When things fall apart on Wall Street, they can get nasty. In a recent example, we have a dipsute about a Branch Office Agreement, which prompts, in part, claims of defamation, fraud, tortious interference with business relations, bad faith, and failure to provide services. There's more than enough finger-pointing to go around for both sides of the lawsuit caption.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in December 2016, Claimants asserted breach of contract; unjust enrichment; defamation; conversion; fraudulent inducement, fraud and suppression; and, tortious interference with business relationships in connection with Respondents alleged breach of an October 1, 2014, Branch Office Agreement. At the close of the hearing, Claimants sought $101,784.31 in commissions, plus interest, attorneys' fees in the amount of up to $160,000.00 for breach of contract, defamation, bad faith and failure to provide services. In the Matter of the FINRA Arbitration Between Barnes Capital Advisors, LLC; Barnes Benefit Consultants, LLC; Barnes Holdings, Inc; and Travis Stanley Barnes, Jr., Claimants, vs. Allen Mooney & Barnes Brokerage Services, LLC; Allen Mooney & Barnes Investment Advisors, LLC; Allen Mooney & Barnes Client Services, LLC; and Miron Herbert Allen, Jr., Respondents (FINRA Arbitration 16-03624, March 19, 2018).
Respondents generally denied the allegations, asserted various affirmative defenses, and filed a Counterclaim asserting fraudulent inducement; breach of fiduciary duty; conversion; and, breach of contract, which references additional unresolved claims Respondents have against Claimants that allegedly exceed the amount due Claimants under the Branch Office Agreement. At the close of the hearing, Respondents sought $641,200.18 in damages.
The FINRA Arbitration Panel found "Respondents liable" on the claim of breach of contract and ordered them to pay to $101,784.00 in compensatory damages minus a setoff of $6,830.00 requested by Respondents in their Counterclaim for diverted commissions. Accordingly, Claimants are awarded the net amount of $94,954.00 plus interest until paid
Additionally the Panel ordered Respondents on a joint and several basis to pay to Claimants $4,000.05 in costs; an $300.00 filing fee.
Bill Singer's Comment: Oddly, the arbitrators issued a Decision that finds Respondents "liable" for a net award of $94,954 but "jointly and severally liable" for the interest on that award and costs and fee. I'm not sure if the distinctions was intentional, inadvertent, or a typographical error of omission.
The applicable questions on the Uniform Termination Notice for Securities Industry Registration ("Form U5"):
As to Claimant Travis Stanley Barnes, Jr., the FINRA Arbitration Panel recommended the expungement of the "Termination Comment" in Question 3 on his Form U5 and the change from "YES" to "NO" of the answer in Question 7(b) The Panel recommended the deletion of the Internal Review Disclosure Reporting Page. The Panel left unchanged the "Reason for Termination."
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?