January 10, 2020
Today's featured FINRA Arbitration comes off as a fairly pedestrian affair. She said. They said. The arbitrators dismissed her case after finding that she lacking the standing to sue. Given Claimant's allegations about forgeries, loans, and lines of credit, it seemed as if there was something serious going on; however, the FINRA Arbitration Decision discloses nothing more than a laundry list of allegations and refutations. All of which prompted me to do some digging. What my research revealed is stunning.
In a FINRA Arbitration Statement of Claim filed in December 2016, customer Claimant Jordan asserted the following causes of action as set forth in the Decision:
loan fraud, theft, fraudulent loan disbursements, failure to supervise, gross negligence, disregard of FINRA Rules, federal statutes, and Respondents' own policies; enabling and facilitating the unauthorized divestiture of assets, aiding and abetting in theft, knowingly accepting fraudulent and forged documents, unauthorized lending, unauthorized wire transfers, fraudulent concealment, false reporting to credit agencies, failure to properly monitor and supervise employees and agents, aiding and abetting in fraudulent conduct, misrepresentations and omissions with the intent to conceal and mislead; ongoing concealment of misconduct, primary and vicarious liability for the misconduct of employees and agents; suppression of material information with the intent to conceal financial fraud; violation of the obligation to notify and include Claimant in the transactions; improper account opening, extension of fraudulent loan proceeds, concealment, breach of fiduciary duty of care, aiding and abetting fraud, neglecting to assert duty of care or act in a way comporting with diligence in verifying the legitimacy of obvious forgeries; fraudulent lending, fraudulent concealment, withholding material information and documents, conversion, respondent superior liability of employer, negligent supervision and secondary liability, and gross negligence per se. The causes of action relate to a bridge loan, mortgage related line of credit, and brokerage accounts.
Claimant Jordan sought $5,385,670.42 in compensatory damages plus punitive damages, interest, costs, and fees. In the Matter of the Arbitration Between Gigi Jordan, Claimant, v. J.P. Morgan Securities Inc., JPMorgan Chase Bank, N.A., JP Morgan Private Bank, Chase Bank U.S.A., N.A., JPMorgan Chase & Co., and Rose H. Cohen, Respondents (FINRA Arbitration Decision 17-00001)
Only Respondent J.P. Morgan Securities Inc. and Cohen denied the allegations; all other Respondents did not submit Answers or Submission Agreements. The FINRA Arbitration Panel made no determination as to the non-Answering Respondents because they are not FINRA member firms and they did not voluntarily submit to arbitration.
Lack of Jurisdiction
Respondent J.P. Morgan Securities moved to dismiss Claimant's claims citing FINRA Rule 12200 and arguing a lack of jurisdiction based upon the assertion that:
there was no enforceable Arbitration Agreement because Claimant testified that she never opened an account at JP Morgan Securities Inc. and her signature on any account agreement was a forgery. Respondents also argued that the dispute was not subject to arbitration under Rule 12200 because Claimant testified she did not open an account at JP Morgan Securities Inc. and because the remaining dispute did not arise in connection with the business activities of a member firm.
Claimant opposed the motions and argued that, even if Claimant did not open the account, the account was still open and Claimant was listed as the account-holder, and the alleged misconduct involved a brokerage account.
No Arbitrable Dispute
The FINRA Arbitration Panel dismissed Claimant's claims without prejudice based upon Rule 12200 for a lack of jurisdiction. The Panel offered, in part, this rationale for its dismissal:
[F]irst, Claimant herself testified that she did not open an account with JP Morgan Securities Inc. and any account opened in her name was the result of forged account opening documents. As a result, the account agreement containing the arbitration clause is void ab initio. Thus, Claimant produced no enforceable written agreement to arbitrate. Second, Claimant testified that she was seeking no damages stemming from any transactions or misconduct in the JP Morgan Securities Inc. account opened in her name. Therefore, the Panel found that the dispute did not arise in connection with business activities of JP Morgan Securities Inc. Absent a dispute that is subject to arbitration at FINRA, the Panel concluded it lacked power to continue the hearing under Rule 12200, and thus could not take any further action on the merits. Thus, the Panel did not rule on the merits of Claimant's claims.
Bill Singer's Comment
So . . . that's it as far as the FINRA Arbitration went. As noted in my opening: She said, they said, and, in the end, she can say whatever she wants because there's nothing here for a FINRA Arbitration Panel to arbitrate.
Ummm, not quite.
How did this case wind up before FINRA's Arbitration forum?
After some four decades on the Street, as a former arbitrator, as a former Claimant's lawyer, as a former Respondent's lawyer, as a former industry regulator, as a former in-house counsel, something about this FINRA Arbitration didn't sit right. Call it instinct. Call it a feeling. Call it whatever you want but I knew that there was more of a story behind this case than what was presented in the FINRA Arbitration Decision. Accordingly, I started to dig.
The FINRA Arbitration Decision says that FINRA arbitration jurisdiction was posited on an arbitration clause in the New Account Agreement. Claimant Jordan testified -- as in the words that literally came out of her own mouth -- that she never opened an account at JP Morgan Securities. Claimant testified that any account that had been opened in her name was the result of a forgery. As such, there wouldn't be any bona fide account Agreement and any mandatory arbitration clause in such an Agreement would not be enforceable. With justification, the FINRA Arbitrators said that Claimant had failed to produce an enforceable Agreement, and by extension, she couldn't litigate in FINRA's arbitration forum because the mandatory arbitration clauses (in the likely-forged Agreements) were unenforceable (particularly against non-FINRA-member-firms) and, as such, rendered any arbitration clause a nullity.
