Cases & Deals

Lehman Brothers obtains defense award on arbitration claims relating to investments in auction-rate securities

Clients Lehman Brothers Holdings Inc.

On February 28, 2011, a panel of three Financial Industry Regulatory Authority ("FINRA") arbitrators sided with a trial team from Jones Day and denied all claims of an investor who alleged losses from its holdings in auction rate securities at Lehman Brothers Holdings Inc.

As the credit crisis expanded in August 2007, demand for these securities dramatically declined and auctions began to fail. As a result, many investors were unable to liquidate their positions. Lehman Brothers filed bankruptcy in September 2008, and any claims pending against it were stayed at that time. In its August 2010 Amended Statement of Claim, the plaintiff alleged that two former Lehman Brothers employees were responsible for its investment losses because they mismanaged its investment account. The plaintiff sought to recover more than $25 million in compensatory and enhanced damages resulting from the illiquidity it experienced from its investments, including interest and attorneys fees.

Following a nearly two-week evidentiary hearing during January 2011 in Houston, Texas, the FINRA panel issued an order denying and dismissing with prejudice each and all of the claims.

MAXXAM Inc. v. Timothy Claude Ford and Kevin Douglas Laurie, FINRA Arbitration No. 09-05147