breach of fiduciary duty, negligence and gross negligence, failure to supervise and control, breach of contract, and violations of federal and state securities laws, NYSE and NASD conduct rules. The causes of action relate to Royal Bank of Scotland (RBS) stock.In the Amended Statement of Claim. Claimant asserted the following causes of action: breach of fiduciary duty, negligence and gross negligence, failure to supervise and control. breach of contract, negligent retention of Respondent Mulcahy, and violations of federal and state securities laws, NYSE and NASD conduct rules.
In light of the fact that this matter was in fact settled and that all parties so advised the panel and FINRA in writing, (which a Florida tribunal had found as fact in a proceeding these respondents commenced) there is no need to delve into the troubling allegations of misconduct by the arbitrators. This award must be vacated.The respondents may not succeed by arguing that public policy favors deference to arbitral awards. There can be no legitimate public interest in respecting arbitrations of disputes that have already been settled - the argument turns public policy on it s head.
[H]ad the Panel abided by FINRA Rules, as FINRA did, and acknowledged that this matter had been settled , the parties could have avoided this needless litigation.The respondents' refusal to abide by the settlement, particularly in light of prior Florida litigation, has resulted in a frivolous waste of counsel's time and efforts , as well as a waste of the scarce resources available to New York's Unified Court System.
Defendant John Fiorilla does not dispute that he signed a promissory note with plaintiff Citibank and failed to make payments on the note upon plaintiff's demand. Rather, he claims that the note is subject to rescission on the ground that he was fraudulently induced into executing it based on misrepresentations made by Citibank and its affiliates, Citigroup Financial Products, Inc. and Citigroup Global Markets, Inc., that the note would be secured by the value of an investment he made on behalf of his trust in a fund called UBP Selectinvest ARV LP (UBP Investment or UBP Position). Fiorilla further claims that he decided to invest in the UBP Position based on misrepresentations made by the Citibank entities that the investment was low risk. However, any allegation of reasonable reliance on the alleged misrepresentations concerning the riskiness and volatility of the UBP Investment was contradicted by the detailed representations and warranties in the UBP "Confirmation" and subsequent Amendment Agreement, both signed by Fiorilla on behalf of the trust, disclaiming reliance on any oral or written representations concerning the investment and any guarantees made concerning the fund's performance (see Citibank v Plapinger, 66 NY2d 90, 94-95 ; Danann Realty Corp. v Harris, 5 NY2d 317 ; Champion Mtge. Co. v Elmore, 5 AD3d 140 [1st Dept 2004]). We note that, contrary to his assertion, Fiorilla is a highly sophisticated individual who has a law degree and has managed and co-founded various firms in the finance industry (see Shea v Hambros PLC, 244 AD2d 39, 47 [1st Dept 1998]).
[T]he arbitrators manifestly disregarded the law by failing to enforce the settlement that respondent and petitioner Citigroup Global Markets, Inc. entered into on April 29, 2012. Notably, petitioners provided the relevant law regarding the enforcement of settlement agreements (see Kowalchuk v Stroup, 61 AD3d 118 [1st Dept 2009]) in their motions to enforce the agreement, but the arbitrators ignored the law and denied the motions without explanation (see Wien & Malkin LLP v Helmsley-Spear, Inc., 6 NY3d 471, 481 , cert dismissed 548 US 940 ). "Although arbitrators have no obligation to explain their awards, when a reviewing court is inclined to hold that an arbitration panel manifestly disregarded the law, the failure of the arbitrators to explain the award can be taken into account" (Matter of Spear, Leeds & Kellogg v Bullseye Sec., 291 AD2d 255, 256 [1st Dept 2002] [internal quotation marks omitted]).
Ouch! Not only did App Div find that the "arbitrators manifestly disregarded the law by failing to enforce the settlement," but, adding insult to injury, the arbitrators did so "without explanation." Yet another in a long line of judicial complaints about FINRA's dubious policy of un-explained decisions as the forum's default protocol.
[A]lthough this action has no connection to France, respondent commenced an ex parte proceeding in that country to enforce the vacated award, and, on or about March 30, 2016, without notification to petitioners, the French court recognized the vacated award under French law and issued writs for the seizure of property belonging to petitioner Citigroup Global Markets, Inc.'s overseas affiliates and counterparties. It is undisputed that respondent did not inform the French court that the award had been vacated by a New York court.
