FINRA Arbitration Has More In and Out Than A Porn Film

May 29, 2020

In a recent FINRA arbitration, the public customer didn't exactly go above and beyond in terms of timely pressing his case. The case caption started with five respondents in. Then three were out. Then we had a non-attorney representative in. Then the non-attorney out. Then an attorney in. then an attorney out. Then a pro se claimant in. Then the pro se claimant seems to have been out when another attorney came in, who then seems to, maybe have gone out. Frankly, there's more in-and-out in this litigation than in most porn films. 

2018 FINRA Arbitration Claim

In a FINRA Arbitration Statement of Claim filed in September 2018, public customer Claimant Best asserted excessive trading; churning; unsuitable transactions; respondeat superior; and failure to supervise. Claimant sought at least $43,851.36 in compensatory damages plus punitive damages, interest, fees, and costs. In the Matter of the Arbitration Between Joseph Best, III, Claimant/Counter-Respondent, v. Columbus Advisory Group, Ltd; Michael Owen Bunsis; Michael Patrick McNulty; Michael Patrick Murphy; Timothy Alan Wright, Respondents  -and- Columbus Advisory Group, Ltd; Michael Owen Bunsis; Michael Patrick McNulty; Michael Patrick Murphy, Counter-Claimants (FINRA Arbitration Decision 18-03337)

Respondents generally denied the allegations, asserted various affirmative defenses, and with the exception of Respondent Wright, filed a Counterclaim asserting breach of contract, fraud, and malicious prosecution.  Although notified of the FINRA Arbitration, Respondent Wright did not file an Answer or Uniform Submission Agreement. 

March 2019: Claimant's Non-Production

On March 22, 2019, Respondents moved to compel the production of documents by Claimant, who did not respond; however, Claimant apparently requested and received several ensuing extensions to produce. As you may imagine, Claimant never produced, and on May 3, 2019, the sole FINRA Arbitrator ordered said production within 10 days and hit Claimant Best with motion costs. 

April 2019: Three Respondents Out, Two Still In

On April 12, 2019, Claimant dismissed Respondents Bunsis, McNulty, and Murphy without prejudice, who all withdrew their counterclaims without prejudice. We're now down to Best v. Columbus and Wright.

July 2019: Hearing Adjourned

As to the July 30, 2019, hearing that was supposed to be held, well, hey, the remaining parties stipulated to Claimant Best's request to adjourn on the 26th. Comes August 1, 2019, the parties agreed to proceed via FINRA's Special Proceeding for Simplified Cases, and, everyone now feeling warm and fuzzy, agreed to do the hearing by telephone.  Nah . . . you didn't really think it would end there, did you? On August 8th, the parties agreed to defer the hearing until October 1, 2019.

Non-Attorney Rep

At the outset of the arbitration, Claimant was "represented by a person who was not an attorney." Frankly, I would have thought that FINRA would have disclosed the identity of that initial Non-Attorney Representative under the "Representation of Parties" section of the FINRA Decision, but all that's set forth for Claimant Best is "At present pro se, Atlanta, Georgia." Making matters worse, the FINRA Decision presents us this with this tortured tale:

[O]n September 26, 2019, Claimant's Non-attorney Representative filed an Emergency Application to Adjourn the Hearing in order for Claimant to hire an attorney ("Motion to Adjourn"), since the Non-attorney Representative was planning to withdraw from the case. On September 27, Columbus filed an opposition and a motion for sanctions of dismissal and striking the Statement of Claim. By Order that same day, the Arbitrator granted the Motion to Adjourn and advised that Claimant's new representative must be an attorney licensed to practice in Georgia and must file an appearance within 21 days, otherwise Respondent's motion to dismiss would be granted. Claimant was assessed all related costs. On October 18, Claimant's Non-attorney Representative filed a notice withdrawing as Claimant's representative. On or about October 29, Claimant's new representative, an attorney, filed a notice of appearance ("Claimant's Attorney of Record").

September 2019: Hiring a Lawyer

On September 26, 2019, Claimant had a Non-Attorney Representative, who filed a Motion to allow Claimant to hire a lawyer. Why? Oh, you know, the Non-Attorney Rep was planning on withdrawing. How nice. The Arbitrator went along with the withdrawal but "advised" Claimant to get a licensed attorney to file an appearance within 21 days.Thereafter, the Non-Attorney withdraws and on October 29, 2019, we got a spanking new bona fide lawyer on the scene.

March 2020: The "Covid-19 situation"

As to that new lawyer, well, gee whiz, comes March 19, 2020, when the Special Proceeding is convened, that lawyer and his client Best didn't show up. Of course, we were sort of in the midst of the COVID pandemic at that point but, what the hell, right? As the FINRA Arbitration Decision explains:

[C]laimant's former Non-attorney Representative (who was supposedly withdrawn and supplanted in this case) appeared and advised that Claimant's attorney was not "feeling well, his son was sick, and Claimant was busy with his business due to the Covid-19 situation" and then requested a four-week postponement on Claimant's behalf. The Arbitrator noted that she was not Claimant's representative of record, and did not explain how she obtained this information, since FINRA, the Arbitrator and Respondent had no knowledge of these facts. Columbus opposed the postponement request. The Arbitrator advised the parties that he would issue a decision on the request, and closed the Special Proceeding.

