An irreverent Wall Street Blog
Comerica Securities Tells Suing Customers It Ain't Me, Babe
June 12, 2019
In a recent FINRA customer arbitration, the public customer Claimants were looking for millions in damages as a result of alleged losses from their investments in Comerica Asset Management products. In filing their Statement of Claim, the customers named Comerica Securities, Inc. as the one and only Respondent. After all, you'd sorta think that Comerica is Comerica is Comerica, right? Well, in reality, no. Respondent's defense pretty much voiced famed Wall Street arbitrator Bob Dylan's lament:
Go 'way from my windowLeave at your own chosen speedI'm not the one you want, babeI'm not the one you need. . .But it ain't me, babeNo, no, no, it ain't me, babeIt ain't me you're lookin' for, babe
Case In Point
In a FINRA Arbitration Statement of Claim filed in November 2018 and as amended, public customer Claimants asserted breaches of fiduciary duty and contract; negligence; negligent supervision; fraud; third-party beneficiary breach of contract; and violation of Section 10(b) of the
Securities Exchange Act and Rule 10b-5 of the Securities and Exchange Commission. Allegedly, the claims arose in connection with Claimants' investments in U.S. and international equities,
alternative investments, and fixed income, which included, among other things,
Claimants' portfolio in Comerica Asset Management Alternative Investment Strategy
and Comerica Asset Management Dividend Income Strategy. Claimants sought between $1 and $5 million in compensatory damages, punitive damages, interest, and costs. In the Matter of the Arbitration Between Richard Assmar, Individually and on Behalf of Richard Assmar Selectrust U/A 12/18/2012; and Beverly Assmar, Individually and on Behalf of Beverly Assmar Selectrust U/A 12/18/2012, Claimants, v. Comerica Securities, Inc., Respondent (FINRA Arbitration Decision 18-03867)
http://www.finra.org/sites/default/files/aao_documents/18-03867.PDF
Respondent Comerica Securities, Inc. generally denied the allegations, asserted various affirmative defenses and moved to dismiss the Amended Statement of Claim based upon FINRA Rule 12504(a)(6)(B).
SIDE BAR: FINRA Rule 12504: Motions to Dismiss states in part:(a) Motions to Dismiss Prior to Conclusion of Case in Chief(1) Motions to dismiss a claim prior to the conclusion of a party's case in chief are discouraged in arbitration.(2) Motions under this rule must be made in writing, and must be filed separately from the answer, and only after the answer is filed.(3) Unless the parties agree or the panel determines otherwise, parties must serve motions under this rule at least 60 days before a scheduled hearing, and parties have 45 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.(4) Motions under this rule will be decided by the full panel.(5) 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.(6) The panel cannot act upon a motion to dismiss a party or claim under paragraph (a) of this rule, unless the panel determines that:
(A) the non-moving party previously released the claim(s) in dispute by a signed settlement agreement and/or written release;(B) the moving party was not associated with the account(s), security(ies), or conduct at issue; or(C) The non-moving party previously brought a claim regarding the same dispute against the same party that was fully and finally adjudicated on the merits and memorialized in an order, judgment, award, or decision. . . .
Pursuant to its motion under FINRA Rule 12504(a)(6)(B), Respondent Comerica argued in part that it was not associated with Claimants' accounts, securitis or conduct at issue; and, further, that Claimants were not customers of Respondent. The Panel heard argument on the pending Motion and dismissed Claimants' claims with prejudice. The arbitrators offered this rationale:
[O]n April 18, 2019, the Panel heard oral arguments on Respondent's Motion to Dismiss and granted the motion pursuant to Rule 12504(a)(6)(B) of the Code on the grounds that Claimants have not established a relationship with the Respondent that justifies an arbitration before FINRA. Claimants have failed to attach any documents evidencing an arbitration agreement between themselves and Respondent or any account statements evidencing that they had accounts with Respondent. Affidavits of: (1) the portfolio manager from June 14, 2011 - January 15, 2013, which was prior to any of the transactions at issue in this matter ("Portfolio Manager"); (2) Respondent's Vice President and CCO; and (3) an employee of Respondent respectively set forth that Respondent never had a client relationship with, nor did it have accounts with Claimants. The accounts at issue were not held by Respondent, and there has been no proof presented that Respondent engaged in the alleged transactions of which the Claimants complain in the Amended Statement of Claim. The Amended Statement of Claim simply has a reference to a specific employee of Respondent. The only contact this employee had with Claimants was in the role as an investment manager for Comerica Bank's Wealth Management Group. Although this employee had a dual role as an investment advisor representative for Respondent, she never dealt with Claimants in that capacity. The Amended Statement of Claim makes no substantive allegation of wrongdoing, let alone any involvement by this employee with Claimants. The Portfolio Manager (under oath in her affidavit) asserts she has never been an employee of Respondent. She further states that she