When it comes to issuing arbitration decisions, the Financial Industry Regulatory Authority plays hide and seek. In today's featured FINRA public customer arbitration, there is not so much as one word of explanation about who the Claimant is, the capacity in which she sued Wells Fargo Advisors, or the underlying facts in dispute. The FINRA Arbitration Decision gives us the parties' names, provides the legalese names of the claims, and lets us know how many dollars in damages were sought but that's it. Who allegedly did what to whom? What transaction(s) were in dispute? When and where did various acts occur? Well . . . FINRA ain't tellin'. You think that BrokeAndBroker.com Blog's publisher Bill Singer is making all that up? Take Bill's challenge and read the FINRA Arbitration Decision for yourself -- and then call him and apologize for doubting his word.
Case In Point #1: FINRA Arbitration
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in February 2015, Claimant Pfeffer asserted breaches of contract and of fiduciary duty based on fraud and intentional misrepresentation, negligent misrepresentation, and conversion of money. Claimant Pfeffer sought at least $910,492.33 in compensatory damages, treble and punitive damages, interest, and attorneys' fees. In the Matter of the FINRA Arbitration Between Alba T. Pfeffer, Claimant, vs Wells Fargo Advisors, LLC and Andre Mirkine, Respondents (FINRA Arbitration 15-00294, September 30, 2016). http://www.finra.org/sites/default/files/aao_documents/15-00294.pdf
Respondents Wells Fargo and Mirkine generally denied the allegations and asserted various affirmative defenses, and sought the expungement of the arbitration from Mirkine's Central Registration Depository records ("CRD").
The FINRA Arbitration Panel denied Claimant's claims and Respondent Mirkine's requested expungement. The FINRA Arbitration Decision states:
Claimant Alba T. Pfeffer appeared pro se
Bill Singer's Comment: Lack of Content and Context in FINRA Arbitration Decision
As readers of the BrokeAndBroker.com Blog I often launch into an impassioned criticism of FINRA's penchant for issuing decisions that lack adequate content and context. In the above FINRA Arbitration Decision we have a classic case of the omission of any meaningful facts. If you think that I'm overstating the point, please avail yourself of the link to the full-text Decision.
Case In Point #2: SDNY
Not willing to take her defeat lightly and again acting pro se, Pfeffer filed a Complaint with the United States District Court for the Southern District of New York ("SDNY"). SDNY deemed Pfeffer's Complaint to constitute a Motion to Vacate the FINRA Award. Alba T. Pfeffer, Plaintiff, v. Wells Fargo Advisors, LLC, And Andre Mirkine, Defendants. (Opinion and Order, SDNY, 16 CV 8321 / May 23, 2017). http://brokeandbroker.com/PDF//PfefferSDNY.pdf As explained by SDNY:
Plaintiff argues her case "meets at least three of the criteria for vacating an arbitration award." (Opp'n Br. at 4). In particular, she argues (i) the award was procured by undue means, (ii) there was evident partiality among the arbitrators, and (iii) the arbitrators were guilty of misconduct,
Page 6 of the SDNY Opinion and Order
In response to Plaintiff Pfeffer's Complaint, Defendants moved to dismiss and also moved to confirm the award.
SIDE BAR: For those of you who think that the lack of content and context in a FINRA Arbitration Decision is acceptable, go ahead, explain to me just what Plaintiff Pfeffer's Arbitration Statement of Claim alleged had happened? Who the hell is Plaintiff Pfeffer and in what capacity is she suing? Oh, and what are the dates when any alleged misconduct occured? What, if anything, did Wells Fargo Advisors do or not do? What, if anything, did Mirkine do or not do -- and just who the hell is he anyway? Wattsamatter? Cat got your tongue? You say you're clueless?
Just the Facts Ma'am
To remind you of the passage of time, Pfeffer filed her FINRA Arbitration Statement of Claim in February 2015. The FINRA Arbitration Decision was rendered on September 30, 2016. On May 23, 2017, SDNY renders its Opinion and Order. Some 2 1/2 years passed from the filing of Pfeffer's FINRA arbitration until the SDNY issued its opinion. A s set forth in pertinent part in the SDNY Opinion and Order, we finally learn about the pertinent facts behind Pfeffer's lawsuit [Ed: Footnotes omitted]
Plaintiff is the widow of Murray Pfeffer, who died in 2012.
