An irreverent Wall Street Blog
by Bill Singer
by Bill Singer
Engelbert Humperdinck Sings About Settling Wall Street Arbitration
November 3, 2014
You only get so many bites of the same apple. In litigation, you only get so many chances to settle a dispute -- and once you sign on the dotted line of that settlement and release document, you don't get another shot to go back for more (unless the other party has breached the terms of the settlement contract). In the immortal words of that great Wall Street professional Engelbert Humperdinck, "please release me, let me go." See the article below, however, for someone who didn't quite get Engelbert's message.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in September 2013, public customer Claimant Elhamrawy, representing himself pro se, asserted breach of fiduciary duty; churning; and omission of facts in connection with a dispute involving option contracts. Claimant sought $37,491.00 in compensatory damages; $112,473.00 in treble damages; $37,491.00 in punitive damages; $14,349.00 interest; $2,000 in costs; sanctions; a disciplinary referral; and other non-monetary relief. In the Matter of the FINRA Arbitration Between Alaa Elhamrawy, Claimant, vs. Merrill Lynch, Pierce, Fenner & Smith Inc., Respondent (FINRA Arbitration 13-02842, October 28, 2014).
Respondent Merrill Lynch generally denied the allegations, asserted various affirmative defenses, and filed a Counterclaim asserting breach of contract. Respondent sought attorneys' fees and expenses in defending an action that the firm asserted had involved previously released claims as memorialized in a settlement agreement (deemed a "contract.")
Please Release Me. Let Me Go
As set forth in the FINRA arbitration decision, Claimant and Respondent executed a General Release on January 13, 2014, which resolved the dispute concerning the same underlying claim as in the arbitration now at issue. Pursuant to the terms of that release, Respondent Merrill Lynch had paid $30,000 to Claimant Elhamrawy. Claimant's notarized signature appeared on the General Release, which among other terms, included an indemnification clause.
SIDE BAR: Elhamrawy may be a lawyer or law school graduate or he may simply be a public customer with no legal training -- the FINRA Arbitration Decision does not provide such details. Given his pro se status, he should get some applause for having extracted a $30,000 settlement from Merrill Lynch.Also, online FINRA records as of November 3, 2014, indicate that in a pro se capacity, Elhamrawy filed an arbitration Statement of Claim in October 2007 in Alaa Elhamrawy, Claimant, vs. Online Brokerage Services, Inc., Respondent (FINRA Arbitration 07-02867, October 12, 2008) seeking $8,754.52 in compensatory damages and $43,772.60 in punitive damages in connection with alleged negligence, failure to execute trade, and unauthorized trading pertaining to options. The FINRA Arbitration Panel dismissed all charges.Online resources as of November 3, 2014, indicate that Elhamrawy represented himself in a pro se capacity in Elhamrawy v. USAA Investment Management Company et al (US District Court of Massachusetts, 1:13-cv-11133-JC) filed: 05/08/2013; terminated: 02/26/2014. The Court granted Defendant's Motions to Dismiss and confirmed the arbitration award. See:
- Plaintiff Elhamrawy's Reply To Motion To Dismiss, and
- Defendants' Reply In Support of the Motion to Dismiss
PERSONAL NOTE FROM BILL SINGER: You really, really want to read the above Replies. As in, you don't want to miss some of the jaw-dropping allegations and assertions.
Release Me, Can't You See
On March 24, 2014, the Panel heard oral argument on Respondent Merrill Lynch's January 2, 2014, Motion to Dismiss. By Order dated April 15, 2014, the Panel granted Respondent's Motion to Dismiss and ordered Claimant to pay all of the forum fees and the reasonable attorneys' fees and costs incurred in this matter, since the date that the claim was filed. Respondent was ordered to submit a affidavit setting forth the hourly rate for all attorneys involved in this matter along with paid incurred costs.
On May 27, 2014, Respondent notified FINRA that it had dismissed its Counterclaim without prejudice, which Claimant accepted.
You'd Be A Fool To Cling To Me
The FINRA Arbitration Panel dismissed Claimant's claims in their entirety pursuant to FINRA Rule 12504(a)(6)(A):
12504. Motions to Dismiss(a) Motions to Dismiss Prior to Conclusion of Case in Chief. . .(6) The panel cannot act upon a motion to dismiss a party or claim under paragraph (a) of this rule, unless the panel determines that:(A) the non-moving party previously released the claim(s) in dispute by a signed settlement agreement and/or written release; or . . .
Additionally, the Panel denied Claimant's motion" to completely drop attorneys' fees," and ordered him to pay to Respondent $5,780.80 in attorneys' fees as provided for in the General Release. Additionally, Claimant was ordered to pay $1,500 in costs.
Bill Singer's Comment:ARBITRATORS' REPORTThe American rule provides that each party is responsible for paying its own attorneys' fees and costs unless otherwise provided by statute or contract. An award of fees and costs against Claimant in this manner is warranted because the claim was the subject matter of a General Release executed by the Claimant pursuant to which the Claimant agreed to indemnify the Respondent for any loss or damage including attorneys' fees for asserting a released claim.
FINRA arbitration panels often give pro se public customer litigants a lot of leeway when it comes to pleadings, discovery, and the conduct of a hearing.
If you ask lawyers for many industry litigants, the courtesies extended to customers representing themselves is often excessive and frequently borders on improper.
If you ask the pro se customers, they will complain about:
- the outrageous costs of retaining a lawyer,
- that they couldn't retain a lawyer and were forced to represent themselves because the industry respondent stole all of their money, and
- that because arbitration now has too many esoteric legal rules and requirements, it involves overwhelming costs and expenses.
Frankly, there's much merit on both sides of the issue.
When I am confronted with a pro se public customer (be that as a potential client or adversary), the words "amateur hour" frequently come out of my mouth.
If it's someone who wants to retain me, they frequently believe that they have reached a point where they have exhausted their ability to competently handle their case any further and are now reluctantly trying to find a way to afford a lawyer. As I review what is handed to me by such a client, I'm usually perplexed by the mess that they have caused with inept pleadings, sins of commissions or omissions, and the scorched earth that they have left behind after pissing off their adversaries or arbitrators. Good luck trying to forge a meaningful settlement with that inheritance! Similarly, if there was some merit in the case that might have warranted taking the matter on a contingency fee, the self-help launch and pursuit of the case often damages things to such an extent that many lawyers will now only take it on an hourly-fee basis.
If the pro se party is an adversary, I am frequently emboldened to offer less dollars via settlement than if I am dealing with a savvy public customer's lawyer; or, frankly, I may simply figure that it makes more sense to roll the dice and see how the case plays out during a hearing. Of course, being adverse to such a public customer Claimant has its own set of issues, not the least of which is the need to avoid beating up on the individual and running the risk of invoking the arbitrators' ire or engendering inappropriate sympathy for the customer.
Some public customers would definitely be better served by at least seeking the counsel of a public customer's lawyer. Claimant Elhamrawy, for example, might have been warned by a lawyer that he was running a very real risk of being deemed in breach of a settlement contract by filing a claim against a previously released party and that the penalty for such conduct could be an award against him of damages, costs, and fees. A lawyer's bill for that advice may have been a few hundred bucks. The consequence of not seeking such advice appears to have been about $7,281 awarded by the Elhamrawy panel against the pro se customer.