FINRA Panel Renders $50+ Million Award Against Hedge Fund and Execs
Posted on Categories Arbitration Awards, Business & Employment, FINRA Code of Arbitration, News, Securities ArbitrationTags , , , , ,

By George H. Friedman, SAA Publisher & Editor-in-Chief

As widely reported in the media, a former D.E. Shaw money manager prevailed to the tune of $52.1 million in his defamation claim against the firm and four senior executives.

Financial services media widely reported recently that former money manager Dan Michalow had won his FINRA arbitration claim in Michalow v. D.E. Shaw & Co., L.P., FINRA ID No. 18-03174 (New York, NY, Jun. 29, 2022). See, for example, DE Shaw, Execs Must Pay $52 Mln to Ex-money Manager, Arbitration Panel Says, Reuters (Jun. 30, 2022).We analyze the case below.

Claims Asserted

In Michalow’s Statement of Claim:

“Claimant asserted the following causes of action: defamation; gender discrimination; violation of New York Labor Law §§ 193, 198 et. seq.; breach of contract; and unjust enrichment. In the Amended Statement of Claim, Claimant asserted the following causes of action: defamation; violation of New York Labor Law §§ 193, 198 et. seq.; breach of contract; and unjust enrichment.”

Damages Sought

Michalow sought:

“defamation damages of $600,000,000.00; discrimination damages of $600,000,000.00; damages emanating from Respondents’ failure to provide Claimant with his deferred compensation, and his 2018 compensation; punitive damages of $600,000,000.00; and such other and further relief, including but not limited to, statutory interest, attorneys’ fees, filing fees, and costs. In the Amended Statement of Claim, Claimant requested defamation damages of $600,000,000.00; damages from Respondents’ failure to provide Claimant with his deferred compensation and 2018 prorated compensation with statutory interest; liquidated damages to which he is entitled under New York Labor Law § 198; litigation costs, including attorneys’ fees; punitive damages; and such other relief as deemed just and proper, including but not limited to, interest, filing fees, and costs. or additional relief and damages which the Panel deemed to be just and equitable.”

Respondents’ Answer

Respondents:

“requested an award dismissing all of Claimant’s claims; ordering Claimant to pay Respondents’ costs and attorneys’ fees; attorneys’ fees and costs in defending the defamation claim; and all other and further relief as deemed just and proper.”

The Award

The Panel finds the Respondents jointly and severally liable for $52,125,000 in compensatory damages for defamation. The Panel also: “specifically finds that Claimant did not commit sexual misconduct.” The $93,150 in hearing session fees were assessed as follows: $46,575 against Claimant and $46,575 jointly and severally against Respondents. All other claims were denied.

(ed: * The third Arbitrator withdrew from this matter, and the parties agreed to continue the hearing with the two remaining Public Arbitrators. **We checked with SAC’s Award Database to see how this fit among the largest awards in securities arbitration, etc. The Michalow award is the largest award ever issued in an industry-initiated case. According to the database, it is also the tenth largest award in any type of dispute in any forum and the eighth largest compensatory damages award. ***This is definitely one to watch.)