In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in November 2009, Claimant Merrill Lynch sought recovery of the outstanding $48,897.69 balance on Respondent Oliver's promissory note plus 4.50% per annum interest from January 23, 2009 until paid in full, and "reasonable attorneys' fees and costs as determined by the Arbitrator following hearings . . ."
In the Matter of the FINRA Arbitration Between Merrill Lynch, Pierce, Fenner & Smith Incorporated, Claimant, vs. Bryan C. Oliver, Respondent (FINRA Arbitration 09-06564, July 28, 2011).
Frankly, this is as garden-variety a breach-of-promissory-note case as there is. Also, Respondent Oliver didn't file an Answer, apparently defaulted, and represented himself. Given all those factors, this should have been a relatively clean sweep for Claimant Merrill Lynch, which was represented by one of its key outside law firms in such employee disputes: Rubin, Fortunato & Harbison P.C.
However, it doesn't seem that all went quite as smoothly as one would have expected. Although the sole FINRA Arbitrator hearing this matter found Respondent Oliver liable to and ordered him to pay to Claimant Merrill Lynch $48,897.69 plus interest, there was a hitch - and a considerable one at that. Rather than paraphrase, here's the verbatim quote:
[R]espondent is liable for and shall pay to Claimant $5,619.12 in attorneys' fees pursuant to Idaho Code section 12-30 and the promissory note executed between Claimant and Respondent. Claimants documentation of attorneys' fees and disbursements failed to identify attorneys or describe with particularity what services were rendered or what disbursements were made. This makes it very difficult for the Arbitrator to evaluate the reasonableness of the charges. Awarded attorneys' fees have been reduced to 50% and none of the disbursements listed on the documentation are awarded.
Whoa! A venerable outside law firm for the powerhouse Merrill Lynch finds itself facing off against a defaulting pro se Respondent in an intra-industry FINRA Arbitration but fails to get more than 50% of the claimed legal fees because the documentation presented to the sole arbitrator "failed to identify attorneys or describe with particularity what services were rendered or what disbursements were made." Talk about a back-handed slap!
Of course, none of which suggests that Respondent Oliver is in a position to pay the ordered damages, much less the attorneys' fees, but, still, someone may have to eat about $5,600 in non-awarded attorneys' fees.
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2008, Claimants asserted causes of action including breach of contract, conversion, and tortious interference with business expectancy. The claims arose in connection with Respondent Penson's alleged breach of the parties' Customer Account, Margin, and Short Account Agreement ("Agreement"). Take a gander at the complicated caption for this case:
In the Matter of the FINRA Arbitration Between:
Othello Capital Partners LP and Othello Capital GP, LP, Claimants, vs. Penson Financial Services, Inc, Respondent
Penson Financial Services, Inc., Counter-Claimant, vs. Othello Capital Partners LP and Othello Capital GP, LP, Jackson Su and Othello Capital Management LLC, Counter-Respondents (FINRA Arbitration 08-03816, July 29, 2011)
Specifically, Claimants asserted that Penson failed to deliver to Cantor Fitzgerald & Co. shares of common stock in Typhoon Touch Technologies, Inc. that Claimants sold short. Further, Claimants asserted that Penson unilaterally withdrew funds from Claimants' brokerage account that corresponded to legal fees and expenses that did not involve the collection of a debit balance and/or any unpaid deficiency in the Claimants' brokerage account as referenced in the Agreement. Ultimately, Claimants sought, in part, $23,024,000.00 in compensatory damages plus other unspecified monetary relief.
Respondent Penson generally denied the allegations, asserted affirmative defenses, and filed a Counterclaim asserting failure to pay funds owed under the Agreement and pursuant to indemnification. Respondent sought, in part, $35,096.37 in compensatory damages plus other unspecified monetary relief.
The FINRA Arbitration Panel found Respondent Penson Financial Services, Inc. liable to and ordered it to pay to Othello Capital Partners LP, Othello Capital GP, LP, Jackson Su, and Othello Capital Management LLC the sum of $250,000.00 in compensatory damages that constitutes the "unreasonable amount of Morgan Lewis & Bockius LLP's attorneys' fees that Penson withdrew from Claimants' account with Penson." Further, the Panel awarded 5% per annum interest on the damages until paid.
In Merrill Lynch v. Oliver, we saw the unusual case where a prevailing industry employer Claimant (over a defaulting pro se Respondent) had its "reasonable" attorneys' fees request slashed in half by a FINRA Arbitrator who was far from impressed with the quality of the evidence introduced in support of those fees.
In Othello Capital v. Penson, we see a FINRA Arbitration Panel describe as an "unreasonable amount" the $250,000.00 purportedly withdrawn from Claimants' accounts as compensation for legal fees by Respondent.
In many cases, "reasonable attorneys' fee" are routinely awarded by arbitrators provided that such a request is supported by applicable law and/or the parties' prior agreements. Moreover, while there is often some fudging of the reimbursable amounts, you just don't see FINRA arbitrators disparage the dollars sought as unreasonable or the quality of proof as vague. When two such cases present themselves, they are not only worthy of separate consideration but, when taken together, could suggest a developing trend whereby requests for reimbursement or payment of legal fees is attracting increased scrutiny.
Frankly, a commendable development!