FINRA Arbitrator Sanctions No-Show Public Customer Lawyer

November 26, 2018

When it comes to FINRA public customer arbitrations, you sort of expect that the respondent brokerage firm and its registered representatives will put up a spirited defense. The thing with "spirited," however, is that it sometimes takes on the hue of hardball -- replete with excessive motions, foot draggin', and whatever tricks a given lawyer has in his or her bag. Similarly, you sort of expect that the claimant customer will be eager to get a hearing date, and will show up on time and at the appointed place. In a recent FINRA arbitration, we are confronted with the oddity of no-show claimants and their lawyer. Even more puzzling, when a beleaguered FINRA arbitrator sanctioned those parties for their failures to appear, the beneficiary stockbroker pulled another vanishing act of his own. It's all very bizarre. Some might say comical. Others may say infuriating. 

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in November 2015 and as amended thereafter, public customer Claimants Charles and Linda Martin asserted churning; unsuitability; unauthorized trading; negligence; breaches of contract and fiduciary duty; misrepresentation; and failure to supervise in connection with in their account and their investments, in part, in Virnetx Holding Corp., Virnetx Call Options and Vringo, Inc Claimants  sought $70,442.51 in damages; punitive damages, costs, and fees. In the Matter of the FINRA Arbitration Between Charles Martin and Linda Martin, Claimants, vs. National Securities Corporation, Dieter H. Huber, Kieran J. Loughran, Mark Harry Goldwasser, Kay Alison Johnson, and Joseph P. Carrara, Respondents  (FINRA Arbitration 15-03213, November 15, 2018).

Respondents NSC, Huber, Loughran, Goldwasser, Johnson, and Carrara generally denied the allegations and asserted various affirmative defenses. An expungement was requested for Respondents Goldwasser and Johnson.

The Parties and Their Representation

The FINRA Arbitration Decision offers the following representation of the parties:

For Claimants Charles Martin and Linda Martin: Hilton Wiener, Esq., Law Office of Hilton Wiener, Boca Raton, Florida.

For Respondents National Securities Corporation ("NSC"), Dieter H. Huber ("Huber"), Mark Harry Goldwasser ("Goldwasser"), and Kay Alison Johnson ("Johnson"): Paul A.Lieberman, Esq., Eaton & Van Winkle LLP, New York, New York.

For Respondent Kieran J. Loughran ("Loughran"): Paul A. Lieberman, Esq., Eaton & Van Winkle LLP, New York, New York until on or about December 27, 2016; thereafter, Matthew N. Fiorovanti, Esq., Giordano, Halleran & Ciesla, Red Bank, New Jersey, for the purpose of  expungement representation only.

Respondent Joseph P. Carrara ("Carrara") appeared pro se.

*FINRA recorded the appearance of Claimants' counsel at the time of filing of the Statement of Claim. The counsel's representation of Claimants may have ended with the parties' settlement. Please see the Other Issues Considered and Decided section of this Award for information on whether Claimants' counsel appeared at the expungement hearing. 

Respondents Goldwasser, Johnson, NSC, and Huber Settle

Claimants notified FINRA that they had settled with Respondents Goldwasser, Johnson, NSC, and Huber, and that they had dismissed with prejudice all claims against those respondents. Accordingly, the sole FINRA Arbitrator made no decision as to any claims against said respondents. Following motion practice, the arbitration continued as against Respondents Carrara and Loughran.

Moving Along

The Claimants filed a Motion for Sanctions alleging, among other things, that Respondents Loughran and Carrara had failed to comply with the discovery Order dated December 8, 2017. In opposing the Motion, Respondent Loughran asserted that he had complied with the Order by producing all documents in his possession, custody and control. In his own Cross-Motion for Sanctions, Respondent Loughran asserted that Claimants had disregarded their obligations under the Order. Respondent Carrara did not file a response to Claimants' Motion for Sanctions. The FINRA Arbitrator denied Claimants' Motion for Sanctions, and deferred to the evidentiary hearing the ruling on Respondent Loughran's Motion for Sanctions.

Respondnet Loughran Settles

In April 2018, Claimants and Respondent Loughran filed a notice of settlement and requested that the file remain open in order for the Arbitrator to consider the expungement request. 

The arbitration proceeded solely against pro se Respondent Carrara.

