A FINRA arbitration panel recently awarded Larry Hagman and his wife $11.6 million in their suitability case against Citigroup.  On 11/5, a motion was filed on Citigroup's behalf in Los Angeles Superior Court seeking a dismissal of the award.   A hearing is scheduled for 12/17.  In the meantime, Citi will owe 10% interest on Mr. Hagman’s award - $10mn of which is earmarked for charity - as stipulated in the arbitrators' ruling. 

 [BTW:  It was the largest arb award for an individual investor this year, and the 9th largest award ever.  And, Hagman was oil tycoon J.R. Ewing in the 1980s hit TV series “Dallas.”]

The petition, filed by California-based law firm of Munger, Tolles & Olson, alleged that the chairman of the arbitration panel failed to disclose a potential conflict of interest.  A FINRA rule requires  arbitrators to disclose “any circumstances which might preclude the arbitrator from rendering an objective and impartial determination.”  Citigroup notes that the panel chairman was once a plaintiff in a lawsuit “involving the same claims and the same subject matter involved in this arbitration proceeding.”

    The Facts, as Presented by NYT Dealbook.   Mr. Hagman, 79, and his wife Maj, 82, accused Citi of, among other things, fraud and breach of fiduciary duty.  The couple contended that they sustained losses on stocks and bonds and a life insurance policy they held with Citi. 

Two years earlier, the panel chairman sued his real estate investment partner for fraud and breach of fiduciary duty, according to Citi’s petition.  The arbitrator “alleged that he and his wife had ‘trusted and relied upon’ the investment advice of their former real estate partner with respect to ‘almost all their life savings,’” Citi’s petition said.  [O.K., but were the subject matters the same?]

According to a recent memo that Mr. Hagman’s lawyers filed with the court, the arbitrator’s suit against his real estate partner was “unrelated” to Mr. Hagman’s case.  The memo noted that the arbitrator’s case “did not involve a securities investment,” nor did the two cases involve the same facts or parties.  The memo called Citi’s petition a “last-ditch effort.”

In its petition, Citi also said “the arbitrators refused to postpone the hearing to allow Citigroup’s key witness - the Hagmans’ financial adviser - to testify.”  The panel ultimately allowed the broker, who was having surgery during the hearing, to testify about a month after the arbitration ended.  “It is noteworthy that she testified after having the opportunity to review the entire record, which was a strategic advantage,” the memo said. 

For access to the Citigroup filing and the memo from Hagman's lawyers, click onto:   [NYT Dealbook, 11/24]