Wipe Out! A FINRA Arbitration Hit By Two Groups

May 31, 2017

Two fighters enter the ring but only one will leave the winner. That's how it goes . . . except. Except sometimes it's a tie or both are disqualified or both get TKO'd or both get knocked out or the lights go out and they stop the bout with no winner or loser. Similar thing recently happened at a FINRA intra-industry arbitration. The former employer firm sued the crap out of its two former employees. Pretty nasty allegations with lots of bucks being sought. The former employees were not simply going to back up and throw soft jabs. No, the respondents counter-claimed, which is the arbitration version of counter-punching. By the time the final bell rang, it was a bloody mess. Which reminded BrokeAndBroker.com Blog publisher Bill Singer of Roulette and the hit song "Wipe Out." Which reminded Bill of Zero and Double Zero and of the Surfaris and the Ventures. Which prompted Bill to offer what he thinks was a brilliant comment on the the FINRA Arbitration. Which, when you read it, you may not quite see whatever brilliance Bill saw. All of which may remind you that Bill has a tendency to consume far too much coffee early in the morning when he edits the final version of each day's blog.

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in August 2015, and as amended thereafter, Claimant Commerce Street Capital, LLC, asserted breaches of contract and fiduciary duty; misappropriation of trade secrets under the Texas Uniform Trade Secrets Act; tortious interference with contracts; and business disparagement. In the Matter of the FINRA Arbitration Between Commerce Street Capital, LLC, Claimant / Counter-Respondent vs.  Eric Rosiak and T. Clark Akers,Respondents / Counter-Claimants  (FINRA Arbitration 15-02125, May 19, 2017).

The causes of action were in connection with Respondents Rosiak's and Akers' July 24, 2015, and August 27, 2015 respective allegedly voluntary resignations from the firm. Claimant alleged that the Respondents began working for FBR & Co. (apparently their next employer) in violation of their Employment Agreements and improperly procured Claimant's proprietary and confidential information without its knowledge or approval.

In addition to declaratory and injunctive relief, Claimant sought compensatory and punitive damages, interest, costs, and fees. In its post-hearing submission, Claimant requested $2,904,600.00 in compensatory damages, $217,699.77 pre-award interest; $654,433.50 attorneys' fees; $194,664.43 costs and expenses, and 5% simple interest from the date of the Award until paid in full.


Respondents Rosiak and Akers denied the allegations and asserted various affirmative defenses. Rosiak and Akers each filed a Counterclaim asserting tortious interference with contract; Texas Uniform Trade Secrets Act (the basis for attorneys' fee for bad faith claim of misappropriation); breach of contract; quantum meruit; unjust enrichment; and violation of FINRA Rule of Conduct 2010. The Counter-Claimants alleged that their Employment Agreement is overbroad and unenforceable.

In their post-hearing submission, Counter-Claimants sought $207,828.70 compensatory damages or $222,828.70 for direct sales Commissions; carried interest on various funds; declaratory judgments for the the Business Opportunities Clause, Confidential Information Clause, and Non-Solicitation Clause provisions of their Employment Agreements: permanent injunction, $100,307.89 costs , unspecified interest, and $1,590,625.67 attorneys' fees.


The FINRA Arbitration Panel denied Claimant's claims and Counter-Claimants' claims.

Bill Singer's Comment

Wow . . . a lot of punches and counter-punches for nothing. It's a wipe-out for everyone. Of course it's less of a wipe-out for the two Respondents, who, after all, were sued and successfully defended but you have to keep in mind that they also filed Counter-Claims and those were denied too. As with surfing, though, if you wipe out you still get to paddle out for another wave. I'm thinking, however, that Claimant may simply call it a day and head for shore.

In keeping with the lack of content and context in many FINRA Arbitration Decisions, this one runs true to form. We don't know what actually prompted this fight, we don't know how the bout went, and we don't understand why the judges ruled it a No Decision. Otherwise, the FINRA Arbitration Decision was a very helpful document that provided us with illuminating insights into this employment dispute.

I manged to obtain just a bit more information from FINRA's online BrokerCheck files: Rosiak was first registered in 2007 and was associated with Commerce Street Capital from August 2009 to July 2015; and Akers was first registered in 2009 and was associated with Commerce Street Capital from April 2013 to August 2015. Not much but at least it's something by way of context.

Even though this Arbitration ended with a No-Decision for the Claimant and the Counter-Claimants, the house of FINRA still made some cash. There was a $1,700 initial claim filing fee charged to Claimant and two $1,575 counterclaim filing fees charged to the Counter-Claimants; a $1,900 member surcharge and $3,750 member process fee charged to Claimant; an $800 discovery motion fee equally divided among the three parties; some 14 pre-hearing and hearing sessions, which incurred $14,400 in fees that were pretty much divided equally among the three parties. Something like $25,700 for FINRA in a case without any winners. Sort of like in roulette when folks are betting Red or Black but the green Zero or Double Zero comes up. It's the house's edge. Even when the bettors wipe out, the house still manages to make a buck.

All of which reminds me of the song "Wipe Out," and the fact that hit versions of that song were performed by the Surfaris and the Ventures. Personally, I'm in the Surfaris camp but as a novice guitar player in the early '60s, it's pretty tough to not acknowledge the Ventures, who technically covered the Surfaris' hit but there are those who, to this day, say, no way, the Ventures put out the better version, which I'm not saying is correct or incorrect but simply repeating the contentions even though I liked both versions but, you know, before Clapton and Hendrix there was the Ventures and it's not like you want to denigrate the group that brought us "Walk Don't Run," and, another thing, they pretty much covered every damn guitar instrumental song that was out there, so after 60 or so years, you sort of forget whether it was originally a Ventures hit or you heard it on one of their compilation albums.. Was "Pipeline" a Chantays or Ventures hit? Was "Telstar" a Tornados or Ventures? Was "Apache" a Shadows or Ventures hit? You know what I'm sayin? No? Oh well, it was the Sixties and television was broadcast in black-and-white unless you went to your rich uncle's house with the expensive RCA color television but you were usually over at his house on a Sunday and your father, uncle, and all the other males were watching a golf tournament with some guy whispering about what was going on and it wasn't like Willie Mays or Mickey Mantle were coming to bat but no one was going to let you watch American Bandstand while this Arnold Palmer or Jack Nicklaus guy was hitting a ball off a tee, and, I sort of liked that Chi Chi Rodriguez guy because he had a fun first name and I wondered who that Slammin' Sammy guy was because I thought Slammin' was a neat nickname even if they spoke about him like he used to be a big shot but had faded with age, but even if you begged to switch the channel to American Bandstand, why bother because American Bandstand was on in the afternoon during the week until they moved it to Saturday but, big deal, because you were only at your uncle's house on Sunday when the program wasn't on anyway; and the thing about American Bandstand was that no one was really playing live but merely syncing and for godsakes, how many more times were they going to make you watch Paul Revere and the Raiders; and god forbid you asked someone a question while they were watching golf on Sunday because they would shush you because the on-air commentators were whispering about how tough the next shot was and then they would cut to a commercial for cigarettes recommended by doctors or a cartoon about beer.