Arbitrator's Order

Following an August 1, 2018 evidentiary hearing, the sole FINRAn Arbitrator entered the following Order:

1) EVIDENTIARY HEARING BACKGROUND, CONDUCT OF HEARING, AND ORDER OF DISMISSAL OF CLAIMANTS' CLAIMS WITHOUT PREJUDICE AGAINST RESPONDENT, JOSEPH CARRARA: This evidentiary hearing was a rescheduled hearing following a telephonic scheduling conference in which all parties and Claimants' counsel participated. The August 1-3, 2018, dates were fully agreed upon and an Order was entered rescheduling the hearing for these dates. Due to Claimants' age and health, the hearing was relocated by agreement, and confirmed in the Scheduling Order, to Miramar Beach, Florida. As is their standard practice, and prior to the August 1, 2018, start of the hearing, FINRA sent standard reminder notices to all parties/counsel. At the request of the Arbitrator, on July 20,,2018, the FINRA Case Administrator sent another specific email again inquiring if the parties intended to go forward on the scheduled date. Claimants' response on July 24, 2018 by email was "Claimant intends to move forward." On August 1, 2018, the Arbitrator was present in the hearing conference room of Regus Conference Center/Sandestin at 8:35 a.m., and Respondent Carrara arrived at 8:45 a.m., waiting in the business lobby. At 9:15 a.m., the Arbitrator called Claimants' counsel's office and left a message on voicemail, then the Arbitrator notified FINRA that neither Claimants nor their counsel were present. FINRA made repeated calls and emails to Claimants' counsel, without success. (As of today, it does not appear that Claimants' counsel has returned any of the messages/emails left with him in this matter.) At approximately 10:45 a.m., the evidentiary hearing was opened. 

Without any witnesses or evidence from Claimants in their case in chief, the Arbitrator concluded Claimants' presentation of evidence and requested that Respondent Carrara open his defense to the claims. Respondent Carrara made a verbal Motion to Dismiss the claims in the absence of any evidence or proof. Under the authority of Rules 12504 and 12603 of the Code ("Hearings -- Failure to Appear. If a party fails to appear at a hearing after having been notified of the time, date and place of the hearing, the panel may determine that the hearing may go forward, and may render an award as though all parties had been present:), the Arbitrator granted Respondent Joseph Carrara's Motion, dismissing all claims of Claimants without prejudice against Respondent Carrara and subject to the further provisions of this Award. Following the Arbitrator's dismissal, the Arbitrator entered a verbal Order of costs and monetary sanctions against Claimants, Charles Martin and Linda Martin, which are detailed hereinbelow. Following the verbal sanctions Order, the evidentiary hearing was concluded at 12:05 p.m.  

2) ORDER AND AWARD OF COSTS AND MONETARY SANCTIONS AGAINST CLAIMANTS, CHARLES MARTIN AND LINDA MARTIN, JOINTLY AND SEVERALLY: This Arbitrator was troubled by the lack of respect shown to FINRA, the parties, the Arbitrator, and the arbitration process itself, by Claimants counsel's failing to appear, failing to respond to multiple messages/emails, and failing at any time to indicate he would not be appearing at this Evidentiary Hearing (which, not incidentally, was relocated to Miramar Beach, Florida, solely for his client's convenience due to their age and health). All others involved -- FINRA, Respondent Carrara, and the undersigned Arbitrator -- incurred unnecessary expenses and lost time in this matter. Under these circumstances, the Arbitrator is awarding monetary sanctions. FINRA Rule 12212 of the Code provides: "Sanctions. (a) The panel may sanction a party for failure to comply with any provision in the Code, or any order of the panel or single arbitrator authorized to act on behalf of the panel. Unless prohibited by applicable law, sanctions may include, but are not limited to: * Assessing monetary penalties payable to one or more parties; * Precluding a party from presenting evidence; * Making an adverse inference against a party; * Assessing postponement and/or forum fees; and * Assessing attorneys' fees, costs and expenses. (c) The panel may dismiss a claim, defense or arbitration with prejudice as a sanction for material and intentional failure to comply with an order of the panel if prior warnings or sanctions have proven ineffective." Under the authority of Rule 12212 of the Code, the following Order and Award of costs and monetary sanctions is entered: 

A. Forum and hearing session fees/costs: It is Ordered that all forum and hearing fees, and associated costs for holding the evidentiary hearing in Miramar Beach, Florida, are assessed 100% against Claimants, Charles Martin and Linda Martin, jointly and severally. 

B. Monetary Award of Sanctions in Favor of Respondent Joseph Carrara: It is Ordered that Respondent, Joseph Carrara, file with FINRA on or before Friday, August 10, 2018, a sworn descriptive list ("List") of all costs he incurred related to his FINRA filing fees, legal fees, and all travel-related costs associated with his travel from New Jersey to Florida (airfare, rental car, lodging, meals, etc.) ("sworn" meaning signed before a Notary Public, after being sworn as to the content listed thereon). The List will be filed on the DR Portal and forwarded to Claimants' counsel at the time of filing; however, no response nor opposition to the List may be filed, as the record of this matter will be closed upon that filing. The total amount of the List will become, at filing, an Order and Award in that amount reflected in the Award in favor of Respondent Joseph Carrara, and against Claimants, Charles Martin and Linda Martin, jointly and severally.

