What Is On First? No, what is on second. Who is in arbitration.

February 25, 2010

In July 2004, public customer Jay Lombard purchased in his retirement account at GunnAllen Financial, Inc., one Unit of Florida Capital Apartments 2004, Ltd., which was sold to Lombard as an Accredited Investor through a private placement.


And that folks, is about the last intelligible thing that I can say about this oddball case.


2006 Settlement


In March 2006, Lombard and GunnAllen executed a written Settlement Agreement and Release dated March 7, 2006 (the "Settlement Agreement") with reference to a dispute that had arisen between them concerning certain alleged improprieties with respect to Lombard's account at GunnAllen.  In keeping with the somewhat hush-hush nature of  Wall Street settlements involving public customers, the Settlement Agreement notes that the parties "desire to compromise and settle all claims, causes of action, injuries, and damages asserted or that may be asserted" and provided for the payment of $5,547.00, in full settlement, to Lombard by GunnAllen.  Pointedly, the Settlement Agreement states that its "[p]erformance...will operate as a general release by and between GunnAllen and Claimant and their present and former representatives."


Don't Ask, Don't Tell


Did the Settlement Agreement have anything whatsoever do to with Lombard's purchase of the Florida Capital apartments 2004, Ltd. private placement Unit? Yes, maybe, possibly, not likely, maybe not, or no. You pick whatever floats your boat because I sure as hell don't have the answer.  Moreover,  Lombard and GunnAllen don't seem willing or able to tell us. 


Why does this all sound like an existential version of Who Is On First? -- my educated guess is that there may be some ironclad confidentiality clause in the Agreement. Among the purposes of settlement agreements is to not spell-out the substance of a customer's complaint.  After all, Wall Street brokerage firms often settle customer complaints for their nuisance value or to simply nip things in the bud.  In such situations, it makes no sense to set forth disputed allegations. Many settled cases go to the grave as pissing contests that neither party concedes but rather than drag out the hostilties, a check gets written, lips are sealed, and the armies return home.


We lawyers get paid big bucks for writing pages of stuff that looks like it says something about something but really just says something about nothing. Something got settled here, but the Agreement isn't giving up that secret.


2009 FINRA Arbitration Complaint


About five years after Lombard's purchase of the Florida Capital Apartments 2004 Unit, and about three years after the settlement of something, Lombard filed an arbitration Statement of Claim with the Financial Industry Regulatory Authority ("FINRA")  on July 9, 2009, seeking $100,000 in compensatory damages and interest in the amount of $40,000.  Lombard alleged Breach of Fiduciary Duty, Omission of Facts, and Failure to Supervise. To which the respondent brokerage firm and individual broker denied the allegations In the Matter of the Arbitration Between:Jay Lombard (Claimant) vs. GunnAllen Financial, Inc., and David Neil Soiferman (Respondents) (FINRA Case Number: 09-04105, February 24, 2010). 


On January 14, 2010, Claimant Lombard withdrew his claims against Respondent Soiferman and moved to amend the Statement of Claim to add a party. On January 22, 2010, the Arbitrator heard oral arguments on GunnAllen's Motion to Dismiss.  On January 25th, the FINRA Arbitrator denied Lombard's motion to add a new Respondent and granted GunnAllen's Motion to Dismiss.


Why did Lombard name Soiferman and then withdraw that claim, only to seek to add another party? I don't know -- and, yes, I don't know is still on third.  What am I talking about? No, what is on second. Who was Soiferman anyway? No, who is on first.


As best I can tell, and trust me on this, I'm clutching at straws here, Lombard asserted in his 2009 FINRA arbitration Complaint that his signature to the 2006 Agreement was procured by fraud on the part of GunnAllen's registered representative Jaime Diaz (perhaps the party whose name Lombard wanted to replace Soiferman's with?). If that's the case, then why did Lombard name Soiferman to begin with, rather than Diaz?  I don't know.  Yeah, he is still on third. 


Lombard complained that he did not understand that the 2006 Settlement Agreement's purpose or effect was as a General Release. Lombard claims that he was assured that the Settlement Agreement was simply a document that he was required to sign in order to obtain the promised payment.


Did Lombard at least deny signing the Settlement Agreement?  No, he admitted to signing it. Did GunnAllen stiff him on the promised payment? No, the brokerage firm shelled out the bucks as promised.  Then what is Lombard complaining about? Sorry, what is on second.  I don't know why Lombard filed the arbitration complaint. Of course, I don't know is still on third base.    


Physician Heal Thyself


In sorting through this odd case, the FINRA Arbitrator informs us that Lombard is a physician - implying that the good doctor is not an uneducated person.  Given that fact, the Arbitrator notes that it would be fair to assume that Lombard at least read and understood that portion of the Settlement Agreement that states, in relevant part immediately preceding the signature lines (including Lombard's admitted signature), that

all parties having consulted legal counsel, or having been advised to consult legal counsel, and having had full opportunity to do so. . .hereby acknowledge that the provisions of this Agreement shall be binding upon themselves and respective heirs and next of kin, executors, and administrators.

The Old Bamboozle


Lombard admitted that at no time did he seek legal advice concerning the settlement or the Settlement Agreement itself, or in connection with his commencement of or participation in any other aspect of the arbitration.  In fact, Lombard filed his FINRA arbitration complaint pro se. Apparently, this Claimant went commando from start to finish. 


In dismissing Claimant Lombard's case, the Arbitrator phrased it this way: "Claimant asserts that in all respects he was bamboozled by Jaime Diaz, whom he has only now named as a Respondent."


Ah, yes, the old bamboozle! 


Don't leave me this way. I can't survive, can't stay alive


But Bill, you plead and beseech of me, don't leave us this way (with all respects to Gloria Gaynor).  Surely, surely the FINRA Arbitrator at least explained the point of the 2006 Settlement Agreement.  Just give us that much, you beg of me.  Okay, just to toss you one last bone, here is the Arbitrator's definitive explanation of the 2006 Settlement Agreement:

The precise nature of the unspecified improprieties is nowhere described, and has not been identified by either party, apart from their both agreeing that it was completely unrelated to Claimant's July 2004 investment that is the subject of this arbitration proceeding.

Costello: What's the guy's name on first base?

Abbott: No. What is on second.

Costello: I'm not asking you who's on second.

Abbott: Who's on first.

Costello: I don't know.

Abbott: He's on third, we're not talking about him.