was a registered representative of Respondent for a brief period of time prior to the dispute in this matter, and she did not act as such in connection with the services either she or Comerica Bank performed for Claimants. She added that Respondent had no, and exercised no, supervision over activities she performed in the course of her employment with, and on behalf of, Comerica Bank. To be liable for her actions, three conditions must be satisfied: Respondent must have been her employer or principal, she must have been acting within the scope of her employment and she must have been an employee at the time she allegedly committed the tort (see Mercury Motors Exp, Inc. v. Smith, 393 So.2d 545, 549 (Fla 1981)), which states in pertinent part "An employer may be held liable for the actions of its employees if the employee was acting within the scope of his employment when he committed the tortious act." Florida jury instructions 402.9 provides further guidance for when vicarious liability is appropriate: It must be determined "[w]hether [the employee/agent] was an employee of defendant and was acting within the scope of [his][her](sic) employment at the time and place of the incident in this case. An employee is a person who is hired by (defendant) and whose actions are controlled by (defendant) or are subject to (defendant's) right of control." As the Portfolio Manager's affidavit establishes, she was not acting within the scope of employment nor was she acting as a registered agent of Respondent. She was never an employee, she was not subject to the control or supervision of Respondent and she terminated her registration with Respondent on January 15, 2013, prior to any of the challenged transactions in Claimants' accounts. Thus, none of the elements necessary to assert a vicarious liability can be satisfied. Additionally, Respondent's Portfolio Manager did not use Respondent to effect any trades or transactions in Claimants' accounts. Therefore, there is no duty, contractual relationship, nor causation that can be imposed on Respondent. Comerica Bank and its Wealth Management Group are not members of FINRA; it is a Texas banking association, chartered under the laws of the State of Texas and is not a broker dealer. Respondent is a wholly separate legal entity. It is a Michigan corporation, headquartered in Detroit, Michigan. The "Investment Proposal" prepared for Claimant Richard Assmar Selectrust, dated February 6, 2014, was provided by the Portfolio Manager. She worked for Comerica Bank's Wealth Management Division. Although Claimants allege fraud and misrepresentations, Claimants fail to identify who at Respondent allegedly made such misrepresentations, how the representations were made or when they were made. As such, there is not a claim against Respondent. Because Respondent was not associated with the accounts, securities or conduct at issue, the Panel has dismissed the Amended Statement of Claim pursuant to Rule 12504(a)(6)(B) of the Code.
Puhlease breathe . . . I mean, wow, that's one helluva long paragraph. Let's break things down a bit.
The three FINRA Public Arbitrators found that the public customer Claimants did not established an arbitrable relationship with the Respondent. Pointedly, the Panel found that the Claimants never presented an arbitration agreement between themselves and Respondent, or even any account statements to prove that they had accounts with Respondent. In contrast to Claimants failure of proof, Respondent presented affidavits asserting that no client relationship had ever existed with Claimants and that they never had any account held by Respondent.
As best the Panel could determine, the Amended Statement of Claim simply asserted that an employee of Respondent had contact with Claimants but only as an investment manager for Comerica Bank's Wealth Management Group, which was not the named Respondent. Although the investment manager was also an investment advisor representative for Respondent Comerica Securities, Inc., she never dealt with Claimants in that capacity and the arbitrators could not find any allegation of wrongdoing by that employee.
In the case of a Portfolio Manager cited as another individual with whom Claimants alleged some form of "contact," that manager asserted that she had been registered representative of Respondent for a brief period of time prior to the dispute in this matter. Further, the manager did not act as Respondent's registered rep in connection with services either she or Comerica Bank performed for Claimants.
The FINRA Arbitration Panel outlined three conditions by which an individual could impose liability upon an employer:
- Employer must have been the individual's employer or principal,
- employee must have been acting within the scope of her employment, and
- employee must have been an employee at the time she allegedly committed the tort.
The Panel did not find that the above three-point test was satisfied by Respondents and declined to attach any vicarious liability on Respondent Comerica Securities. In conclusion, the Panel found that:
Although Claimants allege fraud and misrepresentations, Claimants fail to identify who at Respondent allegedly made such misrepresentations, how the representations were made or when they were made. As such, there is not a claim against Respondent. Because Respondent was not associated with the accounts, securities or conduct at issue, the Panel has dismissed the Amended Statement of Claim pursuant to Rule 12504(a)(6)(B) of the Code.