For many public customers, not being forced to sue in an industry-run arbitration forum would be a great thing. Quite often, you can ring up the cash register in a civil court. A lot of juries aren't enamored with Wall Street. Some of that has to do with the Great Recession. Some of that has to do with the perception that Wall Street is a den of thieves. To that extent, many public customer lawyers would see dollar signs when offered Jordan's case against JP Morgan, Chase Bank, and a host of affiliates and subsidiaries sharing those names. Clearly, allegedly defrauded public customers with the $5 million in damages sought by Claimant Jordan would love to take that case to a state or federal court. So why was Jordan arguing before a FINRA Arbitration Panel?
2017 Federal Court: A Former Husband's Fraud
Something about this case seemed missing. Being the curious fellow that I am, I did some research. The first thing that I found was J.P. Morgan Securities Inc., JPMorgan Chase Bank, N.A., JP Morgan Private Bank, Chase Bank U.S.A., N.A., JPMorgan Chase & Co., and Rose H. Cohen, Plaintiffs, v. Gigi Jordan, Defendant (Memorandum of Law In Support Of Plaintiffs' Motion for a Temporary Restraining Order and Preliminary Injunction, United States District Court for the District of Delaware, 17-CV-00199 / February 27, 2017).
In the above federal lawsuit, Plaintiffs sought to restrain and enjoin Jordan from pursuing a FINRA Arbitration. The Memorandum of Law alleges that Defendant Jordan was a successful pharmaceutical executive who had claimed that in 2004, her former husband, Raymond Mirra, had fraudulently opened a joint account in their names with JP Morgan Securities via the forgery of her signature, and, thereafter, Mirra and his associates, aided and abetted by Plaintiffs, had "obtained a 2004 Bridge Loan and 2005 Home Equity loan in Jordan's name for over $5.3 million." Additionally, the Memo alleges that [Ed; footnote omitted]:
In 2011, in response to Jordan's inquiries into the allegedly unauthorized loans, Rose Cohen allegedly advised Jordan that Mirra had assumed obligations for an outstanding loan and she no longer owed any debt obligation to JP Morgan.
Ahhh . . . so at least we have some sense now of the genesis of Jordan's FINRA Arbitration Statement of Claim seeking $5.3 million.
What comes next, however, is stupefying.
Convicted Felon: Manslaughter
The Memorandum of Law asserts that Gigi Jordan was a convicted felon who filed her claims concerning "two loans that are more than a decade old" in an effort to "avoid a motion to dismiss based on statutes of limitations, which would inevitably have been filed if her claims had been brought in a court, but which is unavailable in the early states of a FINRA proceeding." The Memo alleges that in 2014, Jordan was convicted of manslaughter for the murder of her developmentally disabled eight-year-old son, who she had poisoned in a hotel suite.
No . . . none of that was referenced in the FINRA Arbitration Decision.
2017 Federal Court Opinion
The District Court denied Plaintiffs's requested injunctions against ongoing arbitrations and a related request for a temporary restraining order. In Merrill Lynch, Pierce, Fenner & Smith, Inc., Plaintiff, v. Gigi Jordan and the Hawk Mountain LLC, Defendants -and- J.P. Morgan Securities Inc., JPMorgan Chase Bank, N.A., JP Morgan Private Bank, Chase Bank U.S.A., N.A., JPMorgan Chase & Co., and Rose H. Cohen, Plaintiffs, v. Gigi Jordan, Defendant (Memorandum Opinion, United States District Court for the District of Delaware, 17-CV-49 and 17-CV-00199 / April 27, 2017)
http://brokeandbroker.com/PDF/JordanDDel170427.pdf, the By way of background, the Court explains that:
Notwithstanding its denial of the injunctions/restraining order, the Court pointedly admonished that:
On October 31, 2016, Jordan, together with The Hawk Mountain LLC and
Michelle E. Mitchell, filed a statement of claim against Merrill Lynch, commencing
a FINRA arbitration. (ML D.I. 7). FINRA is a regulatory body for the financial
industry that also acts as an arbitration forum.
On December 29, 2016, Jordan filed another statement of claim with FINRA
against several J.P. Morgan Chase entities along with one employee, Rose Cohen.
(JPM D.I. 7).
Nonetheless, I am not ruling on whether FINRA has jurisdiction under Rule
12200. That determination is for FINRA to make in the first instance.
. . .
As to JPMS and Cohen's challenge to the arbitration clause, I decline to reach
that issue at this time. In her statement of claim, Jordan asserts there is an
arbitration clause in the opening documents for the brokerage account with JPMS.
(JPM D.I. 7 at 8). Part of Jordan's allegations are that her signature on those
documents was forged. (Id. at 14). JPMS and Cohen argue that, because Jordan
alleges the agreement was entered into without her knowledge and consent, the
contract and arbitration clause are invalid. (JPM D.I. 5 at 15).
If Jordan's signature was, in fact, forged without her knowledge, then the
contract would be void and the arbitration clause along with it. See PHL Variable Ins. Co v. Price Dawe 2006 Ins. Trust, 28 A.3d 1059, 1067 (Del. 2011) ("A court may
never enforce agreements void ab initio, no matter what the intentions of the
parties."). I decline, however, to find that the arbitration clause is unenforceable on
allegations alone. Absent fact-finding or a stipulation from JPMS and Cohen that
the signature was a forgery, I will wait to address the applicability of the
arbitration clause. Since there is a likely independent ground for arbitration, there
is no need to consider holding a hearing so that I can decide as a fact whether there
is contractual authority for the arbitration.
And thus we arrive at where we began. Jordan left the jurisdiction of the federal court and proceeded to argue her case before a FINRA Arbitration Panel, which, as we knew from the beginning of this article, dismissed her case for lack of standing. Jordan is now serving 18 years in prison for the death of her son.