February 10, 2014
If you're gonna file a lawsuit, you're gonna need evidence -- and, sometimes, even that isn't enough. In a recent FINRA arbitration, the panel of arbitrators chided a public customer claimant for failing to present credible evidence. On top of that, the claimant was forced to cough up the respondents' legal fees.
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in November 2011, Claimants alleged, among other causes of action, fraud and breaches of fiduciary duty and contract. The allegations arose in connection with alleged account discrepancies and purportedly unauthorized trades. Initially, Claimants' sought $350,000 in compensatory damages, punitive damages, and $7,500 in costs and fees. By the close of the hearing, however, the claim for compensatory damages were reduced to $28,000. In the Matter of the FINRA Arbitration Between Carrie Devorah IRA, Carrie Devorah Living Trust, and Carrie Devorah, Claimants, versus Western International Securities, Inc., Dawn Bennett, and Bennett Group Financial Services, LLC, Respondents (FINRA Arbitration 12-03894, January 30, 2014).
Respondents generally denied the allegations and asserted various affirmative defenses.
During the final hearing, the Panel denied Claimants' Motion for a Directed Verdict but at the conclusion of Claimants' case-in-chief, the Panel granted Respondents' Motion to Dismiss based upon a finding that:
Claimants failed to present credible evidence with respect to any theory advanced in their Statement of Claim and brief. . .
Not merely content to wag a finger at Claimants, the Panel ordered them to pay $35,000 in attorneys' fees to Respondents. In explaining the rationale for such an award, the Panel explained:
The Panel relied on common law to the effect that when both parties request an award of attorneys' fees in their pleadings, the arbitrators have the authority to grant them to either party. Respondent made an ore tenus motion for attorneys' fees. Claimants and Respondents agreed that the Panel had the authority to award attorneys' fees in this case. The crux of the cases on this issue is that the party against whom a ruling is made brought (or defended) the action or maintained it in bad faith, or without a justifiable basis.
In the FINRA Dispute Resolution Arbitrator's Guide Attorneys' Fees section is this guidance:
The authority for granting attorneys' fees must be included in the award. If the arbitrators have doubts regarding their authority to award such fees, they should request the parties to brief the issue. There are three situations when parties may pursue attorneys' fees:
a contract includes a clause that provides for the fees;
the fees are allowed as part of a statutory claim; or
all of the parties request or agree to such fees.
Arbitrators must award reasonable attorneys' fees to claimants who prevail under certain statutes, including Title VII actions for discrimination based on race, color, religion, sex or national origin. If the panel determines that a party has a right to reimbursement for attorneys' fees, that party must prove the amount to the satisfaction of the panel.
Prevailing Respondents' Counsel was David E. Robbins, Esq., Kaufmann Gildin & Robbins LLP, New York, NY.
Bill Singer's Comment
A short-and-sweet Decision that presents us with the rationale for this Panel's sanctions against Claimants -- compliments to this FINRA panel of arbitrators!
We see the impatience of the arbitrators with a Claimants' case that failed to present credible evidence about any theory. That's as harsh a condemnation as is apt to issue forth from a FINRA Arbitration Panel. One can almost smell the fumes from this fuming group of arbitrators. It's as if they are uttering a "really?" followed by "are you serious?" followed by "are you kidding us?" followed by "gee, thanks for wasting our time."
Should the Claimants pursue an appeal to the courts, it will be interesting to see whether the award of lawyers' fees stands. When one sees a reference to "common law," that's a sign that lawyers aren't exactly standing on firm ground -- there's no actual law, rule, or regulations that we can cite in support of our position but, hey, you know, for generations and centuries there's the common law where we think, we believe, we urge, we strongly suggest that what we're asking for is okay, usually, normally, sort of.
Sensing the need to justify their award of attorneys' fee to the Respondents, the Panel goes to some pains to note the common law principle that when both parties request an award of attorneys' fees in their pleadings, the arbitrators have the authority to grant them to either party. That's normally a fairly sound proposition but not one that always stands up on appeal. Thankfully, Respondents' legal counsel specifically asked on the record for an award of attorneys' fees -- that extra fillip by a veteran lawyer may ultimately save the day. The other bit of weight that may tip the balances in Respondent's favor is the Panel's clear-cut rationale for making the award of attorneys' fees: the Claimant brought the action or maintained it in bad faith, or without a justifiable basis.