Throughout this litigation, Fiorilla has pursued a relentless campaign to circumvent this Court's final judgment by attempting to re-litigate already decided matters. He has prolonged this litigation and compelled CGMI to expend significant resources, both in New York and in France. Both the French proceedings and the OSC were frivolous and completely without merit. Thus, the record establishes that Fiorilla's outrageous conduct merits the imposition of sanctions, and an award of reasonable attorneys fees.Fiorilla's frivolous conduct included making inaccurate and incomplete factual assertions in the French proceedings. To obtain ex parte recognition of the Award in France, Fiorilla submitted a copy of the Award, and omitted the critical fact that this Court had already vacated the Award and entered a final judgment, which was affirmed on appeal. Fiorilla even used the already vacated Award to attempt to seize CGMI's assets in France.Fiorilla's subsequent OSC to vacate the Award was also frivolous. This is not a simply a circumstance where an argument failed to persuade the Court (see Gelobter v Fox, 90 AD3d 829, 832 [2nd Dept 2011]). Rather, Fiorilla and his counsel rehashed arguments in duplicative proceedings that had already been deemed to lack legal merit by this Court and on appeal. Fiorilla cited no new arguments or evidence in support that warranted reconsideration. Mr. Fiorilla. persisted in this conduct despite repeated warnings by this Court and the First Department (see Tr 10/11/16 11:20-21, 24:24; Citigroup Global Markets, Inc., 151 AD3d at 666.The Court wholly rejects Fiorilla's assertion that his conduct was not in bad faith. Fiorilla's opposition to the motion largely ignores the factual record and repeated admonishments, both by this Court and by the First Department pertaining to his conduct.
In 2010, Fiorilla commenced a FINRA arbitration against petitioners. In April 2012, with express authorization from Fiorilla, his attorney, Toskes, settled with petitioners in exchange for $800,000. The parties confirmed the settlement in writing with FINRA. Fiorilla changed his mind and directed Toskes to proceed to arbitration. Toskes refused and Fiorilla fired him. Successor counsel for Fiorilla persuaded FINRA that the parties had not settled.Fiorilla filed a disciplinary complaint against Toskes with the Florida Bar, alleging that Toskes had lied about the FINRA settlement. The Florida Bar dismissed the complaint, finding, in effect, that Toskes had acted truthfully and ethically in settling the matter. Citigroup notified FINRA of the Florida Bar ruling, but FINRA still refused to enforce the settlement. The matter proceeded to arbitration, ending with an $11 million award in Fiorilla's favor.
[I]n May 2014, Supreme Court, finding that Fiorilla had in fact settled his claim against petitioners for $800,000, rendered judgment vacating the award and awarding Fiorilla $800,000. In April 2015, this Court unanimously affirmed, finding that the arbitral panel had manifestly disregarded the law in failing to enforce the settlement. In so holding, this Court found unavailing Fiorilla's arguments that the arbitrators, and not the courts, were the sole adjudicators of whether the parties had settled, and that Citigroup's attorney had misled Supreme Court into thinking that a Florida court, rather than the Florida Bar, had found that the parties had settled the FINRA arbitration . . .
[I]nstead, the most that can be said on the existing paper record is that the signing of the order to show cause signified the court's agreement that, if everything in the papers were accurate, it would be possible to grant Fiorilla the relief he sought. Indeed, the frivolousness of the papers is not apparent on their face. To the contrary, their frivolousness becomes evident only when taken in context, and only with a knowledge of the history of the parties' dispute. . .
As noted, Supreme Court imposed sanctions of $20,000 on Fiorella, and directed him to pay them to the Lawyers' Fund. We modify to delete the provision for payment to the Lawyers' Fund and substitute therefor a provision directing that the $20,000 be deposited with the Clerk of the Supreme Court, New York County, for transmittal to the State Commissioner of Taxation and Finance" (Martinez v New York City Tr. Auth., 218 AD2d 643, 643 [2d Dept 1995]; see 22 NYCRR § 130-1.3).
We note that Supreme Court's award of $20,000 in sanctions exceeds the $10,000 maximum "for any single occurrence of frivolous conduct" (22 NYCRR § 130-1.2). On our independent review of the record, we find that an award of sanctions of $10,000 is appropriate for each of the two discrete instances of frivolous conduct presented; that is, for the Citigroup II application and the French enforcement proceedings. With that finding, we exercise our discretion to modify the award to an aggregate total of $20,000 (see David Z. Inc. v Timur on 5th Ave., 7 AD3d 257, 257-258 [1st Dept 2004]).
Citibank, N.A. v Fiorilla 11/22/2011 App Div, 1st DeptCitibank, N.A. v Fiorilla 10/02/2014 App Div, 1st Dept 121 AD3d 435Citibank, N.A. v Fiorilla - John Leopoldo Fiorilla Trust 04/14/2015 App Div, 1st Dept 2015 NYSlipOp 69967(U)Citigroup Global Markets Inc. et al. v John Leopoldo Fiorilla etc. 08/20/2019 App Div, 1st DeptCitigroup Global Mkts., Inc. v Fiorilla 08/01/2018 Other CourtsIn re Citigroup Global Mkts., Inc. v Fiorilla 06/25/2015 App Div, 1st DeptMatter of Citigroup Global Mkts., Inc. v Fiorilla 04/09/2015 App Div, 1st Dept 127 AD3d 491Matter of Citigroup Global Mkts., Inc. v Fiorilla 06/29/2017 App Div, 1st Dept 151 AD3d 665Matter of Citigroup Global Mkts., Inc. v Fiorilla 12/19/2019 App Div, 1st DeptMatter of Citigroup Global Mkts., Inc. v John Leopoldo Fiorilla, etc.10/20/2015 Court of AppealsMatter of Citigroup Global Mkts., Inc. v John Leopoldo Fiorilla, etc.10/24/2017 Court of Appeals