According to plaintiff's statement of claim submitted to FINRA, Mr. Pfeffer executed a "power of attorney" in 2003 under which plaintiff "was authorized to act as Murray Pfeffer's authorized agent and attorney-in-fact to buy, sell and trade in any stocks and bonds, options, other securities, commodities and contracts relating to them, on margin or otherwise." (Betz Aff. Ex. B ¶ 4). The power of attorney authorized plaintiff "to act for her husband . . . and on his behalf . . . regarding 'everything mentioned['] in the power of attorney document and everything necessary to conduct his account." (Id. (quoting the power of attorney, Betz Aff. Ex. F at 14)). The following year, on June 29, 2004, Mr. Pfeffer created two revocable trusts-"Trust A" and "Trust B"-with A.G. Edwards, a company that in 2008 was acquired by Wachovia Corporation and then by Wells Fargo. (Id. ¶ 5). Plaintiff was the beneficiary of Trust A ("plaintiff's trust"); and Murray Pfeffer's children from his first marriage were the beneficiaries of Trust B ("the children's trust").
Defendant Andre Mirkine was at all relevant times a financial advisor and Mr. and Mrs. Pfeffer's contact at A.G. Edwards and later Wells Fargo. (Betz Aff. Ex. B. ¶ 2; Transcript of proceedings before the FINRA arbitration panel (Grannum Jan. 10, 2017, Aff. Exs. A-E and Grannum May 11, 2017, Aff. Exs. A-B, hereinafter "Tr.," at 461)). 2
Beginning in October 2009, plaintiff and Murray Pfeffer allegedly became "concerned with the way in which Mirkine was handling the accounts." (Betz Aff. Ex. B ¶¶ 7-8). As a result, Mr. Pfeffer told Mirkine to transfer all of the assets in the children's trust into plaintiff's trust. (Id. ¶ 8). Mirkine refused to do so because he believed Mr. Pfeffer was not competent. (Id.). Mirkine then "advised Murray Pfeffer to write him a letter requesting the transfer." (Id. ¶ 9). On January 11, 2010, Mr. Pfeffer sent a letter to Mirkine making the request. (Id. ¶ 10).
On January 13, 2010, plaintiff spoke with Mirkine on the phone. Mirkine told her that Murray Pfeffer's children from his first marriage "brought him two letters from physicians declaring Murray Pfeffer mentally incapacitated." (Betz Aff. Ex. B. ¶ 11). Mirkine also told plaintiff that "the money within [the children's trust] was now frozen." (Id.).
Sometime in early 2010, Murray Pfeffer's children commenced a guardianship proceeding for their father in New York State Supreme Court, Westchester County. In August 2010, the court appointed plaintiff to be the guardian of Mr. Pfeffer's "person," and appointed an independent guardian of Mr. Pfeffer's property. (Tr. at 387-88; Betz Aff. Ex. F at 18).
Mr. Pfeffer died on October 6, 2012. Thereafter, the guardian of the property distributed the property to plaintiff and the children. (See Tr. at 387).
In February 2015, plaintiff, who was then represented by counsel, commenced the arbitration by filing a statement of claim with FINRA. (See Betz Aff. Exs. B, C). Plaintiff asserted causes of action for breach of fiduciary duty based on fraud, breach of contract, negligent misrepresentation, and conversion. The essence of her claims was that Wells Fargo and Mirkine had wrongfully refused to follow Mr. Pfeffer's instructions to transfer assets from the children's trust into plaintiff's trust.
A three-person FINRA arbitration panel held a hearing over the course of seven sessions in January, May, and September 2016, during which plaintiff, who at that point was proceeding pro se, gave an opening statement, testified, was cross-examined, called witnesses to testify, presented documentary evidence to the panel, and gave a closing argument. Defendants, represented by counsel, were afforded the same opportunities during the arbitration hearing.
By arbitration award dated September 30, 2016, the FINRA panel "denied [plaintiff's claim] in its entirety." (Betz Aff. Ex. A at 2).
The Elements of Appeal
In addressing Plaintiff Pfeffer's allegation of undue means, the SDNY Opinion and Order notes that this assertion was raised in connection with defense counsel having allegedly:
"yelled at the arbitrators on many occasions," "tried to take control of the arbitration," and "the arbitrators were intimidated by him."
Page 6 of the SDNY Opinion and Order
In rejecting Pfeffer's claim of undue means, SDNY found that:
contrary to plaintiff's contention, a review of the transcript of the arbitration proceedings shows the panel conducted a fair, professional, and proper hearing. Moreover, the panel repeatedly allowed plaintiff leeway because of her pro se status, and frequently ruled against defendants, including by denying their motion for a directed verdict.
