On one side of today's featured FINRA customer arbitration we got an ex-wife. On the other side, we got the ex-husband and what looks like two brokerage firms. On that other side with the ex-husband, only one of the three named respondents submits an Answer. We got aspersions that are cast. We got a pension account in which the ex-husband, who may not have been an ex- at the time cited, engaged in trades which the now ex-wife doesn't seem to think were properly made. As you might sense, this is a mess of a case involving allegations of fraud, breach, negligence, unsuitability and a few other claims to boot. Also turns out that things get a bit testy and nasty between two of the parties' lawyers.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2015, Claimant Vyas asserted the following causes of action against the referenced Respondents:
First Affiliated and Interfirst: violations of federal securities laws; breaches of contract and fiduciary duty; common law fraud; negligence and gross negligence.
Bhaskar Vyas: negligence/breach of fiduciary duty; misrepresentation (intentional and negligent); unauthorized trades; and unsuitability.
Claimant Vyas sought no less than $100,000, exemplary damages; fees, costs and an accounting of all securities transactions inclusive of commissions and funds transfers. In the Matter of the FINRA Arbitration Between Sujata Vyas, Claimant, vs. First Affiliated Securities, Interfirst Capital Corporation, and Bhaskar Chandrakant Vyas, Respondents(FINRA Arbitration 15-02886, September 12, 2017). The FINRA Arbitration Decision notes the following:
REPRESENTATION OF PARTIES
For Claimant Sujata Vyas ("Claimant"): Marie Mirch, Esq., Mirch Law, San Diego, California and Nupur Nagar, Esq., Law Offices of Nupur Nagar, Riverside, California.
For Respondent Interfirst Capital Corporation ("Interfirst"): Dennis M. Holmgren, Esq., Holmgren Johnson Mitchell Madden, Dallas, Texas.
Respondents First Affiliated Securities ("First Affiliated") and Bhaskar Chandrakant Vyas ("Bhaskar Vyas") did not enter an appearance.
The FINRA Arbitration Decision asserts that only Respondent Interfirst generally denied the allegations and asserted various affirmative defenses. Default Proceedings
On May 4, 2017, Claimant Vyas sought to have her case deemed a Default Proceeding as none of the three Respondents had filed an Answer. On May 18, 2017, Respondent Interfirst filed an Answer. By letter dated June 2, 2017, FINRA advised that Claimant's claims against First Affiliated and Bhaskar Vyas would proceed as a bifurcated case under Rule 12801. Accordingly, FINRA Arbitration 15-02886 proceeded against only Respondent Interfirst. Six Years of Eligibility
On June 8, 2017, Respondent Interfirst filed a Motion to Dismiss pursuant to Rule 12206(a), which Claimant opposed.
SIDE BAR: FINRA Code of Arbitration Procedure for Customer Disputes Rule 12206: Time Limits:
(a) Time Limitation on Submission of Claims. No claim shall be eligible for submission to arbitration under the Code where six years have elapsed from the occurrence or event giving rise to the claim. The panel will resolve any questions regarding the eligibility of a claim under this rule.
(b) Dismissal under Rule. Dismissal of a claim under this rule does not prohibit a party from pursuing the claim in court. By filing a motion to dismiss a claim under this rule, the moving party agrees that if the panel dismisses a claim under this rule, the non-moving party may withdraw any remaining related claims without prejudice and may pursue all of the claims in court.
(1) Motions under this rule must be made in writing, and must be filed separately from the answer, and only after the answer is filed.
(2) Unless the parties agree or the panel determines otherwise, parties must serve motions under this rule at least 90 days before a scheduled hearing, and parties have 30 days to respond to the motion. Moving parties may reply to responses to motions. Any such reply must be made within 5 days of receipt of a response.
(3) Motions under this rule will be decided by the full panel.
(4) The panel may not grant a motion under this rule unless an in-person or telephonic prehearing conference on the motion is held or waived by the parties. Prehearing conferences to consider motions under this rule will be recorded as set forth in Rule 12606.
(5) If the panel grants a motion under this rule (in whole or part), the decision must be unanimous, and must be accompanied by a written explanation.
(6) If the panel denies a motion under this rule, a party may not re-file the denied motion, unless specifically permitted by panel order.
(7) If the party moves to dismiss on multiple grounds including eligibility, the panel must decide eligibility first. If the panel grants the motion to dismiss the case on eligibility grounds on all claims, it shall not rule on any other grounds for the motion to dismiss. If the panel grants the motion to dismiss on eligibility grounds on some, but not all claims, and the party against whom the motion was granted elects to move the case to court, the panel shall not rule on any other ground for dismissal for 15 days from the date of service of the panel's decision to grant the motion to dismiss on eligibility grounds. If a panel dismisses any claim on eligibility grounds, the panel must record the dismissal on eligibility grounds on the face of its order and any subsequent award the panel may issue. If the panel denies the motion to dismiss on eligibility grounds, it shall rule on the other bases for the motion to dismiss the remaining claims in accordance with the procedures set forth in Rule 12504(a).
(8) If the panel denies a motion under this rule, the panel must assess forum fees associated with hearings on the motion against the moving party.
(9) If the panel deems frivolous a motion filed under this rule, the panel must also award reasonable costs and attorneys' fees to any party that opposed the motion.
(10) The panel also may issue other sanctions under Rule 12212 if it determines that a party filed a motion under this rule in bad faith.
