragraph petitioners present evidence nasd policy giving specific manual arbitrators petitioners assert manual even used arbitration gave rise case importantly indication text client agreement parties intended manual used arbitrators second manual provide rules sense contemplated paragraph instead provides general information advice arbitrator mastrobuono shearson lehman hutton hints chair sica arbitrator manual manual nothing sort guide arbitrator one bit advice example care exercised particularly questioning witness arbitrator indicate disbelief grimaces frowns hand signals avoided poker face goal even parties intended adopt manual read resolve issue punitive damages read context portion sica manual upon majority relies seems explain punitive damages establish whether arbitrators authority award issue punitive damages may arise great frequency arbitrations parties arbitration informed arbitrators consider punitive damages remedy generally proceedings punitive damages consist compensation excess actual damages awarded form punishment wrongdoer punitive damages awarded decision arbitrators clearly specify portion award intended punitive damages arbitrators consider referring authority relied mastrobuono shearson lehman hutton even one made stretch reading passage punitive damages relate nasd arbitrator authority sica manual limits applicability situation presented case according manual code ethics arbitrators hen arbitrator authority derived agreement parties arbitrator neither exceed authority less required exercise authority completely regarding procedural rules code agreement parties sets forth procedures followed conducting arbitration refers rules followed obligation arbitrator comply procedures rules manual clearly contemplates parties agreement define powers authorities arbitrator thus directed back rest paragraph intent parties whose expression issue decision incorporate laws new york examination client agreement provision nasd code procedure sica manual demonstrates parties made intent clear way divined majority new york law specifically precludes arbitrators mastrobuono shearson lehman hutton awarding punitive damages clear conflict majority puts new york law nasd rules provision speaks directly issue nasd code silent giving effect every provision contract requires us honor parties intent indicated text agreement preclude award punitive damages arbitrators iii seventh circuit adopted de novo standard review arbitrators decision although yet decided standard review apply cases sort see first options chicago kaplan cert granted petitioners waived argument deferential standard appropriate petitioners raise argument petition certiorari opening brief standard review may antecedent question see bank oregon independent insurance agents america sct given petitioners waiver argument seems appropriate resolve question first options new york appeals rested holding principle punitive damages exemplary social remedies intended punish rather compensate power punish rest hands state found private arbitrators wield authority impose damages garrity rules include chair maintain decorum times shouting profanity gratuitous remarks stopped securities industry conference arbitration arbitrator manual attorneys think often statement made truer becomes chair however discourage needless repetition ibid immediately close hearing arbitrators usually remain hearing room either begin deliberations set date deliberation unlike jurors panel members restricted discussing case among telling petitioners even claim reply brief paragraph expressed intent reserve arbitrators authority award punitive damages instead petitioners consistently argued agreement constitute waiver right obtain punitive damages page