March 13, 2014
We got an interesting dispute here involving allegations that one party skimmed off a chunk of the other party's commissions. A lot of folks on Wall Street should find this case not only interesting but potentially unsettling -- after all, the biz is not without its various forms of tribute, vigorish, and kick-backs. Sometimes the divvying up of commissions is a legitimate way to get a piece of the action. Sometimes not. Unfortunately, the Decision in this case doesn't do more than fan the flames and produce more smoke.
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in May 2012, Claimant Williams asserted
- violations of Minnesota Statues § 181: Employment et seq;
- breach of contract;
- civil theft;
- unjust enrichment;
- constructive trust;
- defamation per se;
- violation of Minnesota Prevention of Consumer Fraud Act; and
- violation of Minnesota Deceptive Trade Practices Act.
Claimant Williams asserted that around June 2010, Respondent Rickett skimmed off about 40% of her commissions. Ultimately, Claimant sought $272,600.00 in damages. In the Matter of the FINRA Arbitration Between Katherine Williams, Claimant/Counter-Respondent, vs. Daniel J. Rickett, Respondent/Counter-Claimant (FINRA Arbitration 12-02075,March 6, 2014).
Respondent Rickett generally denied the allegations, asserted affirmative defenses, and filed a Counter-Claim asserting slander per se arising from allegedly defamatory statements made by Claimant Williams regarding his professional capacity. Respondent sought $200,000 in compensatory damages, costs, and attorneys' fees.
The FINRA Arbitration Panel found Respondent Rickett liable and ordered him to pay to Claimant Williams $60,000.00 in compensatory damages for the claim of unjust enrichment.
Bill Singer's Comment
In general, proof of a claim of "unjust enrichment" requires a showing that there was illegal or unlawful conduct involved, but the burden has sometimes been satisfied by a showing that the charged party's retention of the cited benefit would be found "morally wrong."
Not the typical FINRA intra-industry arbitration dispute. Here we have the somewhat unique allegation -- presented in the form of 11 causes of action -- that Respondent Rickett had wrongfully skimmed commissions from Claimant Williams. For whatever reasons, the FINRA Arbitration Panel apparently did not find liability on 10 of Claimant's causes of action but predicated liability and the award solely on "unjust enrichment." As such, Respondent beat 10 of the 11 claims, but it's that 11th one that drew blood (but only about 22% of the damages sought).
Why were 10 of the claims rejected by the Panel? Dunno. And the arbitrators ain't tellin' us.
Why did they find "unjust enrichment?" Again . . . dunno and nobody's sayin' jack.
How come they awarded only $60,000 versus the $272,600 sought? Who the hell knows.
It would have been nice for this Arbitration Panel to offer us some rationale for its award but FINRA arbitrations are often short on substance. Unfortunately, this Decision sets us adrift on a sea of litigation without a map, without a compass, without sails, and without oars. In the end, we were presented with an intriguing dispute but virtually no comprehensible explanation as to the outcome.