(c) Effect of Rule on Time Limits for Filing Claim in Court. The rule does not extend applicable statutes of limitations; nor shall the six-year time limit on the submission of claims apply to any claim that is directed to arbitration by a court of competent jurisdiction upon request of a member or associated person. However, when a claimant files a statement of claim in arbitration, any time limits for the filing of the claim in court will be tolled while FINRA retains jurisdiction of the claim.
d) Effect of Filing a Claim in Court on Time Limits for Filing in Arbitration. If a party submits a claim to a court of competent jurisdiction, the six-year time limitation will not run while the court retains jurisdiction of the claim matter
Lawyers In Love (NOT!)
The FINRA Arbitration Decision asserts the following:
In a letter dated August 1, 2017, Nupur Nagar, a lawyer for Claimant asserted that Interfirst's counsel had violated California Rule of Professional Conduct 5-200 and California Business and Professions Code Section 6068(d) during the July 31, 2017 oral argument on Interfirst's Motion to Dismiss. Ms. Nagar asserted that Interfirst's counsel had done so by:
repeatedly quot[ing] Family jurisdiction on these accounts when in fact a little research would have revealed that current and pending claims filed by Sue in Federal courts have survived the motions to dismiss on the family court jurisdiction because family courts do not have jurisdiction under ERISA 502(a)(2) and (3).
The Panel notes that California family law did figure in the arguments of Interfirst's counsel. Interfirst's counsel observed that when Claimant divorced her husband, Bhaskar Vyas, California family law gave Claimant the tools to discover the transactions that she challenges. Since Claimant did not even assert that she used these tools, Interfirst's counsel argued that her failure to discover these transactions does not provide a sound reason for tolling FINRA Rule 12206(a).
The Panel also notes that how to accommodate California family law and ERISA did not figure in the argument of Interfirst's counsel. This comes as no surprise because the resolution of this issue has no bearing on the motion to dismiss. No argument about this issue could be materially misleading. In any event, the appropriate resolution of this issue is debatable, so if Interfirst's counsel had offered an argument about it, the appropriate professional response would be to offer a counter argument. It would be neither appropriate nor professional to respond by casting aspersions on the ethics and integrity of the lawyer who advanced the original argument. It is even worse to cast these aspersions when the lawyer made no such argument. Ms. Nagar must bear the consequences of her behavior. She must reimburse Interfirst for the costs of replying to her letter.
The State Bar of California Rule 5-200: Trial Conduct
In presenting a matter to a tribunal, a member:
(A) Shall employ, for the purpose of maintaining the causes confided to the member such means only as are consistent with truth;
(B) Shall not seek to mislead the judge, judicial officer, or jury by an artifice or false statement of fact or law;
(C) Shall not intentionally misquote to a tribunal the language of a book, statute, or decision;
(D) Shall not, knowing its invalidity, cite as authority a decision that has been overruled or a statute that has been repealed or declared unconstitutional; and
(E) Shall not assert personal knowledge of the facts at issue, except when testifying as a witness.
State of California Business and Professions Code
ARTICLE 4. Admission to the Practice of Law
It is the duty of an attorney to do all of the following:
. . . .
(d) To employ, for the purpose of maintaining the causes confided to him or her those means only as are consistent with truth, and never to seek to mislead the judge or any judicial officer by an artifice or false statement of fact or law.
The FINRA Arbitration Panel found Claimant liable and ordered her to pay to Interfirst $712.36 in attorneys' fees incurred in responding to Claimant's letter dated August 1, 2017. Further, the Panel granted Respondent Motion to Dismiss pursuant to Rule 12206 of the Code without prejudice to any right Claimant has to file in court. In expressing its rationale for the dismissal, the arbitrators explained that::
[C]laimant's claim against Interfirst is that it failed to adequately supervise Bhaskar Vyas, Claimant's former husband, in connection with trades he made in a pension account held solely in his name. According to Claimant, the trades in question took place no later than 2001 (Interfirst ceased doing business in 2002). Claimant filed her claim in 2015, approximately fourteen years after the occurrence or event giving rise to the claim. Therefore, Rule 12206(a) renders this claim ineligible for submission to arbitration - at least it does unless there appears some sound reason for tolling. That Claimant allegedly did not discover the existence of the pension account until 2014 does not constitute such a reason because Claimant should have discovered it much earlier in connection with the divorce proceedings between her and Bhaskar Vyas
Bill Singer's Comment
Oh my . . . imagine that . . . we got lawyers fightin' with each other and pointin' fingers about professional misconduct and askin' for sanctions and . . . wow, I thought that they had taught us in law school that we weren't supposed to lose our cool and wash our dirty laundry in public. I mean, you know, all of us lawyers belong to a very private club with a special handshake which, no way, no how, am I going to share with you. If you ever watched an episode of "Law and Order," you know that we all dress very well and almost never raise our voices and after the case is over, we get together at an expensive restaurant and sit at the bar cracking jokes about how well we did and then charge the whole meal to our client. For a sample of just how warm and fuzzy things are among all of us in the legal profession, consider this videotape of what's called a Deposition:
An online commentator indicated the following about the above video:
This is from May of 1992.The deposition was taken in St Louis.The deponent is "Jack Garrett" who was at one time a research chemist at Monsanto's Texas City facility in the 1950's. Monsanto (represented by Ed Carstarphen on the left),was being sued by some residents of Houston represented by Joe "Hairpiece" Jamail on the right with the wagging finger) who alleged that Monsanto had harmed them by exposing them to dangerous chemicals. The suit was settled out of court for $39 million."Tucker"was an attorney representing Ayrshire.There is an Ayrshire a real estate development company in Houston,so I can only assume it's the same company,though I'm not sure of their role in this case. It's probably got something to do with property values allegedly impacted by Monsanto.