Delray Beach (Fla.) Police & Firefighters Retirement System can go ahead with its federal lawsuit against Citigroup Global Markets seeking to recover at least $9 million in investment damages, according to a June 23 ruling by U.S. District Court Judge Kenneth L. Ryskamp in West Palm Beach, Fla.
Citigroup Global Markets had sought to have the suit by the $100 million pension fund moved to arbitration, noting in a motion that William Adams, then chairman of the system's board, approved in 2003 and 2004 a provision in the investment consulting agreement for arbitration of disputes.
Mr. Ryskamp upheld the system's contention that a majority of the system's board needed to approve such an agreement and that Mr. Adams lacked authority to make such a condition.
Citigroup Global Markets, formerly Salomon Smith Barney, was investment consultant to the system from 1995 to 2006. The suit, originally filed in November 2008 in Florida state Circuit Court, accuses Salomon Smith Barney of breaching its fiduciary duty and fraud by recommending investment managers that would use Salomon Smith Barney as a broker, allowing the firm to earn commissions on trades, an alleged conflict of interest never disclosed to or authorized by fund trustees.
The lawsuit was later moved to U.S. District Court.
In Mr. Ryskamp's eight-page ruling, he wrote, Citigroup “lacked a reasonable basis to assume that (Mr.) Adams had authority to bind the board to material modifications to the pension consulting agreement.”
Christy Pollack, Morgan Stanley Smith Barney spokeswoman, said, “We intend to appeal the court's decision, and we continue to believe these claims are without merit and we will defend ourselves against them.”
Citigroup entered into a joint venture June 1 with Morgan Stanley to create Morgan Stanley Smith Barney, the new name of the successor consulting firm.
The law firm Greenberg Traurig is representing Citigroup Global Markets.
Stephen H. Cypen, attorney with Cypen & Cypen, the system's legal counsel, said Mr. Ryskamp asked both parties to submit scheduling plans for the case by early July. Milberg and Saxena White also represent the system in the case.
Bogdahn Consulting replaced Salomon Smith Barney as consultant to the system in 2006 after Salomon Smith Barney resigned as consultant.
