Losses Mounting for Former New Canaan Fund Manager

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In a strongly worded rebuke, a U.S. district judge last week dismissed a New Canaan man’s complaint against the American Arbitration Association in connection with a $7.8 million award against him.

Judge Naomi Reice Buchwald of the Southern District of New York said the complaint filed by town resident Gregory Imbruce amounted to a “thinly veiled attempt” to strip the AAA of its immunity—a key defense to Imbruce’s claim that the AAA committed breach of contract, unjust enrichment and fraud, among other violations.

The plaintiffs in the case are Imbruce and five companies in which Imbruce himself is the sole member, according to the court order (embedded below).

Imbruce accused the AAA of wrongfully allowing his adversaries to pay tardily an administrative fee in the arbitration. That, in turn, allowed the adversaries in Imbruce’s claim to assert a monetary damages claim, resulting in the multi-million dollar civil theft award against him. (Imbruce’s adversaries included two town residents who had invested with him.)

Yet if Imbruce’s “objection is solely that AAA wrongfully collected a filing fee for a monetary counterclaim,” then he hasn’t “suffered harm that this suit could redress,” the judge wrote in her decision, issued Sept. 22. The judge noted that Imbruce had ample notice that his adversaries were seeking monetary relief, which was also found by the Connecticut Superior Court in rejecting a similar attempt by Imbruce to avoid the award.

In her decision, the judge wrote: “We can only construe this claim as an indirect attempt to challenge the arbitral award through a declaration that the arbitrator was without authority to award monetary damages. Such an attack must be brought in an action to vacate the arbitrator’s decision, which plaintiffs have already unsuccessfully attempted to do…”

Buchwald notes that Imbruce, after he was found liable for civil theft, breach of contract and Connecticut state securities violations, argued that the arbitrator was biased—a claim that a Connecticut Superior Court judge denied in April.

“Plaintiffs [Imbruce] similarly twist themselves into knots in their opposition memorandum in an effort to make it seem as if they challenge only post-award conduct,” she wrote.

In dismissing Imbruce’s case, the federal judge wrote: “[T]he semantic distinction plaintiffs [Imbruce] urge us to adopt in their attempt to avoid arbitral immunity borders on the frivolous.”

It is unknown whether the AAA will seek its costs and attorneys’ fees in defending this case against Imbruce.

Meanwhile, the underlying award against Imbruce has grown to approximately $8.3 million, officials said, and Imbruce’s former investors have an attachment of his assets against him in that amount. Imbruce has appealed the court decision, upholding the arbitration award, which remains pending.

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