Facts

In 2001, Wedbush was the underwriter of various Gateway Academy Charter School notes in Fresno. Kent Wilson, D.D.S. purchased $60,000 worth of notes. In 2002, the notes defaulted and Dr. Wilson lost all of his money. In 2003, Dr. Wilson filed suit for fraud, breach of fiduciary duty, and other claims against Wedbush in San Diego Superior Court. Wedbush petitioned to compel arbitration before the NASD. The petition was granted and in 2006, arbitration proceeded before the NASD in Salt Lake City before three arbitrators under NASD arbitration rules and California law.

At the arbitration, the head of the Wedbush municipal bond department admitted that he knew, prior to issuance of the Gateway Academy notes, that the New Issue Marketing Memo contained false information. The arbitrators issued an award dated May 8, 2006, awarding Dr. Wilson $60,000 in compensatory damages, $25,250 in interest, $30,000 in attorney's fees, costs, and $120,000 in punitive damages. With respect to punitive damages, the award stated: "[Wedbush] is liable to and shall pay [Wilson] the sum of $120,000 in punitive damages. The award of punitive damages is based on recklessness."

Wedbush filed a petition to vacate and/or correct the arbitration award in the San Diego Superior Court, contesting the award of punitive damages, attorney's fees and costs. Wedbush argued that the arbitrators had acted beyond the scope of their authority or in violation of public policy. The Hon. Eugenia A. Eyherabide denied the petition. Wedbush paid all the awards except the $120,000 for punitive damages.

Wedbush filed an appeal in the 4th District Court of Appeal, challenging the punitive damages award. The Court's unpublished opinion, filed on Nov. 8, 2007, explains how California law directly contradicts all the arguments made by Wedbush on appeal. The Court of Appeal awarded costs on appeal.

Wedbush next filed a Petition for Review with the California Supreme Court. On Feb. 13, 2008, Wedbush's Petition for Review was denied without comment in an En Banc Notice.

Wedbush paid the punitive damages award of $120,000 plus interest in the amount of approximately $18,000.

Dr. Wilson sought attorney's fees for legal work for opposing the petition to vacate the arbitration award and for fighting the appeal and petition for review. On April 24, 2008, the Hon. Roger W. Krauel denied the motion for attorney's fees for opposing the petition to vacate as untimely, but awarded attorney's fees and costs for opposing Wedbush's appeal in the amount of $89,388.89. Wedbush has paid the attorney's fees and costs and the case is concluded.