Judge Blasts Dain Rauscher in Raiding Case

Court upholds record $16.5 million award. A Minnesota state judge rebuked Dain Rauscher in supporting a record raiding-case award against it.Hennepin County judge Marilyn Kaman in August confirmed the $16.5 million award won by John G. Kinnard & Co. against Dain Rauscher this past December in an NASD arbitration (see February 2000 RR, Page 32).In its argument against Kinnard's motion to confirm, Dain

Court upholds record $16.5 million award. A Minnesota state judge rebuked Dain Rauscher in supporting a record raiding-case award against it.

Hennepin County judge Marilyn Kaman in August confirmed the $16.5 million award won by John G. Kinnard & Co. against Dain Rauscher this past December in an NASD arbitration (see February 2000 RR, Page 32).

In its argument against Kinnard's motion to confirm, Dain Rauscher stated that one of the arbitrators was biased. Prior to the start of the hearing, Dain had asked that the arbitrator be removed. The NASD denied that request, and the case proceeded.

Judge Kaman wrote in her decision that the allegation of bias appeared to "have been reserved for the purpose of later challenging" the award.

Kaman further wrote that the arbitration record was "replete with evidence" that Dain had raided Kinnard. She scolded Dain for allowing witness-signaling to occur during the hearing (seen by two of the three arbitrators) and for doing after-the-fact investigations of the arbitrators and witnesses.

The judge noted that Dain had asked that the large award be thrown out to preserve the perception of fairness in arbitrations. But the judge turned that argument on its head, saying, "It is Dain's conduct in this case that would promote the erosion of confidence in the system of arbitration."

Dain did not respond to requests for comment about whether it would appeal.

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