$1 Arbitration Award plus punitive damages amended

After remand from court, arbitrators correct their award to comply with the applicable statutes.

ALLISON v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., NASD ID No. 01-05877 (Tampa, 2/26/04).

The Arbitrators issued an amended Award in this case, because the first time, when they tried to give the Claimant $1.00 in damages under the state securities statute, the Award was vacated.

We covered that vacatur decision in the Securities Litigation Alert, SLA 2003-38. In their Award, the Arbitrators specifically based the monetary award upon “Respondent’s violation of the Florida Securities and Investor Protection Act” and, in addition to the $1.00 in damages, granted $20,000 in attorney’s fees. That created a double-whammy, because Florida-based arbitrators are not generally authorized to grant attorney fees. The Court vacated the attorney fees on those grounds.

The $1.00 damage award appears to have arisen from the Panel’s application of a discount for market-driven losses, but the FSIPA does not allow for such discounts and counsel advised the Panel of that fact at hearing. “Thus, the three arbitrators – two of whom were attorneys – were plainly informed of the mandatory damage provision under the Florida Securities Act. Despite the fact that they limited their liability finding to that statute, the arbitrators awarded only a nominal compensatory figure that bore no relation whatsoever to the true size of Allison’s losses.” That act was a manifest disregard of the law and warrants vacatur.

The matter will be remanded to the same Panel, “with directions to issue a new, amended award of such damages in accordance with Section 517.211 Florida Statutes.” The new Award recites this history and the Court’s instructions and indicates a request for $130,000 in damages. The Arbitrators render a precise figure of $65,699.49 in compensatory damages under the state statute and assess, in addition, $9,796.25 in costs. All fees are charged to Respondent.

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Securities Attorney at Sallah Astarita & Cox | 212-509-6544 | mja@sallahlaw.com | Website | + posts

Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.