A federal judge has upheld a $1.47 million arbitration award given last fall to former NBA star Horace Grant for losses he sustained on investments in failed Regions Morgan Keegan Select bond funds.
Morgan Keegan & Co. Inc. appealed the award in February, claiming that the arbitration panel was biased.
(Read that full story here.)
The firm claimed that a tape recording of the arbitrators, who discussed the case during a break in the proceedings, showed bias.
Morgan Keegan also claimed that one of the arbitrators, Los Angeles attorney Jonathon Schwartz, failed to disclose that he represented investors seeking recovery for investments in collateralized debt obligations.
Last week, federal Judge S. James Otero of the U.S. District Court for the Central District of California dismissed the firm's appeal.
In an opinion, Mr. Otero said the arbitrators' conversation was "nothing more than informal banter" and that it was "disingenuous" of Morgan Keegan to claim it was unaware of Mr. Schwarz's legal practice.
Morgan Keegan also claimed that Mr. Grant's net losses were only about $350,000.
Judge Otero disagreed, saying that because the firm was a fiduciary under California law, the panel could award more than just out-of-pocket losses.
The decision was a "good, old-fashioned hammering for what was clearly a frivolous" appeal by Morgan Keegan, said Andrew Stoltmann, Mr. Grant's Chicago-based attorney.
Appeals of arbitration decisions are very rare, Mr. Stoltmann said, but Morgan Keegan has appealed about 10 of the more than 70 bond fund cases that have been decided by arbitration panels.
" We believe that there was strong evidentiary support for this motion to vacate and are obviously disappointed with this decision," said Eric Bran, a Morgan Keegan spokesperson, in a statement. "At this point, we are still studying the court order to determine what our options are."
Mr. Bran said the firm has appealed six cases out of the 98 that have been heard, including the Grant decision, and that "courts have found in our favor in all but two of those appeals."
The court's decision was reported by The Daily News, a Memphis, Tenn., publication.
