Morgan Keegan move rejected

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.

The firm claimed that a tape recording of the arbitrators discussing 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, 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 Mr. Grant’s net losses were only $350,000.

Mr. Otero disagreed, saying that because the firm was a fiduciary under California law, the panel could award more than 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 attorney.

Appeals of arbitration decisions are rare, he said, but Morgan Keegan has appealed about 10 of the more than 70 bond fund cases that have been decided by arbitration panels.

The court’s decision was reported by the Daily News of Memphis, Tenn.