Matter of Ladenburg Capital Mgt. Inc. v Herskovits

[*1] Matter of Ladenburg Capital Mgt. Inc. v Herskovits 2006 NY Slip Op 50945(U) [12 Misc 3d 1157(A)] Decided on March 7, 2006 Supreme Court, Suffolk County Emerson, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 7, 2006
Supreme Court, Suffolk County

In the Matter of Ladenburg Capital Management Inc. and LADENBURG, THALMANN & COMPANY, INC., Petitioners,

against

Esther Herskovits, Respondent, and MICHAEL ALEXANDER RAIMO and GARY HERSKOVITS, Additional Parties.



24909-05



DAVID HIRSCHBERG, ESQ.

Attorney for Petitioners

585 Stewart Avenue, Suite 750

Garden City, New York 11530

SHELDON H. KRONEGOLD, ESQ.

Attorney for Respondent and Additional Parties

67 Wall Street, 22nd Floor

New York, New York 10005

Elizabeth Hazlitt Emerson, J.

ORDERED that this petition for an order vacating in part an arbitration award dated September 16, 2005, is denied, and the award is confirmed.

This case involves a securities arbitration in which the respondent, Esther Herskovits, asserted claims against her broker, Michael Alexander Raimo, and his former brokerage firm, Landenburg Capital Management, sounding in breach of fiduciary duty, churning, fraud, negligence, and negligent supervision, among other things. The matter was heard by a securities arbitration panel, which found in favor of the respondent and against Landenburg Capital Management and dismissed the respondent's claims against Raimo and Landenburg, Thalmann & Co. The petitioners seek to vacate so much of the award as directed Landenburg Capital Management to pay the respondent compensatory damages in the amount of $148,754.10 with interest at the rate of 7.5% per annum from December 5, 2001, until the date the award is paid. The petitioners contend that, by dismissing all claims against the broker, Raimo, the arbitrators manifestly disregarded the law of respondeat superior and removed any possible legal basis for

holding Landenburg Capital Management liable. Accordingly, the petitioners contend that the award is totally irrational.

The petitioners' contentions to the contrary notwithstanding, an arbitration panel may hold a brokerage firm liable while absolving the particular broker from liability (see, Morgan Stanley DW Inc. v Afridi, 13 AD3d 248; Perpetual Securities, Inc. v Tang, 290 F3d 132 [2d Cir] ; Barkan v Lehman Brothers, Inc., 2005 WL 1863672 [SDNY]). Negligent supervision can provide an independent basis for liability even when the individual broker is not similarly held liable by the arbitrator (see, Barkan v Lehman Brothers, Inc., supra). Moreover, if the arbitrator found that Landenburg Capital Management's culpability was so much greater than Raimo's culpability, Landenburg Capital Management may be held solely liable for the respondent's losses (see, Morgan Stanley DW Inc. v Afridi, supra at 250-251, citing Perpetual Securities, Inc. v Tang, supra). Finally, there is no evidence in the record that the petitioners argued to the arbitrators that applicable law required either a finding of liability against both Landenburg Capital Management and Raimo or dismissal of the claims against both (see, Morgan Stanley DW Inc. v Afridi, supra). Accordingly, the petition is denied, and the award is confirmed.

DATED: March 7, 2006

J. S.C.