NYSE Awards 02/03 From the Securities Law Home Page

   

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ML Media Cases, Broker Cross Claims against Settling BD and more

NYSE AWARDS, 2/03:

24 of the 28 Awards issued by the Exchange in this monthly period were customer-related, with the ML Media Awards comprising about half of the Awards on the customer side. The “ML Media” Awards are those which relate to a limited partnership investment, ML Media Opportunity Partners, LP, and a dispute between investors in that partnership and Merrill Lynch concerning alleged misrepresentations. The misrepresentations deal with ML Media’s stated intention to diversify its investments within set parameters and charges that it exceeded specified concentration percentages. Single Arbitrators have been appointed to hear the cases, which are presented independently of one another, but without hearings. Much of the time, the same attorneys appear on each side, and, evidently, there is agreement that the amounts claimed can exceed the Small Claims jurisdictional amount, as can the amounts awarded.

Despite this standardized approach, each Arbitrator is taking his or her own perspective on the case at hand, so that the results reached have run the gamut. Generally speaking, though, Merrill Lynch has defeated a majority of the claims and this month’s lot was no exception. Investors won damages in four of the 11 Awards.

Perhaps the largest award to a customer in the February group of Awards occurred in Kusmierski & Singer v. Josephthal & Co., Inc., NYSE ID #2002-010590 (New York, 2/6/03), where the “say-nothing” Award described the clients’ claims as “breach of contract, negligent misrepresentation and omissions, unauthorized trading, unsuitability, negligence, breach of fiduciary duty….” The Award directs payment by all Respondents of $300,000 on a $400,000 compensatory claim. Claimants were represented by Christine M. Bae and Carlton R. Asher, NYC.

Newfield v. Dain Rauscher, NYSE ID #2001-009522 (New York, 2/7/03), drew our interest, because the $225,000 award to a customer on charges crisply described only as “unsuitable investment and churning” reveals a divided defense. The awarded amount, which compares with $2.2 million in claimed damages, will be the sole responsibility of the broker. The firm settled, evidently during the proceeding, and broker Todd Cowle filed a cross-claim to keep Dain Rauscher in the case. The Arbitrators ruled on the cross-claim, but denied it in full. The Award does not indicate who was assessed with the $12,500 in forum fees.

Finally, both sides won something in an industry dispute in which Prudential Securities claimed amounts due on a promissory note and Shane Mahieu responded with charges of “constructive termination.” Prudential Securities, Inc. v. Mahieu v. Bobo & Bell, NYSE ID #2002-010253 (New York, 2/20/03). The “Award Data” section of the Award incorrectly double-counts the $25,000 award to Mr. Mahieu, but the “Decision” section clarifies that Prudential won its full claim on the note, but was directed to credit Mr. Mahieu with an offset of $25,000.

  

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