At some point, you just decide to toss in the towel. You move on. You give up. You retire. Lots of reasons for stopping one thing and starting another. On Wall Street these days, lots of folks seem to be in the midst of a "career transition." In disgust, many are abandoning the whole FINRA broker-dealer thing for what they deem the sunnier pastures of a registered investment advisor. Older registered persons believe that the light at the end of the Great Recession tunnel is sun rather than an oncoming freight train. Whatever the reason, for many disenchanted and wannabe retirees, it's time to cash out. Accordingly, the thought comes up that maybe I can sell my book of business. Nice thought. But, indeed, the Devil is in the details. Consider today's BrokeAndBroker Blog in which two industry veterans entered into an agreement to purchase a practice. Now, you tell me, is that sunlight or a freight train?
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in December 2011, Claimant Yarbrough asserted the cause of action of breach of a Purchase of Practice Agreement dated December 31, 2009, (the "Agreement"). Claimant sought damages arising from Respondent Lechner's alleged failure to repay commissions to him for the period of July 3 to July 23, 2010. Claimant sought $12,500 in compensatory damages, interest, attorneys' fees, and costs. In the Matter of the FINRA Arbitration Between James Kelley Yarbrough, Claimant, vs. John Gerald Lechner, Respondent, vs. Larry Joe Herring, and Money Concepts Capital, Corp., Third-Party Respondents (FINRA Arbitration 11-04568, February 20, 2014).
Respondent Lechner generally denied the allegations, asserted various affirmative defenses, and filed a Counter-Claim.
Lechner asserted that Yarbrough had transferred customers to him after the latter's resignation from non-party Raymond James Financial Services, Inc. Thereafter, Lechner alleges that Yarbrough, Herring, and Money Concepts improperly solicited those customers. In his Counterclaim, Lechner asserted against Yarbrough breaches of a contractual relationship and of the covenant of good faith and fair dealing. As against Third-Party Respondents Herring and Money Concepts, Yarbrough asserted tortious interference with a contractual relationship.
Lechner sought $38,000 in compensatory damages for paid commissions, at least $50,000 compensatory damages for lost anticipated commissions, interest, punitive damages, and costs.
SIDE BAR: According to online FINRA documents as of February 28, 2014, Claimant Yarbrough was registered with Raymond James Financial Services, Inc. from April 1992 until December 2009; and, thereafter, starting in July 2010 with Money Concepts Capital Corp.
According to a Final Order in John G. Lechner, Appellant, v. James K. Yarbrough, Appellee (Ninth Judicial Circuit, Orange County, Florida, 2011-cv-32, October 12, 2011)
On or about December 31, 2009, Appellant, a branch manager and principal for Raymond James Financial Services, Inc. ("Raymond James") and Appellee, a former financial advisor registered with Raymond James who worked directly under Appellant, entered into a purchase of practice agreement ("Agreement") whereby Appellant agreed to purchase Appellee's existing client accounts with Raymond James. The Agreement provided that when Appellant received commissions from Appellee's former client accounts, he was to pay Appellee a commission. Thereafter, a dispute arose between the parties as to the Agreement whereupon the parties attempted to mediate the dispute. . .
Don't Show Me The Money (Concepts)
On or about April 17, 2013, Respondent Lechner filed a Notice of Voluntary Dismissal with Prejudice as to Third-Party Respondent Money Concepts; and, accordingly, the FINRA Arbitration Panel made no determinations with respect to that party.
And For Good Measure
On or about January 20, 2014, Respondent Lechner filed a Motion for Punitive Damages against Third-Party Respondent Herring; to which Herring objected.
The FINRA Arbitration Panel denied Claimant Yarbrough's claims but found him liable for breach of contract and ordered him to pay to Repondent Lechner $20,000 in compensatory damages. Further, the Panel made a "prevailing party" finding entitling Respondent Lechner to seek recovery in court of his attorneys' fees.
Bill Singer's Comment
Ouch! That has to hurt. Claimant Yarbrough sues for about $12,000 in unpaid commissions; however, the FINRA Arbitration Panel dismisses his demands but hits him with $20,000 in damages arising from Lechner's Counterclaim plus a further assessment by a court of attorneys' fees.
As much as I would like to pontificate here and share my brilliant insights as to the wisdom (or lack thereof) of undertaking a nearly four-year lawsuit over a relatively paltry $12,000 commission dispute, the FINRA Arbitration Decision doesn't offer us enough content and context for me to feel comfortable with the necessary inferences and implications that I would need to rely upon. Notwithstanding, at least one takeaway from this case is that you need to carefully weight the pros and cons of initiating legal action when the dispute involves a relatively modest sum. Always consider your time cost, your own legal fees, the costs and expenses that you will incur prosecuting your claims; and then, just as importantly, anticipate the costs of losing, which may well involve an award against you replete with interest, fees, costs, and expenses. There's an axiom on Wall Street that sometimes the best trades we make are the ones that we don't. Same can be said for lawsuits.