Page 6 of the SDNY Opinion and Order
As to Plaintiff's charge of the arbitrators evident partiality, SDNY noted that the basis for that allegation was Plaintiff's perception that the arbitrators were intimidated by defense counsel and made rulings in his favor. Not finding that such an assertion rose to demonstrating partiality, SDNY rejected this claim.
Finally as to Plaintiff's claim of the arbitrators' misconduct, SDNY characterized the allegation as asserting that the Panel did not allow Plaintiff to present her case and did not consider her evidence. As set forth in pertinent part:
She alleges she was "repeatedly cut off by the Board when she tried to testify," and "was told that her statements were repetitive," and that her "documentary evidence was . . . disregarded by the Board." She alleges that the panel allowed defendant to use her exhibits against her, they did not take her evidence with them to review between sessions, and they destroyed the evidence at the end of the last hearing day. (Opp'n Br. at 3-4)
Pages 7 - 8 of the SDNY Opinion and Order
In rejecting this last basis of appeal, SDNY found that the FINRA Arbitration Panel had considered Plaintiff's allegations and evidence and "showed a thorough understanding of the issues."
In conclusion, SDNY denied Plaintiff Pfeffer's Motion to Vacate and confirmed Defendants' FINRA Arbitration Award. Finally, the SDNY Opinion and Order notes in pertinent part:
The Court certifies pursuant to 28 U.S.C. § 1915(a)(3) that any appeal from this Order would not be taken in good faith, and therefore in forma pauperis status is denied for the purpose of an appeal. See Coppedge v. United States, 369 U.S. 438, 444-45 (1962).
Case In Point: 2Cir Appeal
Ya think we're done here? Not by a long shot.
The inveterate Ms. Pfeffer appealed the SDNY Opinion and Order to the United States Court of Appeals for the Second Circuit ("2Cir"). Again proceeding pro se, Plaintiff/Appellant Pfeffer again argued that the FINRA Arbitration Award was procured by undue means, evident partiality, and misconduct. She further alleged that the FINRA arbitrator had exhibited manifest disregard for the law and facts. Alba T. Pfeffer, Plaintiff/Appellant, v. Wells Fargo Advisors, LLC and Andre Mirkine, Defendants/Appellees -- and -- the Financial Industry Regulatory Authority, Inc. Defendant (Summary Order, 2Cir, 17-1819-CV / February 15, 2018). http://brokeandbroker.com/PDF/Pfeffer2Cir.pdf
In affirming SDNY, 2Cir states that:
Upon review, we find no error in the district courtʹs confirmation of the arbitration award. Mrs. Pfeffer failed to meet her ʺvery highʺ burden to demonstrate that vacatur was appropriate. Id. at 103. The transcript of the arbitration reveals no suggestion that the award was produced by undue means, evident partiality, or misconduct. Her allegations that the Panel failed to abate defense counselʹs abrasive manner and that it was intimidated by him are belied by the record. Contrary to Mrs. Pfefferʹs allegations, the transcript of the proceedings shows that the Panel considered her evidence, understood the issues underlying her claims, and afforded her latitude because she was proceeding pro se. Furthermore, Mrs. Pfeffer has shown nothing to indicate that the Panel manifestly disregarded the law in coming to its conclusion.
Pages 5 -6 of the 2Cir Summary Order
Bill Singer's Concluding Snarky Comment
Personally, I found the underlying fact pattern fascinating. It's unfortunate that FINRA failed to disclose the underlying issues that prompted the arbitration because they contain valuable lessons for the investing public and the industry. Given that FINRA customer arbitration is mandatory, given that FINRA generally charges thousands of dollars to process and conduct arbitrations, and given that FINRA publishes arbitration decisions on its website, it's baffling that the self-regulatory-organization's alternate dispute resolution forum lacks sufficient quality control to ensure that its public documents contain minimal disclosures of content and context. No matter how many times you read the Pfeffer v. Wells Fargo FINRA Arbitration Decision, you learn nothing -- and I mean NOTHING -- about any underlying fact in the dispute.
As evidenced by SDNY's and 2Cir's recitation of the facts in their orders, the allegations raised by Claimant Pfeffer in her FINRA arbitration claims involved somewhat complex and nuanced facts. I would argue that the presentation of those facts compels the dismissal of the charges against Respondents Wells Fargo and Mirkine. I would further argue that the presentation of the facts also constitutes a compelling rationale for the arbitrators' findings. How could a FINRA Panel of Arbitrators get everything so right but the alternate dispute resolution forum get everything so wrong?