FINRA Arbitration Panel Asks: Bueller? Bueller??

March 1, 2017

Today's BrokeAndBroker.com Blog features that wonderful scene from that iconic 1986 film "Ferris Bueller's Day Off."  You know the one that I'm talking about. Actor Ben Stein does the roll-call. Bueller is not there. Which reminded me of a recent FINRA arbitration at which the complaining customer showed up but the industry respondent didn't quite make it to the hearings. 

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in January 2013, public customer Claimant Strang asserted causes of action including fraud, negligence, and breach of fiduciary duty. Strang sought at least $250,000 in compensatory damages plus costs/fees arising from his allegations of unsuitable investments. In the Matter of the FINRA Arbitration Between Richard W. Strang, Claimant, vs. Robert M. Marks, Jr. Respondent (FINRA Arbitration 13-00215, February 6, 2017).

Respondent Marks generally denied the allegations and asserted various affirmative defenses.

Bueller? Bueller?

On December 1, 2015, Respondent Marks filed a motion to postpone the evidentiary hearing, which Claimant Strang opposed. On December 15, 2015, the Panel issued the following Order:

Due to the uncertainty with respect to Mr. Sullivan's schedule this week the panel has decided to grant Respondent's motion to postpone this case. The postponement fee shall be assessed 100% to Respondent. Further, Mr. Neuman is directed to provide an accounting of all costs Claimant has incurred in travel, accommodations, and any related expenses with respect to Mr. Neuman's attendance at this postponed hearing. Reasonable costs shall be reviewed by the panel and, once approved, become immediately due and payable to Claimant by Respondent. The parties should meet and confer with respect to a new hearing date and propose 4 sets of mutually agreeable hearing dates for the panel's consideration.

I have no idea who Mr. Sullivan is and his status is not set forth in the FINRA Arbitration Decision. Mr. Neuman is likely Claimant Strang's attorney Jonathan E. Neuman. Respondent Mark's attorney is disclosed in the FINRA Arbitration Decision as Kevin J. Werner. Sullivan? Sullivan? Bueller? Bueller?

Stay and Un-Stay

On May 25, 2016, Respondent Mark's bankruptcy counsel purportedly advised FINRA that Marks had filed for bankruptcy, which resulted in a Stay of whatever hearing dates had been scheduled pursuant to the Panel's December 2015 Order. On June 27, 2016, Claimant Strang advised of his intention to move the bankruptcy court to lift the Stay. On August 23, 2016, Claimant Strang provided an Order terminating the FINRA Arbitration Panel's Stay.

Bueller? Bueller?

On September 27, 2016, the Panel held a telephonic pre-hearing conference for the purpose of working with the parties to reschedule hearing dates. As noted in the FINRA Arbitration Decision [Ed: the "[sic]" references in original]:

At the hearing setting conference this morning, held at 9:00 a.m., PST, no appearance was made on behalf of Respondent. Kevin Werner, who has been representing Robert Marks did not appear. The panel requested that from Mr. Werner's office participate in the phone conference. Rose Lule from Mr. Warner's [sic] office attended the conference and stated that she had no authority to make any representations for Mr. Warner [sic] or Respondent, but that she did have Mr. Werner's calendar with her so that she could inform the panel which dates Mr. Werner could not attend the hearing in this case, to be held in Los Angeles. Consequently, with consideration of Mr. Werner's unavailability, the panel set the hearing dates as set forth in this Hearing Setting Conference Scheduling Order.

Apparently, the Hearing Setting Conference Scheduling Order set hearings for January 18, 19, and 20, 2017. 

Bueller? Bueller?

The next development set forth in the FINRA Arbitration Decision is that:

Neither Respondent nor Respondent's counsel appeared at the evidentiary hearing on January 20, 2017. Upon review of the file and the representations made on behalf of the Claimant, the Panel determined that Respondent has been properly served with the Statement of Claim and received due notice of the hearing, and that arbitration of the matter would proceed without said Respondent present, in accordance with the Code of Arbitration Procedure (the "Code").

What happened on the hearing dates that had been scheduled for January 18th and 19th? I dunno. The AWC doesn't say. Maybe there were two days of hearings and then Respondent and his counsel didn't show? Maybe the two days were cancelled and the festivities started on the 20th? Not sure why this wasn't clarified in the Decision but it is what it is.

Award

At the conclusion of the hearing, the Panel granted Claimant's oral motion to amend the Statement of Claim to include a claim for elder abuse and attorneys' fees for that claim. The FINRA Panel of Arbitrators found  in part that:

1. Respondent Robert Marks, Jr. ("Marks") made specific statements to Claimant Richard Strang ("Strang") knowing the statement to be false at the time they were made.

2. Marks engaged in a fraudulent course of conduct with respect to the handling of Strang's account. Specifically, Strang's account was excessively traded by Marks in a manner consistent with a finding of fraud.

3. Marks committed actual fraud, used false pretenses, and committed fraud as a fiduciary as to Strang . . .

6. Marks committed financial abuse of Strang pursuant to California Welfare and Institutions Code §§15600, et seq. . .

In rendering its Award, the FINRA Arbitration Panel found Respondent liable to and ordered him to pay to Claimant:

  • $440,520 in compensatory damages;
  • $2,100 cost reimbursement for the cancelled hearing
  • $27,000 in attorneys' fee
  • $300 reimbursement of filing fees
Bill Singer's Comment

What was that Woody Allen quote? Something about 80% of success in life is just showing up. 

Separately, should be fun to see how much of the cash award Claimant Strang manages to collect from the seemingly insolvent Respondent Strang.