Judge Issues Rare Arbitration Reversal
Wednesday, January, 15, 2014
The New York State Supreme Court has vacated an arbitration award in a case between Citigroup, Inc. and an individual investor, John Leopoldo Fiorilla.
Mr. Fiorilla had invested monies through Citigroup, which in turn invested his funds in the Royal Bank of Scotland Group. The RBSG suffered tremendous losses in the economic downturn and had to be bailed out with government funds. Mr. Fiorilla sued, claiming $19.5 million in losses. According to evidence submitted to the Supreme Court, Mr. Fiorilla's lawyers negotiated a settlement of $800,000, which was confirmed by Mr. Fiorilla.
However, he then changed lawyers and claimed the settlement was rejected, and push onward to arbitration, where he was awarded $10.8 million in damages. Citigroup sued, claiming that the original settlement was legitimate and thus arbitration had been avoided. The Supreme Court has agreed, and has set aside the entire $10.8 million.
It’s very rare for arbitration decisions to be challenged in court, though there are a limited number of vectors available under the arbitration rules established by the Financial Industry Regulatory Authority (FINRA). It is even rarer for an arbitration ruling to be overturned in this manner.