A Pro Se Respondent and a Lawyered-Up Respondent: Similar Cases -- How did they fare?

July 6, 2010

Respondent Proceeded Pro Se

In its Statement of Claim filed October 20, 2009, Claimant Morgan Stanley Smith Barney, LLC. ("MSSB") alleged that on November 9, 2007, Respondent Malcolm G. Taaffe had defaulted on his agreement to pay three promissory notes, and, as a result, had breached his agreement to pay the sums due. Claimant sought to recover on three promissory notes executed respectively on

  1. September 10, 2003 ("Note 1": $300,113.96 principal plus accrued interest of $1,973.40[sic: as stated in the FINRA Decision], plus accruing interest at 4% per annum); 
  2. November 24, 2004 ("Note 2": $262,371.54 principal plus accrued interest of $10,062.5, plus accruing interest at 4% per annum); and 
  3. November 26, 2006 ("Note 3": $106,685.75 principal plus accrued interest of $4,536.75, plus accruing interest at 4% per annum). 

Totaling $669,171.25 in principal and $16,572.65 in accrued interest.

Claimant additionally sought the costs of collection of the FINRA arbitration ($11,021.44) and attorney's fees ($23,244.00). In the Matter of the Arbitration Between Morgan Stanley Smith Barney, LLC, formerly Morgan Stanley DW Inc, Claimant, v. Malcolm G. Taaffe, Respondent (FINRA Arbitration 08-03835, June 23, 2010)

Respondent Taaffe, who represented himself (pro se), generally denied the allegations and asserted various affirmative defenses. Moreover, Respondent asserted a Counterclaim citing:

  • Breach of Employment Agreement and/or Wrongful Termination;
  • Breach of the Covenant of Good Faith and Fair Dealing and/or Standards of Commercial Honor and Principles of Trade;
  • Tortious Interference with Business Relationships; and
  • Conversion.

In March 2010 the parties entered into a Settlement Agreement, which was presented to the FINRA Arbitration Panel for purposes of being entered as a Stipulated Award. That award granted the following relief to Claimant MSSB:

  • $781,636.30, constituting $669,171.25 in principal plus accrued interest of $78,199.61 (as calculated through February 10, 2010);
  • $23,244.00 in attorneys' fees 
  • $11021.44 in costs
  • Additional 12% per annum accruing interest from February 10, 2010.

Respondent Represented by Law Firm

In its Statement of Claim filed February 16, 2009, Claimant Banc of America Investment Services (BAIS) alleged that on November 2, 2007, Respondent Steven Michael Pompan had defaulted on his agreement to pay three promissory notes, and, as a result, had breached his agreement to pay the sums due. Claimant sought to recover on four promissory notes executed respectively on

  1. August 6, 2004 (Note 1: $100,000.01 principal plus accrued interest of $1,205.60, plus accruing interest at 5% per annum);
  2. October 5, 2005 (Note 2: $104,166.67 principal plus accrued interest of $399.56, plus accruing interest at 5% per annum); and 
  3. August 1, 2006 (Note 3: $83,333.33 principal plus accrued interest of $1,105.77, plus accruing interest at 5.21% per annum); and · September 21, 2007
  4. Note 4: $75,000.00 principal plus accrued interest of $431.34, plus accruing interest at 5% per annum)

Totaling $362,500.01 in principal and $ 3,142.27 in accrued interest.

Claimant additionally sought the costs of collection of the FINRA arbitration ($11,021.44) and attorneys fees ($23,244.00). In the Matter of the Arbitration Between Banc of America Investment Services, Inc.,Claimant, v. Steven Michael Pompan, Respondent (FINRA Arbitration 09-00822, June 22, 2010)

Respondent Pompan generally denied the allegations and asserted a Counterclaim citing

  • Receipt of Commission;
  • Damage of Trust and Confidence Necssary for Employment Relationship;
  • Damage to Reputation;
  • Use of Bait and Switch Techniques;
  • Financial Loss Due to Loss of Revenue.

Respondent requested

  • $800,000 in damages for lost fee base revenues and damages to his reputation;
  • $25,000 for unpaid fees; and
  • $75,000 for mental distress and time committed for collection.

The Arbitration Panel made the following awards: Respondent shall pay to Claimant

  • $362,500.01 in compensatory damages; 
  • $19,294.40 in attorneys' fees; 
  • $1,415.63 in costs; and 
  • $1,000 reimbursement for non-refundable portion of filing fees.

The Panel denied Claimant's request for interest.

Bill Singer's Comment: We've explored this issue a number of times recently and noted varying results. See, A Hobson's Choice for Pro Se Respondents in FINRA Arbitrataions. http://www.brokeandbroker.com/index.php?a=blog&id=454  In this column, the Pro Se Respondent Taaffe seems to have agreed to virtually everything sought by the Claiminat.  In the case of the the Respondent (Pompan) using legal counsel, the settlement does not appear to require payment of several thousand of dollars in interest. Whether the off-set of the interest was greater than the legal fees charged (I doubt it) is not stated.