7 Year Arbitration Saga Ends In Ashes For Public Customers

August 13, 2015

The Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim under consideration today was filed in 2008. The age of that filing is very unusual and immediately suggested to me that something odd was underfoot in this case, which prompted me to read the Decision. My instincts are apparently still pretty sharp after three decades on the Street.

Let's first take note of the caption in this arbitration:

In the Matter of the FINRA Arbitration Between John Marshall Properties, Inc.; Palm Coast Collectibles, Inc.; John D. Marshall, as Trustee of the Marshall Family Education Trust; and John D. Marshall Hispanic America Foundation, Inc., Claimants, vs. Wachovia Securities, LLC, Respondent (FINRA Arbitration 08-00501, August 3, 2015).

Marshalling the Claimants

We've got four Claimants. On top of that we've got a cavalcade of lawyers who represented those Claimants: 

  • One lawyer was on board from February 22, 2008, to March 3, 2009.
  • A second lawyer handled things from March 3, 2009, to May 4, 2009.
  • A third lawyer took over from May 4, 2009 to May 12, 2011. 
  • On May 13, 2011, it appears the John D. Marshall, Sr. served as "Personal Representative." 
  • From March 15, 2013 to March 20, 2013, a fourth lawyer took a shot at things. 
  • Mr. Marshall was back as Personal Representative from March 20, 2013 to November 8, 2013. 
  • For reasons that escape me, a fifth lawyer came aboard from November 2013 to September 20, 2014. 
  • Of course, after September 20, 2014, Mr Marshall was back handling things on his own - with the exception of the January 2, 2015, appearance by yet a sixth lawyer for the limited purpose of submitting Claimants' Response to Respondent's Motion to Dismiss and Motion to Reconsider the Award of Legal Fees and Costs to Respondent.

Wachovia Takes Some Wacks

Perhaps feeling a bit left out of the attorney musical chairs thing, Respondent Wachovia utilized three different lawyers from April 16, 2008 until the Panel's ruling.

Looking for Millions

According to the FINRA Arbitration Decision, Claimants asserted causes of action for:

  1. failure to treat Claimants in a just and equitable manner;
  2. breach of contract;
  3. breach of fiduciary duty;
  4. common law fraud and fraudulent misrepresentation; and
  5. negligence, negligent supervision, negligent misrepresentation, and gross negligence.

In addition to seeking at least $3.6 million in compensatory damages, the Claimants sought punitive damages, interest, and costs. 

Claimants' Production Problems

As early as January 2009, Respondent moved to compel Claimants' production of documents, and, in response, the Panel issued an April 2009 Order granting the motion and requiring production within five-business days. The Panel admonished Claimants that a failure to timely-produce risked sanctions, which could include dismissal.

$1,700 Sanction

In May 2009, Claimants moved for an extension of time to respond based upon the retention of new counsel. Respondent objected and requested sanctions,  and asserted that Claimants were in material breach of the Panel's April 2009 Order. Around May 13, 2009, the Panel partially granted Respondent's request for sanctions. The Panel directed Respondent to submit an Affidavit setting forth its costs and fees for the conferences attendant to the discovery issue. The subsequent Affidavit set forth $1,700 in expenditures. Around May 21, 2009, Claimants filed a Notice of Compliance in which they represented the $1,700 had been paid.

All of which should have set the stage for a swift scheduling of hearings and onward to closing argument. Yeah. . . sure.

Education Trust

Around August 28, 2009, Respondent filed an Emergency Motion to Dismiss All Claims Asserted on Behalf of the Marshall Family Education Trust, in which Respondent asserted that John D. Marshall lacked standing to sue on behalf of the Education Trust because he was not its Trustee. Claimants' response to the Motion was a bit odd, so I will defer to the Panel's explanation:

In their response to the Motion, Claimants contended, among other things, that John D. Marshall, with guidance from Respondent, was under the impression that he was permitted to act on behalf of the Marshall Family Education Trust.

At some point, Claimants sought and were granted permission to substitute "Joseph Marshall" as the Trustee for the Education Trust, to which Respondent did not object.

2012 -- Four Years After Filing of the Claim

And now a couple of years inexplicably pass and our hero Odysseus is still trying to find his way home to Ithaca but . . . oops, sorry, wrong saga. In this arbitration, we arrive at the March 19, 2012, evidentiary hearing, where we learn that Claimants had filed a Motion to Compel Discovery and Postpone the Final Hearing, in which they asserted that Respondent did not respond to document requests. Respondent asserted, among other things, that Claimants' request for production of documents was filed untimely and Respondent did not have to comply with it.

Showing dogged determination, the Panel scheduled hearings and set a briefing schedule. Shortly thereafter, Respodnet moved to dismiss the Education Trust claims because Joseph Marshall had "abandoned the Trust's claims by failing to appear at the hearing after receiving proper notice of the same." Around March 21, 2012, the Panel ordered Joseph Marshall to submit a notarized statement within 120 days (120 days???  Wow, no one is in any rush here!) as to whether he intends to proceed with the Trust's claims.

After moving to dismiss the Education Trust's claims around September 17, 2012 for failure to comply with the March 21st order, Respondents further asserted that Joseph Marshall had not been duly appointed as Trustee. Around November 21, 2012, the Panel ordered the dismissal of the Education Trust claims without prejudice.

Okay, great, now we can fast track this sucker to hearings and verdict.  I mean, c'mon, Penelope is now thinking that one of the suitors isn't that bad looking and maybe she should simply leave a souvlaki for her missing husband and let him pop it into the microwave whenever he comes home.

Getting Personal

Around October 30, 2012, Claimants moved to postpone the November 26-30, 2012, hearings "for personal reasons to which Respondent did not object." The Panel granted the postponement. Personal reasons? No objection. Postponement granted. Why of course . . . let's just pile on the absurd to the inane.