March 2020: The Record of Record on the Record

On March 25, 2020, the Arbitrator issued an Order whereby he found that the Non-Attorney Rep did not represent Claimant because  . . . well, in part, because an Attorney of Record was still on the record as the attorney of record -- my, what an impressive bit of tautology. Anyone remember the Department of Redundancy DepartmentNot unexpectedly, the FINRA Arbitrator issued in the March 25th Order this understandably testy finding:

Mutually scheduled evidentiary hearings have been postponed twice before at Claimant's request. Claimant has not complied with discovery obligations, despite orders to do so and despite sanctions including assessed fees and potential dismissal of Claimant's claims. The pattern in this case evinces a clear disinclination to prosecute Claimant's claims and a material and intentional failure by Claimant to comply with obligations imposed by the Code and orders entered that he do so. 

Accordingly, Claimant's case is dismissed with prejudice pursuant to [Rule] 12212(c).

SIDE BAR: FINRA Code of Arbitration Procedure for Customer Disputes

Rule 12212: 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.
(b) The panel may initiate a disciplinary referral at the conclusion of an arbitration.

(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.


Although Claimant Best may be high and dry, the Counter-claimants were still still pressing their claims, and the Arbitrator was prepared to render a Decision on those claims because they were already in the record along with Claimant's opposition. Accordingly, on March 31, 2020:

[C]olumbus filed a submission in support of its Counterclaims and requested an award of attorneys' fees of $16,350.00, expert witness fees of $2,500.00, and FINRA forum fees of $3,450.00, and projected that its costs for confirming and collecting the award would be $5,000.00. Claimant did not file a response.

April 2020: The Attorney In-and-Out Play

But, hold on, what's a Shaggy Dog story with a shedding, shaggy dog? As if things weren't so far off the road and into a ditch that you didn't need to call a tow truck, we come across this additional bit of silliness:

On April 7, 2020, Claimant's Attorney of Record filed a notice withdrawing as Claimant's representative. That same day, another attorney filed a Notice of Limited Appearance ("Limited Attorney") advising that he appeared on Claimant's behalf "for the limited purpose of filing a [m]otion for [r]econsideration and to oppose the counterclaim." He further requested that any award with respect to all prior representation reflect the appropriate representative and exclude him. That same day, Claimant filed a motion to reconsider the order dismissing his claims, and a motion to stay the decision on Columbus' Counterclaims until the motion to reconsider was decided ("Motions to Reconsider and to Stay"). On April 8, Columbus filed an opposition to Claimant's motions. The same day, the Claimant filed a reply in support of his Motions to Reconsider and to Stay.

Trailing in the fourth quarter, Claimant Best needs a quick, desperate score, and he opts for the old in-and-out play with seconds left on the clock. As the ball was hiked, the Non-Attorney Rep was in. Then the Non-Attorney was out. Then the admitted Attorney was in. Then the admitted Attorney was out. Then the Non-Attorney was almost in but not quite. Then the admitted Attorney was out but a new admitted Attorney was in. There's more in-and-out in this FINRA arbitration then in a porn film.

FINRA Arbitrator Provides Rationale

Apparently somewhere in the self-quarantining discomfort of his home during the onslaught of the COVID pandemic, the sole FINRA Arbitrator dismissed with prejudice Claimant Best's claims against Respondents Columbus and Wright as a sanction for Claimant's non-compliance with FINRA Arbitration Code Rule 12212(c); and the Arbitrator also dismissed Columbus' Counterclaims. The Arbitrator issued a pithy rationale, which, in part, stated:

Claimant seeks reconsideration of an order of March 25, 2020 dismissing his claims with prejudice ("Dismissal Order"). The Dismissal Order was based, not on the merits of the case, which cannot be determined, but on a finding that Claimant materially and intentionally failed to comply with discovery obligations, despite orders that he do so and sanctions for his non-compliance. No determination can be made on the merits of any claims or defenses because this case has not been heard, the parties' witnesses and respective experts have not been questioned, and Claimant, a key witness, has not been examined. Claimant's case has been scheduled to be heard on the merits three times and Claimant has postponed the Special Proceeding twice and failed to appear the third time. 

After the Dismissal Order, only Columbus' Counterclaims remained in the case until Claimant filed Motions for Reconsideration and to Stay. In the motion for reconsideration, Claimant's Limited Attorney argued that the Dismissal Order should be vacated because Claimant had a right to an attorney for the Special Proceeding convened on March 19, 2020. However, Claimant had an attorney at the time and the Special Proceeding could not take place precisely because neither Claimant nor Claimant's Attorney of Record appeared, without prior notification to FINRA, the Arbitrator or Respondent. 

The entire record, except for other arbitration awards not material to this case attached to pleadings, has been carefully reviewed in detail and reconsidered. For the reasons set out in the Dismissal Order, the decision to dismiss Claimant's claims with prejudice is affirmed and Claimant's motion for reconsideration is denied. Since the motion for reconsideration has been decided, Claimant's motion to stay the decision on the Counterclaims is moot. 

Columbus' Counterclaims are based on the grounds that Claimant's claims were frivolous. However, there has been no finding that Claimant's claims were frivolous, because that issue has not been tried on the merits. It is clear that if this case had proceeded normally, Columbus would have incurred expert costs and attorneys' fees. However, whether more fees and costs than necessary have resulted due to Claimant's actions cannot be determined without an opportunity for evaluation after a hearing. Accordingly, Columbus' Counterclaims are dismissed. . . .