That sigh of relief you are heard yesterday may have emanated from Kansas City. Executives at Waddell & Reed Financial learned that a New York appellate court set aside $25 million of a $27.6 million award the NASD had granted stockbroker Stephen Sawtelle.

In setting aside the punitive damages in the case, the judge ruled that the NASD had "completely ignored" applicable law in determining the amount. The original NASD panel will once again have to review to the case to redetermine the proper award for damages suffered by Sawtelle.

Sawtelle first brought the case after Waddell & Reed sent a letter to his 2,800 clients which stated he had been dismissed for "personality conflicts" and that he was no longer authorized to handle their accounts.

In its opinion the court noted that Sawtelle had immediately found new employment and retained nearly all of his clients despite the letter sent by Waddell & Reed. It added that the ratio of the award to actual damages (23 to 1) was far higher than the 4 to 1 ratio typically seen in such cases. That math suggests that Waddell & Reed should expect an award of between $4.5 and $5 million in the second go round.  

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