(Bloomberg News) Citigroup Inc., the third-largest U.S. bank by assets, won't have to pay almost $12 million in damages in a case involving actor Larry Hagman after a California court dismissed an arbitration ruling.

Judge Michelle R. Rosenblatt in Los Angeles on February 9 vacated the Financial Industry Regulatory Authority arbitration board's decision because one of the arbitrators didn't disclose he had been involved in a similar lawsuit in 2007, according to court filings. The Finra case was filed in May 2009 and involved the mishandling of investment accounts of Hagman and his wife.

The board ruled in October that New York-based Citigroup must pay $1.1 million in compensatory damages and donate $10 million of punitive damages to charities chosen by Hagman, 79. The bank was also told to pay Hagman, who played the oil tycoon J.R. Ewing in the 1980s television show "Dallas," about $460,000 for attorney fees and other costs.

"We think the result is absurd, and feel very comfortable that the appellate court will reverse it," Philip Aidikoff, a lawyer for Hagman at Aidikoff, Uhl & Bakhtiari, said in an interview. He said he plans to file an appeal "immediately."

"We're pleased with the court's decision," said Alexander Samuelson, a Citigroup spokesman.

Peter Steinbroner, a member of the arbitration board, and his wife had petitioned in bankruptcy court against an investment partner who had allegedly breached his fiduciary duty and caused substantial losses in the Steinbroner's retirement funds, according to the court filing.

Steinbroner said in a Finra form that he hadn't been involved in a dispute involving the same subject matter in the last five years, the filing said. Hagman's case involved the breach of fiduciary duty resulting in losses of $1.35 million.

Asset Allocation

Steinbroner's 2007 dispute "didn't involve the securities industry, didn't involve asset allocation, which is what this case is about," Aidikoff said.

The Finra case was against the Smith Barney brokerage, which was held within Citigroup Global Markets before Morgan Stanley purchased a controlling stake in a joint venture with Smith Barney last year.

A Smith Barney broker, Lisa Detanna, put Hagman and his wife, Maj, now 82, into a life insurance policy with annual premiums of $168,000, according to the Finra statement of claim. The Hagmans also told Detanna in 2005 that they needed income-producing investments that would protect their principal, according to the claim. By June 2008, their accounts were about 69% invested in equities.

The arbitration board said it enforces punitive damages under its authority if a company "has engaged in serious misconduct," according to the ruling. The board didn't provide a reason for its decision.

Hagman has appeared in movies and television shows for more than 50 years, according to the website IMDB.com. He played Anthony Nelson in the TV show "I Dream of Jeannie" and was nominated for two Emmy awards and four Golden Globes for his role in "Dallas."