December 21, 2017
Today's BrokeAndBroker.com Blog deals with unanswered questions. We start with a fairly straightforward proposition of Raymond James wanting to be repaid the remaining balance on a loan it made to a former associated person. Fair enough. On the other hand, it seems that Raymond James is holding on for dear life to the former associated person's Joint Tenants With Right of Survivorship account, in which his wife is the other tenant. In filing its lawsuit, Raymond James named the husband as a Respondent and also named the wife as a Respondent. The wife refused to submit to FINRA arbitration. Now what? Can Raymond James essentially seize the assets in the JTWROS to satisfy the husband's debt if the wife is not subject to FINRA arbitration jurisdiction? Also, how come the wife isn't subject to FINRA jurisdiction?
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in February 2015, Claimant Raymond James asserted unjust enrichment and that Michael Edward Camferdam (herein, the "Respondent') had breached the terms of his Loan Agreement and Bonus Agreement dated March 26, 2012, and that he failed to pay the remaining loan balance upon his termination. Claimant sought a declaration that the "Michael E, Camferdam & Denise B Camferdam JT/WROS" be fully applied toward satisfying the debt at issue. Claimant sought $253,270.47 attorneys' fees, expenses and the costs of collection; and, as set forth in the FINRA Arbitration Decision:
A finding that the monies in the Joint Account were contributed by Respondent
and that the assets therein can be applied toward the award; . . .
In the Matter of the FINRA Arbitration Between Raymond James & Associates, Inc., Claimant/Counter-Respondent, v. Michael Edward Camferdam, Respondent/Counter-Claimant, and Denise B. Camferdam, Respondent (FINRA Arbitration 15-00341, December 15, 2017).
Denise B. Camferdam, Respondent's wife, is not a member or associated person of FINRA and did not voluntarily submit to arbitration. Therefore, the Panel made no determination with respect to Claimant's claims against her.
Respondent generally denied the allegations, asserted various legal and affirmative defenses, and filed a Counterclaim alleging defamation in his Form U5; negligence; breach of contract; wrongful termination in violation of public policy; violation of Florida wage law; unjust enrichment; and tortious interference with a contract or business relationship. Respondent sought at $1,352,000.00 in lost income (ongoing commissions, trailers and fees), lost bonus opportunity as well as reputational damages; punitive damages; attorneys' fees and costs. Additionally, as set forth in the FINRA Arbitration Decision, Respondent sought:
4. A declaration that the promissory note and/or any corresponding instrument(s) at
issue be declared invalid;
5. Expungement of both the involuntary termination and the current defamatory
language on Respondents Form U5 requiring that it be replaced with accurate
language, as determined by the Panel . . .
The FINRA Arbitration Panel found Respondent liable and ordered him to pay to Claimant:
- $251,414.00 in compensatory damages plus interest;
- $101,800.00 in costs and expenses; and
- $373,879.00 in attorneys' fees.
Additionally, as set forth in the FINRA Arbitration Decision:
4. Claimant's request that the funds in the Joint Account be applied towards theamounts Respondent owes in this award is granted.
Bill Singer's Comment
A seemingly mudane case but one that warrants some thought. We start with the existence of a JTWROS account held by a husband and wife. Next, we have the husband receiving what we infer is a six-figure loan/bonus from his employer. Moving on, the loan portion of the husband's package apparently had a six-figure unaccrued balance that was subject to repayment to his employer at the time of the termination of the employment relationship. In an effort to force the husband to honor his obligation to repay the loan balance, the former employer alleged that the funding of the JTWROS was derived solely from the husband's funds and, accordingly, sought an order from a FINRA Arbitration Panel that the JTWROS account held by the firm could be liquidated towards paying back the loan balance. The Panel ordered the husband to not only pay some $250,000 in loan balance but tacked on some $375,000 in costs, fees, and expenses.
Now . . . let's plug in an interesting aspect of this case: The wife is purportedly not subject to FINRA jurisdiction because she was not found to be an associated person and did not voluntarily submit to FINRA jurisdiction.
That assertion perplexes me because the wife is apparently a "customer" of the member firm via her joint tenancy in the brokerage account. Since I have never seen a FINRA member firm that does not impose a mandatory customer arbitration clause over all customers, I'm not quite understanding how the wife was deemed not subject to FINRA jurisdiction when her joint brokerage account is essentially being seized and used to pay off her husband's debt. As a customer with an executed Raymond James Joint Account Agreement, would she not have agreed to FINRA arbitration as her sole dispute resolution option? As set forth in the FINRA Arbitration Decision:
Nature of the Disputes: Member vs. Associated Person and Customer
Associated Person vs Member
This case was decided by a majority public panel.
As such, the case is styled as one in which member firm Raymond James is suing associated person Michael Edward Camferdam and Raymond James is also suing Denise B. Camferdam in her role as a "customer." The arbitration panel is a "majority public" one. I'm still not quite understanding why Denise Camferdam was not bound by the determination in her role as a customer subject to FINRA arbitration as per the typical JTWROS customer agreement. The absence of clarification as to this issue is an unfortunate aspect of this FINRA Decision.
The arbitrators could have and/or perhaps did find that this was an intra-industry dispute and, as such, a mere public customer was not subject to jurisdiction -- or, in the alternative, perhaps there was no executed, original JTWROS account agreement that bound the wife to FINRA arbitration. Whatever the facts, it would have been helpful for the arbitrators to have provided some rationale as to why they found the wife not subject to FINRA jurisdiction, on the one hand, but then, on the other hand, took her joint tenancy property to satisfy her husband's debt. To be clear, there is a legal basis for deeming joint property as subject to application to the debts of any single tenant but, again, there is no such explanation in the FINRA Arbitration Decision for that ruling (if, in fact, that was the finding).