Bill Singer has been left speechless by what he calls one of the most devastating FINRA arbitration victories won by a former employee. Bill has been in the securities industry since 1982 and admitted to the Bar since 1985, so, this is one hell of a noteworthy moment. The Claimant not only got compensatory damages but the arbitrators added awards for loss of reputation; early retirement; emotional suffering, anxiety, and depression; and, for good measure, a healthy dollop of punitive damages. In addition to delivering a powerful punch of an Award, the FINRA Arbitration Decision is an articulate document replete with content and context.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in June 2015 and as amended thereafter, former employee Claimant Roberts argued that he had voluntarily resigned from former employer Janus but that the firm had reported his termination as a discharged. In addition to seeking the expungement of allegedly defamatory statements from his Central Registration Depository record ("CRD") and Uniform Termination Notice for Securities Industry Registration ("Form U5"). Claimant ultimately asked for:
$123,770.53 for net loss of income;
$100,000.00 for loss of reputation damages;
$61,241.75 for attorneys' fees;
$8,600.00 for compensatory damages for early retirement account withdrawals;
$200,000.00 for emotional suffering, anxiety, and depression;
$150,000.00 for punitive damages; and
9% interest from November 14, 2014.
In the Matter of the FINRA Arbitration Between Daniel Lawrence Roberts, Claimant, vs. Janus Distributors LLC, Respondent (FINRA Arbitration 15-01565, August 5, 2016).
Respondent Janus generally denied the allegation and, in specific, asserted that its reporting of Claimant's Form U5 was done in good faith.
In the afternoon of the fourth day of the arbitration, Respondent Janus moved to have Arbitrator Brown recuse herself for alleged evident partiality, which Claimant Roberts opposed. Following discussion and and argument on the motion, Arbitrator Brown (with the full support of her co-arbitrators) denied the motion for her recusal.
In response to the denial of its recusal motion, pursuant to FINRA Rule 13412, Respondent asked that the Panel stay the proceedings in order for Respondent to appeal to the Director for recusal of Arbitrator Brown and appointment of a new arbitrator, which Claimant opposed.
The Director may exercise discretionary authority and make any decision that is consistent with the purposes of the Code to facilitate the appointment of arbitrators and the resolution of arbitrations.
Following deliberations, the Panel denied the motion to stay the proceedings and directed the parties to proceed.
On the fourth day of the arbitration, Respondent Janus requested that the Panel issue an "Explained Decision," which Claimant did not join (in contradistinction to "opposing" ?).
FINRA Arbitration Rule 13514: Prehearing Exchange of Documents and Witness Lists, and Explained Decision Requests
(a) Documents and Other Materials
At least 20 days before the first scheduled hearing date, all parties must provide all other parties with copies of all documents and other materials in their possession or control that they intend to use at the hearing that have not already been produced. The parties should not file the documents with the Director or the arbitrators before the hearing.
(b) Witness Lists
At least 20 days before the first scheduled hearing date, all parties must provide each other party with the names and business affiliations of all witnesses they intend to present at the hearing. At the same time, all parties must file their witness lists with the Director, with enough copies for each arbitrator.
(c) Exclusion of Documents or Witnesses
Parties may not present any documents or other materials not produced and or any witnesses not identified in accordance with this rule at the hearing, unless the panel determines that good cause exists for the failure to produce the document or identify the witness. Good cause includes the need to use documents or call witnesses for rebuttal or impeachment purposes based on developments during the hearing. Documents and lists of witnesses in defense of a claim are not considered rebuttal or impeachment information and, therefore, must be exchanged by the parties.
(d) Explained Decision Request
At least 20 days before the first scheduled hearing date, all parties must submit to the panel any joint request for an explained decision under Rule 13904(g).
After deliberation, the FINRA Arbitration Panel concluded that:
[U]nder FINRA Rule 13514, an explained decision must be jointly requested and must be made no later than the time for the pre-hearing exchange of documents and witness lists. Respondent's request for an explained decision does not meet the requirements of FINRA Rule 13514 and is thereby denied.
Finding defamation, the FINRA Arbitration Panel recommended the expungement of the "Reason for Termination" and "Termination Explanation" on Section 3 of Claimant Roberts's CRD/U5 as filed by Respondent Janus on December 10, 2014. The Panel recommended that the termination be deemed "Voluntary" and that the attendant explanation be expunged and left blank in its revised form. Additionally, the Panel recommended the expungement of "YES" answers to Questions 7B and 7F(s) on Claimant's Form U5.
SIDE BAR: The applicable Questions on the Form U5:
3. FULL TERMINATION
Is this a FULL TERMINATION?
Note: A "Yes" response will terminate ALL registrations with all SROs and all jurisdictions.
Reason For Termination:
Discharged Other Permitted to Resign Deceased Voluntary
If the Reason for Termination entered above is Permitted to Resign, Discharged or Other, provide an explanation below:
If amending the Reason for Termination and/or termination explanation, provide an explanation below:
. . .
Internal Review Disclosure 7B. Currently is, or at termination was, the individual under internal review for fraud or wrongful taking of property, or violating investment-related statutes, regulations, rules or industry standards of conduct?
. . .
7F. Did the individual voluntarily resign from your firm, or was the individual discharged or permitted to resign from your firm, after allegations were made that accused the individual of:
1. violating investment-related statutes, regulations, rules or industry standards of conduct?
2. fraud or the wrongful taking of property?
3. failure to supervise in connection with investment-related statutes, regulations, rules or industry standards of conduct?
As to damages, the Panel found Respondent Janus liable to and ordered it to pay to Claimant Roberts:
$123,770.00 for net loss of income;
$100,000.00 for loss of reputation damages;
$125,000.00 for emotional suffering, anxiety and depression;
9% per annum accruing from November 14, 2014, until the three above Award are paid in full;
$61,241.00 for attorneys' fees;
$600.00 as reimbursement for the non-refundable portion of the FINRA filing fee; and
$150,000.00 for punitive damages.
In rendering an award of punitive damages, the Panel explained that it had found that:
[R]espondent has caused damages to Claimant attended by circumstances of willful and wanton conduct. The Panel finds that it has authority to award punitive damages in this FINRA arbitration proceeding by the authority of the U.S. Supreme Court outlined in Mastrobuono v. Shearson Lehman Hutton, 514 U.S. 52 (1995). See also Pyle v. Securities USA, Inc., 758 F.Supp. 638 (D. Colo. 1991).
After some 34 years on the Street, I am hard put to recall a more dramatic and convincing termination/defamation victory than Roberts. Notably, the Panel awarded the former employee damages for loss of reputation and for emotional suffering, anxiety and depression: You rarely, if ever, see that laundry list of sought damages checked-off in such a complete fashion. Additionally, the Panel awarded punitive damages coupled with the approbation of "willful and wanton conduct" by Janus. Talk about pouring salt on an open wound! Claimant sure as hell got his money's worth and more from his legal counsel!