An angry Morgan Stanley customer had what he deemed a dormant account. They didn't give me any advice for 16 years, he complained. But they sure as hell racked up charges for doing nothing, he fumed. All of which prompted him to file a FINRA arbitration seeking damages. The litigation cards get the old Wall Street shuffle. Place your bets on the customer, the broker-dealer, and the stockbroker.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in August 2017, public customer Claimant Footlik asserted Respondents Morgan Stanley and Weinstock ignored his account for 16 years and failed to provide investment advice. Claimant Footlik alleges that although his account was dormant, Respondents continued to charge and receive management fees. Claimant sought $52,000.00 in damages, which the FINRA Arbitration Decision alleges was derived by "estimating the reasonable gains Claimant would have received had his account not been ignored by Respondents as alleged." At the close of the hearing, Claimant requested $2,500.00 to $15,000.00 in damages. In the Matter of the FINRA Arbitration Between Leonard Neil Footlik, Claimant, vs. Morgan Stanley and Eleanor Weinstock, Respondents (FINRA Arbitration 17-02236, July, 16, 2018).
Respondents generally denied the allegations and asserted various affirmative defenses.
Motion to Compel
On March 21, 2018, Respondents filed a Motion to Compel the Production of
Documents and Information, which Claimant opposed. By Order dated April 18, the sole FINRA Arbitrator granted the motion and ordered that
Claimant provide his responses on or before May 4, 2018. Claimant was admonished that pursuant to FINRA Code of Arbitration Rule 12511, his failure to comply may result in the dismissal of his claims.
SIDE BAR: FINRA Code of Arbitration Rule 12511: Discovery Sanctions
(a) Failure to cooperate in the exchange of documents and information as required under the Code may result in sanctions. The panel may issue sanctions against any party in accordance with Rule 12212(a) for:
Failing to comply with the discovery provisions of the Code, unless the panel determines that there is substantial justification for the failure to comply; or
Frivolously objecting to the production of requested documents or information.
(b) The panel may dismiss a claim, defense or proceeding with prejudice in accordance with Rule 12212(c) for intentional and material failure to comply with a discovery order of the panel if prior warnings or sanctions have proven ineffective.
Notice of Non-Compliance
On May 11, 2018, Respondents filed a Notice of Non-Compliance seeking dismissal of Claimant's claims, which Claimant opposed. By Order dated
June 4, 2018 the Arbitrator denied the dismissal request.
At the conclusion of Respondents' opening statement at the evidentiary hearing, held on
June 21, 2018, Respondents renewed their request for discovery sanctions against
Claimant. Claimant did not respond to the renewed sanctions request. The FINRA Arbitrator
deferred ruling on the request for discovery sanctions until the conclusion of the
At the conclusion of the evidentiary hearing, the Arbitrator requested Respondents'
counsel confirm whether expungement was being requested. In response, Weinstock
confirmed that expungement was not being pursued because the matter was not reflected on her
Also at the conclusion of the evidentiary hearing, the Arbitrator informed the parties that
they had until June 29, 2018, to file a summary of damages requested. Claimant timely filed his damages calculations, which included his withdrawal of the claim for damages equivalent to the estimated growth of this investment. Apparently, that's how the initial $52,000 got whittled down to a range of between $2,500 to $15,000.
The Sole FINRA Arbitrator denied Claimant Footlik's claims.
Additionally, the Arbitrator found Clamant Footlik liable and ordered him to pay to Respondent Weinstock $3,750.00 in legal fees for Weinstock's previously retained separate counsel.
Further, the Arbitrator found Claimant liable and ordered him to pay to Respondent Morgan Stanley $2,238.00 as a
sanction for fees incurred in connection with Claimant's failure to comply with the
discovery provisions and $2,308.46 in costs.
Bill Singer's Comment
It's not every day that a FINRA arbitration panel or sole arbitrator awards damages against a public customer Claimant. Today's arbitration decision is all the more dramatic because it not only resulted in the denial of all the customer's claims but fired off a double-barrelled salvo in the form of awards against the customer and in favor of both the FINRA member firm and its registered representative. Moreover, the awards are for legal fees, discovery abuse, and costs. That's an $8,296.46 insult added to the alleged damage of a dormant account accruing management fees.