Actor Larry Hagman Wins $11.5 Million Arbitration Against Citigroup
Wall Street Journal
An arbitration panel ruled in favor of actor Larry Hagman in a securities case against a unit of Citigroup Inc., which was ordered to pay $1.1 million to the former star of the TV show “Dallas,” and another $10 million to charities of his choosing.
Mr. Hagman, along with various trusts and IRA accounts titled in his name, filed a claim in May 2009 against Citigroup Global Markets alleging breach of fiduciary duty, civil fraud, misrepresentation and other charges. The case was related to unspecified securities in accounts held with Citigroup and with the purchase of a life-insurance policy, according to the ruling.
As occurs in most securities-arbitration awards, the Financial Industry Regulatory Authority panel didn’t spell out details of the case or of the reasoning behind its decision. However, the $10 million awarded in punitive damages suggests a conclusion of serious wrongdoing.
Finra’s manual for arbitrators, which was cited by the three-person panel, allows punitive damages if a firm engages in “serious misconduct that meets the standard for such an award.” A 1995 U.S. Supreme Court case ratified Finra arbitrators’ authority to order punitive damages.
Mr. Hagman requested $1.3 million in compensatory damages, plus punitive damages, lost-opportunity costs and other relief, according to the ruling. The $11.6 million award includes $1.1 million in compensatory damages, and Citigroup must also pay $440,000 in legal fees and $20,000 in arbitration costs.
Punitive damages are ordered in a very small number of such cases, said William Jacobson, director of the Securities Law Clinic at Cornell Law School. He was unaware of another case in which a panel required the payment of punitive damages to a charity.
“Having them paid for some public purposes is an interesting concept. The panel just could have made the amount payable to the claimant,” he said.
“We are disappointed and disagree with the panel’s finding,” a Citigroup spokesman said in a statement. The company is reviewing its options, he said.
Mr. Hagman is best known for playing J.R. Ewing in the 1980s hit television series “Dallas,” and Major Anthony Nelson in “I Dream of Jeannie,” the 1960s television comedy.
In its ruling, the panel also declined to expunge a reference to the case in a public-disclosure document for Mr. Hagman’s adviser, Lisa A. Detanna, who works in a Beverly Hills, Calif.-based office of Morgan Stanley Smith Barney. Smith Barney-Citigroup’s retail brokerage-and Morgan Stanley merged their brokerage operations in 2009.
The disclosure, which mentions the docket number of Mr. Hagman’s case but not his name, refers to an allegation of mismanagement by “failing to protect…principal and investing in unsuitable securities from 2005 until 2009.” The case involved both listed and over-the-counter stocks, according to the disclosure.
A second arbitration case related to Ms. Detanna, alleging $2.5 million in damages, according to the disclosure report. The report doesn’t include the claimant’s name, but mentions allegations of making unsuitable investments and failing to take steps to reallocate investments to protect against losses.
Ms. Detanna didn’t return a phone call requesting comment. A Citigroup spokesman declined to comment on the disclosures.
Brokerage firms usually request to expunge information about arbitration claims from brokers’ public disclosure records, according to securities lawyers, and arbitration panels only approve the request in extreme cases, such as where there was a fundamental misunderstanding about the facts.
“Expungement is often requested and rarely granted,” said George Brunelle, a securities lawyer for Brunelle & Hadjikow, P.C. in New York who represents brokers.
Arbitration rulings involving celebrity claimants are rare, say lawyers. Many such cases settle before the proceedings end.
Philip Aidikoff, a Los Angeles-based lawyer who represented Mr. Hagman in the case, declined to comment.