Morgan Keegan's FINRA Arbitration Settled -- sez who?

May 26, 2011

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in December  2009, Claimants asserted causes of action including negligence and unsuitability in connection with the purchase in their account of RMK Select High Income Fund. That Fund ("Regions Morgan Keegan" (RMK)) was an open-end fund with assets in the subprime mortgage market through collateralized debt obligations ("CDOs").

Claimants sought no less than $340,000.00 in compensatory damages plus prejudgment interest (approximately $40,000); costs; and attorneys' fees (one-third of the fees, or the net of about $113,000. 

In the Matter of the FINRA Arbitration Between

  • David F. Fleming and Carmeletta P. Fleming
  • David F. Fleming and Carmeletta P. Fleming
  • Joint Revocable Tmst Account dated 06/06/03
  • David F. Fleming IRA Account, Claimants


  • Morgan Keegan & Company, Inc.
  • Gary Aday
  • James C. Kelsoe, Respondents

(FINRA Arbitration 09-06951, May 20, 2011)

Respondents generally denied the allegations and asserted various affirmative defenses.

An Unsettling Issue

In Respondents Morgan Keegan and Aday's pre-hearing brief, Respondents Morgan Keegan and Aday requested that the Panel enforce the parties' settlement agreement by dismissing all of Claimants' claims and awarding Respondents Morgan Keegan and Aday their attorneys' fees, forum fees and costs (including expert witness costs) that had been incurred since December 7, 2010. As a set-off, Respondents were prepared to deduct $18,000.00 that they agreed to pay to settle Claimants' claims.

On or about March 18, 2010, verified that they had opted out of all class actions based upon the same facts and law as their Statement of Claim and involving Morgan Keegan as a defendant.

On or about December 2, 2010, Claimants filed with FINRA a Notice of Settlement and a Withdrawal of Claim. However, on or about December 7, 2010, Claimants notified that they did not want to proceed with the settlement and sought to rescind the withdrawal. 

Respondents filed a Motion to Close the Case, asserting that Claimants could not rescind their withdrawal.  Moreover, Respondents objected to FINRA's failure to close the matter as had purportedly been requested by the parties, and, further, objecting to FINRA's failure to close the matter.

SIDE BAR: Respondents argued that the parties had an oral settlement agreement.  Accordingly, Respondents asserted that the agreement was in place and that the parties' intent to memorialize the terms of their oral agreement in a later writing should not invalidate the oral contract. The argument was essentially that the agreement was in place and the mere delay in memorializing what had been agreed to did not invalidate the contract.

Claimants asserted that they had refused to sign the General Release and Settlement Agreement that was tendered to them by Respondent Morgan Keegan.  As such, absent the signatures and executed document, the parties had no binding settlement agreement and the matter should remain open. Moreover, the Claimants insisted that there was no enforceable oral contract because there was no meeting of the minds on material terms.

Following oral argument during a January 2011 teleconference, the FINRA Arbitration Panel denied Respondents' Motion and ordered the case to proceed on its merits.

In March 2011, Claimants filed a nofice of dismissal of Respondent Kelsoe from this matter, with prejudice. Therefore, the Panel made no determinations with respect to Claimants' claims against Respondent Kelsoe.


The FINRA Arbitration Panel found Respondent Morgan Keegan liable to and ordered it to Claimants $170,000 in damages with interest specifically excluded.

The Panel dismissed all claims against Respondent Aday.