If It Wasn't For Bad Luck, I Would Not Have No Luck At All in FINRA Arbitration

July 30, 2019

There's that wonderful lyric from the song "Born Under A Bad Sign" that laments if it weren't for bad luck, I wouldn't have no luck at all. A recent FINRA intra-industry arbitration pits a former AXA rep against his firm and two individuals. Throw into this dispute a bankruptcy petition (denied) and a $6.5 million demand for damages, and, well, you got a lot of bad signs but not much luck.

Case In Point

In a FINRA Arbitration Statement of Claim filed in October 2016 and as amended, associated person Claimant Feld asserted  negligent misrepresentation; fraudulent concealment; breach of fiduciary duty; negligence; tortious interference with business relationship; breach of implied duty of good faith and fair dealing; promissory estoppel; unjust enrichment; and conversion. In addition to compensatory damages, interest, costs, and fees, Claimant Feld sought the formation of a constructive trust in his favor for any ill-gotten gains.  At the close of the hearing, Claimant sought $6.5 million in actual damages. In the Matter of the Arbitration Between Jeffrey Feld, Claimant, v AXA Network, LLC, AXA Advisors, LLC, Hugo Castro, and Luis G. Chiappy, Respondents (FINRA Arbitration Decision 16-03169)  http://www.finra.org/sites/default/files/aao_documents/16-03169.pdf As set forth in part in the FINRA Arbitration Decision:

[T]he causes of action relate to Respondents' alleged misrepresentation by when Claimant was required, as a registered representative, to complete certain continuing education and licensing requirements to avoid the suspension and/or termination of Claimant's registration(s) and associate agreements.

Respondents generally denied the allegations and asserted various affirmative defenses.

2017 Bankruptcy Proceedings

Following Claimant Feld's filing of a Chapter 11 Notice of Bankruptcy in July 2017, the the United States Bankruptcy Court issued an Order on December 8, 2017, dismissing Claimant's bankruptcy petition and terminating the automatic stay; and, thereafter, Claimant elected to proceed with his FINRA arbitration.

Respondent Chiappy

Claimant withdrew with prejudice his claims against Respondent Chiappy during the evidentiary hearing and, accordingly, the FINRA Arbitration Panel made no determinations pertaining to Chiappy.

Moving Along

At the conclusion of Claimant Feld's case-in-chief, the FINRA Arbitration Decision asserts that:

[R]espondents AXA and Castro moved to dismiss all claims asserted against them on the basis that Claimant failed to make a prima facie case against them. Claimant objected and stated that he met all of the requirements of a prima facie case. The Panel granted the Motion in part and denied the Motion in part. Specifically, the Panel dismissed all claims against Respondent Castro, with prejudice, as set forth in the Award section below, and denied the Motion with respect to Respondent AXA. 


While the evidentiary hearing was underway, Respondents notified the Panel that they were requesting an expungement of the matter, and that Claimant did no object and, in fact, had agreed to the request. In response, the Panel informed the parties that:

"A review of FINRA's BrokerCheck Reports for these parties [Respondents Castro and Chiappy] did not reflect any disclosures for the Panel to consider expunging. Therefore, please provide the Panel with specific language Respondents Castro and Chiappy wish to have expunged and provide a copy of the relevant U4 and/or U5 records on which it appears." In their submission, Respondents AXA Network, LLC, AXA Advisors, LLC, Hugo Castro and Luis Chiappy, sought an order of expungement, inter alia, of "all references to [Respondents Castro and Chiappy] within any court records related to the State Court Lawsuit." 


The FINRA Arbitration Panel dismissed with prejudice Claimant's claims against Respondent Castro and denied the claims against the AXA Resondents. Further, the Panel denied the expungement requests of Respondents Castro and Chiappy.

Bill Singer's Comment

Now this is a case that we don't see everyday. As best I understand Claimant Feld's claims, he was arguing that Respondents had misrepresented the dates by which he was required to complete continuing education and licensing requirements in order to remain registered. Ummm . . . sure . . . okay. And what was the price-tag for the Respondents' alleged wrong advice? Claimant Feld was seeking $6.5 million in damages. That has a nice ring to it, no?

Clearly, Claimant Feld was not having a good run of luck, what with his becoming suspended for his apparent non-compliance with CE and licensing requirements and his filed but not discharged bankruptcy. Add into all those reverses the loss of his arbitration case, and, like the song says, if it wasn't for bad luck, Feld would have no luck at all.

Oh, one last thing, there's that interesting issue about the Respondents seeking expungement, and the Panel asking what do you want expunged, and the Respndents saying "all references" in court records, and the Panel apparently saying, not gonna happen -- we can't tell a court to expunge its records.

The FINRA Small Firm community must send a clear and unequivocal message to FINRA to "remain strictly neutral" when it comes to Small Firm politics.