No . . . we're not done. 

Award of Sanctions Rescinded

The sole FINRA Arbitrator dismissed Claimants' claims without prejudice as against Respondent Carrara. Despite having won an award of sanctions in his favor, Respondent Carrara failed to comply with the Arbitrator's directive to provide the above-referenced List of costs, and, in response the Arbitrator rescinded Carrara's award for costs. 

Expungement Requests Deemed Abandoned

As to the requested expungements, the Arbitrator deemed that Respondents Goldwasser and Johnson had abandoned their requests and no determination was made. 

Loughran Expungement

The Arbitrator held an expungement hearing for Respondent Loughran at which Claimants' counsel participated and contested the requested relief. Ummm . . . yes, the lawyer who didn't show up for the plenary hearing against Respondent Carrara did put in an appearance, brief as it proved to be, during the expungement hearing against Respondent Loughran. 

The Arbitrator recommended the expungement of Claimants' complaint from the Central Registration Depository records ("CRD") of Respondent Loughran pursuant to a Rule 2080 finding that the claim, allegation, or information is factually impossible or clearly erroneous, and is false. The Arbitrator offered the following rationale:

A comparison of the Statement of Claim against the actual case documents and Respondent Loughran's sworn testimony clearly indicate that the Statement of Claim is a "boilerplate" claim alleging non-specific and various theories of recovery against Respondent Loughran which do not stand up under closer examination. Further, although Claimants' counsel did appear to give an opening statement in opposition to the expungement request, he chose not to remain on the line and cross examine Respondent Loughran during the expungement hearing. Further, he offered no evidence in rebuttal. It is noted that this is the same counsel who failed to attend the evidentiary hearing against the sole remaining Respondent Carrarra (despite his email assertion that he would be present), leading to those claims being dismissed without prejudice at the hearing in August 2018. 

The testimony and review of the evidence presented at the expungement hearing support the conclusion that the claims asserted against Respondent Loughran are both "clearly erroneous", "false", and, in some instances, "factually impossible" and should be expunged because Respondent affirmatively disproved each and all allegations in the Statement of Claim, through his testimony and exhibits introduced during the hearing. Specifically, Claimants' account opening documents reflected that Claimants had investment objectives of speculation and growth, and that they advised Respondent Loughran that the money they were investing was "play money" and only a small portion of their retirement investments. 

The documentary evidence relied upon in reaching this recommendation for expungement are the 400+ pages of documents which were attached to the Motion seeking expungement and which were reviewed in detail during the sworn testimony of Respondent Loughran. This sole arbitrator found those documents fully dispositive and were also supported by the uncontroverted and sworn testimony of Respondent Loughran at the expungement hearing, which was found to be credible.

Charges and Fees

The following charges and fees were assessed on a joint and several basis:

Claimants the Martins: $975 FINRA Filing Fee; $225 postponement fee; $450 postponement fee; $225 postponement fee; $225 postponement fee; $225 postponement fee; $300 last minute cancellation fee ; and $2,925 hearing session fees

Respondent NSC: $1,100 FINRA Member Surcharge; $2,250 Member Process Fee

Respondent Loughran: $450 hearing session fee

Respondents Huber and Loughran: $450 hearing session fees

Respondent Loughran and Carrara: $225 postponement fee; $225 postponement fee $225 postponement fee; $300 last minute cancellation fee; $1,575 hearing session fees

Respondents NSC, Huber and Loughran: $225 postponement fee 

Respondents NSC, Huber, Loughan, Johnson, and Goldwasser: $450 hearing session fees

Bill Singer's Comment

Compliments to FINRA Arbitrator Mark A. Myers for a persuasive Decision; and for pointedly expressing his outrage:

This Arbitrator was troubled by the lack of respect shown to FINRA, the parties, the Arbitrator, and the arbitration process itself, by Claimants counsel's failing to appear, failing to respond to multiple messages/emails, and failing at any time to indicate he would not be appearing at this Evidentiary Hearing (which, not incidentally, was relocated to Miramar Beach, Florida, solely for his client's convenience due to their age and health). All others involved -- FINRA, Respondent Carrara, and the undersigned Arbitrator -- incurred unnecessary expenses and lost time in this matter. . .

Unfortunately, having vented his spleen via awarding monetary sanctions to Respondent Carrara, I can only imagine Arbitrator Myers' disgust when Carrara failed to file the List setting forth the various fees and costs he incurred. A pox on both your houses!