Arbitration Claimant Wins Case But Damages Smorgasbord May Have Hurt

February 15, 2012

In a Financial Industry Regulatory Authority ("FINRA") ArbitrationStatement of Claim filed in March 2011, Claimant Francois asserted causes of action including fraud and negligence in connection with his investment in the Franklin Fund on margin. In his claim, Claimant requested at least $250,000 in compensatory damages; but at the close of the hearing, that amount was recast in the form of three different "levels" of damages - a smorgasbord, if you will:

  1. $251,822.00
  2. $371,289.41; and
  3. $576,000.

In the Matter of the FINRA Arbitration Between John Andre' Francois,Claimant vs. Zions Direct, Inc., Respondent (FINRA Arbitration 11-01055, February 10, 2012).

Respondent generally denied the allegations and asserted various affirmative defenses.


The FINRA Arbitration Panel found Respondent liable and ordered the firm to pay to Claimant $35,750.00 in compensatory damages; and to reimburse Claimant for its $300 FINRA initial claim filing fee.

Bill Singer's Comment

Whoa - how do you get from a quarter of a million dollar in claimed damages to about $36,000 in awarded damages?  Not having any first-hand knowledge about this case and being provided with virtually no meaningful facts or rationale by this Arbitration Panel, I'm pretty much left to ruminating. So - let's get on with the ruminating.

While an award is an award is an award, this case seems more like a victory for the Respondent than the Claimant.  It would be hard to imagine that there wasn't an offer on the table from Respondent for at least (if not more) than the paltry $35,750 that was awarded.  All of which strongly suggests that Claimant may have overplayed his hand.

I'm having quite a time figuring out how the Claimant calculated between a quarter and over a half a million in damages - that's quite a range!  Moreover, it seems to have been presented to the arbitrators as a smorgasbord of three choices.  While I appreciate that there's more than one way to skin a cat, I would think that it's a stronger litigation tactic to go with your best estimation of damages and urge the arbitrators to make that award.  Giving several choices is akin to a moving target - all the more difficult to hit.  Worse, when faced with a $250,000 range among the three damages calculations, arbitrators may not feel comfortable in espousing any of the three.

Of course, I wasn't there and I have no intimate knowledge of this arbitration.  Nonetheless, the facts speak for themselves. Claimant thought his case was worth at least about $250,000 and up to about $500,000.  The Panel apparently found wrongdoing on Respondent's part because they issued an award in Claimant's favor; however, that was for about 15% of the low-end of the loss calculation and about 6% of the high-end.