Facts

Claimant Narramore Christian Foundation alleged breach of fiduciary duty, fraud, negligent misrepresentation, negligence, unsuitability, failure to supervise, breach of contract, and violation of California Corporations Code Sections 25401, 25501 and 25504. The claims were connected to investments in collateralized mortgage obligations.

Respondents Michael Farah and Wedbush Morgan Securities Inc. denied the claims, except where they specifically admitted the allegations in their answers to the statement of claim. Both asserted affirmative defenses.

Respondent Wedbush filed a cross-claim, alleging express indemnification, implied equitable indemnification, interference with contractual relations, interference with prospective economic advantage, intentional misrepresentation, negligent misrepresentation, and breach of contract.

Respondent Farah denied the cross-claims, except where it specifically admitted the allegations in its answer. It asserted affirmative defenses.

Damages

Claimant sought approximately $1,033,000 in compensatory damages, unspecified punitive damages, pre- and post-judgment interest, and costs, including attorney fees. In its amended statement of claim, claimant increased its request for compensatory damages to approximately $1,350,000. In the alternative, it sought rescission damages totaling about $1,430,000. In its answer, respondent Webush sought dismissal of claimant's statement of claim and costs, including attorney fees. In its cross-claim, respondent sought express and equitable indemnification for all losses and liabilities incurred in connection with named arbitrations, unspecified compensatory damages, unspecified punitive damages, and costs, including attorney fees. In his answer, respondent Farah sought dismissal of claimant's statement of claim and costs, including attorney fees. In his answer to the cross-claim, he sought dismissal of the cross-claim and costs, including attorney fees.

Result

The Panel decided as follows: 1) Respondent Wedbush is liable to and shall pay claimant the sum of $1,137,397 in compensatory damages; 2) Respondent Wedbush is liable to and shall pay claimant the sum of $80,822.20 in costs, including expert witness fees; 3) Except as awarded above, the parties shall bear their respective costs, including attorney fees; 4) All other relief requested and not expressly granted is denied.

Other Information

In November 2004, claimant signed a waiver agreement which waived any and all rights and benefits under California Civil Code Section 1542 and the California Ethical Standards for Neutral Arbitrators. In December, claimant filed an amended statement of claim under NASD Code of Arbitration Procedure Rule 10328(a).