US court rejects $241 mln award in Executive Life

By Gina Keating

LOS ANGELES, Aug 25 (Reuters) - A U.S. appeals court on Monday threw out a $241 million restitution award against France's Artemis SA resulting from a lawsuit over the purchase of assets from the failed Executive Life Insurance Company, and ordered a retrial of the damages phase.

The California insurance commissioner's lawsuit had accused Artemis, controlled by billionaire Francois Pinault, and French banking, insurance and government entities of conspiring to circumvent California and U.S. law to buy a junk bond portfolio and other assets in a state sale of the insurer in 1991.

The other defendants -- including Credit Lyonnais, insurer MAAF Assurances SA, a French government entity and a number of individuals -- all settled the case, paying a total of about $700 million in damages.

Most of the same defendants pleaded guilty to federal criminal charges of making false statements to federal bank regulators in connection with the Executive Life transactions.

Credit Lyonnais was accused of leading a conspiracy of the other defendants to buy the Executive Life assets through a front company, and lying to state and federal regulators about who controlled the company.

At trial, a Los Angeles jury exonerated Pinault and found Artemis liable for conspiracy, but awarded the insurance commissioner no compensatory damages.

The Los Angeles district judge vacated the panel's $700 million punitive damages award, and instead, awarded $241 million in restitution. Both parties appealed the judgment.

The Ninth Circuit Court of Appeals on Monday affirmed the lower court decision to vacate the punitive damages award, but said the commissioner was not entitled to restitution and should have been allowed to argue in the damages phase that if not for the conspiracy, the state would have selected another bidder.

The appeals court ordered a new damages phase to let the commissioner make the argument.

Attorney James Clark, who represented Artemis, said the commissioner would have "a bit of a tough time" proving the damages theory.

"They are going to have to argue that Artemis, which wasn't even in existence when this conspiracy was formed ... was responsible for the damages, if any, caused by the conspiracy," said Clark, of Gibson Dunn & Crutcher in Los Angeles.

The California Department of Insurance said it was "currently reviewing the decision and considering what our options are going forward." (Editing by Braden Reddall)