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Securities: Record Arbitration Punitive Damages Case Will Get More Mediation (Web)

Securities:  Record Arbitration Punitive Damages Case Will Get More Mediation.
Both sides in the long-running Sawtelle v. Waddell & Reed Financial Inc. case are still talking.  The Kansas City Star and the Kansas City Business Journal report that plaintiff Stephen Sawtelle says that a June 6 date is set for a second mediation session.

After years of litigation, the case--where a New York arbitration panel has twice awarded $25 million in punitive damages, likely the largest U.S. arbitration punitive damages award—had its first post-arbitration mediation date on May 6. 

The talks didn’t settle the case, the Kansas City newspapers report, but Sawtelle says that the sides would return to the negotiating table next month.  He says that the parties have set a second date, June 8, to continue talks if progress is made.

The May 13 Kansas City Star article can be found at (registration required); the May 12 Business Journal article can be found at

The punitive damages awards in the eight-year-old case were overturned twice by New York courts; the second time, the trial judge sent the case back to arbitration but said a new panel had to be formed to consider the case. 

Waddell, of Overland Park, Kan., has paid Sawtelle more than $1 million in compensatory damages.  The fired broker won the punitives because of tortuous interference by Waddell personnel; Sawtelle has alleged that the actions were in retaliation for testimony he gave about Waddell practices to the U.S. Securities and Exchange Commission.

Both news articles report that Sawtelle says Waddell didn’t have the proper executives present with authority to settle the case earlier this month.  He says in both articles that there were no objections by the Waddell attorneys to his demand of at least $10 million to settle the case.  The Business Journal reports that Sawtelle didn’t attend the New York talks.

The Star reported last month that on Friday, April 29, after a one-day mediation, Waddell announced it had agreed to pay $32.5 million to settle regulatory disputes with the NASD, state agencies and suits with its former parent company, Torchmark Corp.

[For details on those disputes, including previous mediation efforts, see “Financial Services Company Finds Itself Awash in ADR Matters,” 23 Alternatives 19 (February 2005), available without charge to CPR members in Members Only.]

[For details on the Sawtelle case, see “Record Punitive Damages Are Overturned—Again—as Court Appoints a New Panel,” 22 Alternatives 54 (April 2004); for commentary, see Constantine N. Katsoris, “Post-Sawtelle Tremors:  Arbitration Faces New Questions about the Sustainability of Punitive Awards,” 22 Alternatives 61 (May 2004). ]

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