Let's fast - or is that slow? - forward to June 2013 when one of the three arbitrators has a scheduling conflict for hearings set for July 15 - 19, 2013.


Around August 22, 2014, Claimants moved to reinstate the Education Trust claim. 

Of course they did. I mean, you know, why not?  Anyone seen a Cyclops? 

Claimants asserted that Joseph Marshall had not received notice of the dismissal and was unaware of the Panel's order that he submit a notarized statement of his intent to proceed. Claimants submitted an August 22, 2014, Affidavit from Joseph Marshall corroborating their assertions. Around October 13, 2014, the Panel denied Claimants motion to reinstate.

Around October 31, 2014, Claimants filed a Motion to Reschedule Hearings for personal reasons. Respondent objected. The Panel denied.

Motion to Dismiss

Around November 12, 2014, Respondent filed a Motion to Dismiss under Rules 12504 and 12212 of the Code in which it asserted, among other things, that Claimants' refusal to comply with various Orders of the Panel warrants dismissal. In response to the Motion, Claimants sought an extension of time to respond for "personal reasons." 

The Panel ordered that Claimants respond on January 2, 2015, and further awarded $14,492.23 in costs and attorneys feed to Respondent for its attendance at the November 3, 2014 hearing. 

Around July 8, 2015, the Panel granted Respondents' Motion to Dismiss.

Panel Finds Time To Make A Finding

At long last, the FINRA Arbitration Panel brought this tortured drama to rest and issued this finding:

This matter was scheduled for a final evidentiary hearing to begin on Monday, November 3, 2014. Respondent filed its Rule 12514 Disclosures on October 14, 2014, including its forensic accounting reports, expert witness curriculum vitae, and its revised witness and exhibit lists. Mr. Marshall did not file any of the required disclosures. Late in the day on the Friday preceding the hearing (October 31, 2014), Mr. Marshall filed a motion to continue the hearing citing a litany of personal issues (some previously alluded to over the last two years and others appearing to be new). The Panel issued an Order dated October 31, 2014, which denied Claimants' Motion, and stated that the hearing would begin at 10:00 AM EST on November 3, 2014, at FINRA Dispute Resolution's Boca Raton, Florida office. . .]

On Monday morning, November 3, 2014, Mr. Marshall failed to appear at the hearing on behalf of the Claimants in violation of Orders issued by the Panel in this matter. Mr. Marshall's failure to appear constituted a violation of the Panel's October 31, 2014, Order denying his request to continue the hearing as well as the pre-hearing conference scheduling Order dated February 24, 2014, memorializing Mr. Marshall's original agreement and consent to participate on these hearing dates.

[T]he Panel issued an Order dated November 3, 2014, directing Mr. Marshall to substantiate his claims that he was unable to attend the hearing. The Panel Ordered Mr. Marshall to produce this evidence by no later than 12:00 PM EST the following day, November 4, 2014.

Respondent appeared the following day, but Mr. Marshall did not. Mr. Marshall also did not provide the required evidence by the 12:00 PM EST deadline set forth by the Panel. Instead, Mr. Marshall provided an untimely note that failed to comply with the Panel's Order dated November 3, 2014.

After reviewing Mr. Marshall's untimely and non-compliant response, the Panel offered Mr. Marshall a second opportunity to prove his inability to attend the hearing. The Panel vacated its existing Order dated November 3, 2014, denying Claimants' request to postpone the hearing, and issued a new Order dated November 4, 2014, granting Mr. Marshall more time to provide the required evidence. The Panel gave Mr. Marshall until 3:00 PM EST on Friday, November 7, 2014, to comply with this Order which specifically provided that time is of the absolute essence. Mr. Marshall failed to meet and comply with the November 7, 2014, deadline imposed by the Panel's Order. Instead Mr. Marshall filed a handwritten response containing a note which he served on FINRA and Respondent via email at 3:32 PM EST on November 7, 2014, that was neither timely nor compliant with the substantive provisions of the Panel's November 4, 2014, Order. Mr. Marshall's response was untimely in that it was not received until 3:32 PM. The note was dated November 6, 2014, indicating that Mr. Marshall had the note in time to meet the deadline, but elected to send it late. Mr. Marshall's note contained none of the information requested or required by the Panel. There was nothing stated that prevented Mr. Marshall from participating in the arbitration process. Instead, the note simply stated that Mr. Marshall is "... unable to work or participate in any function."

. . .

Claimants failed to make payment to Respondent in the amount of $14,492.23 on or before January 16, 2015, (and still have not made payment to the Panel's understanding as of the date of this Award and Mr. Marshall has not provided any evidence of any payment to this Panel). Claimants' failure to make payment violated the Panel's November 4, 2014, Order and November 21, 2014, Order. Mr. Marshall was also directed by the Panel in its February 3, 2015, Order to provide suitable dates for the scheduling of a pre-hearing conference on Respondent's Motion to Dismiss and did not do so. . .


At some point, long after my eyes glazed over, the FINRA Arbitration Panel concluded its explanation as how this case started, where it went, how it got lost, and why it sunk to the bottom of the sea. There was also a brief mention of the young son Telemachus and the elderly father Laertes. At the end of this long voyage, the Panel explains that:

  1. Claimants' claims are dismissed with prejudice in their entirety for failure to adequately or appropriately comply with the series of Orders previously issued by the Panel, as outlined in the "Other Issues and Decided" section above.
  2. Claimants are jointly and severally liable for sanctions and shall pay to Respondent the sum of $14,492.23 representing the fees and costs associated with Respondent's appearance at the November 2014 hearings, as previously ordered by the Panel, but not yet paid by Claimants. . .