Angry Variable Annuity Customer Vexatiously Pursues His Legal Rights

July 6, 2021

As the United States District Court for the Southern District of Ohio ("SDOH") brings the curtain up on Act I, Scene I, sometime in 2012, Houston Byrd Jr. engaged Wayne Farnsworth, Jr., Brad D. Farnsworth, and Valmark Securities, Inc. to provide him with financial advice and investment services; and in furtherance of that relationship, Byrd wound up purchasing an AIG variable annuity in his Individual Retirement Account. Sadly, the relationship among the parties became contentious, and on April 28, 2017, Byrd was informed that no further investments services would be rendered to him and, in essence, take your business elsewhere. As to the annuity policy, Byrd was advised the the carrier/fund family would directly service his needs and should be contacted directly by him. Houston Byrd, Jr., Plaintiff, v. Christopher Cook, et al., Defendants (Opinion and Order, United States District Court for the Southern District of Ohio, 21-CV-2288)

Disgruntled Customer Contacts FINRA

Unhappy with the manner in which he had been treated, Byrd contacted the Financial Industry Regulatory Authority ("FINRA") but apparently got nowhere with the self-regulatory-organization's initial response and with the follow-on efforts of FINRA's Office of the Ombudsman/Assistant Director Christopher Cook. From Byrd's perspective, FINRA poured fuel on the fire. 

SIDE BAR: The SDOH Opinion/Order asserts in part on Page 3 that [Ed: footnote omitted; emphasis added]:

Mr. Byrd sought relief from the Financial Industry Regulatory Authority ("FINRA"). Mr. Byrd was apparently dissatisfied with FINRA's response, both initially and when he elevated his complaint to the Office of the Ombudsman, headed by Mr. Cook. (See ECF No. 4, 16.) . . .

As far as I know, Cindy Foster has been heading FINRA's Office of the Ombudsman since 2009, so I'm not all that clear as to what Byrd had alleged about Christopher Cook's role or what SDOH about what the court had taken judicial notice.

SDOH Complaint and Its Shortcomings

Byrd filed a federal lawsuit against FINRA's Cook, and included in the caption Brad D. Farnsworth. The Defendants filed Motions to Dismiss and a Motion to Declare Plaintiff a Vexatious Litigator. 

More often than not, you have to read a ways into a court's Opinion or Order if you want to figure out how the court is going to decide. Not in Byrd v. Cook. The very first sentence under "Background" on Page 2 of the Opinion/Order telegraphs just about everything we need to know:

Proceeding without assistance of counsel, Mr. Byrd filed this suit in the Common Pleas Court of Licking County on April 7, 2021. (See ECF No. 4.) Before summarizing the allegations, the Court must note that Mr. Byrd's Complaint is nearly incomprehensible. It lacks organization and structure, which renders the content difficult to interpret. The Complaint also includes several emails-some of which appear to have been later annotated -- in no discernable order and without context. Despite its shortcomings, the Complaint does make clear that Mr. Byrd's claims center around the allegedly unauthorized purchase of an annuity contract for his individual retirement account ("IRA").

Pro Se Leeway

In Byrd v. Cook, SDOH is mindful of Byrd's self-representation and notes that:

Although a pro se litigant is entitled to a liberal construction of his pleadings and filings, he still must do more than assert bare legal conclusions, and the "complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory." . . .

at Page 5 of the SDOH Opinion/Order

The Cook Claims

When considering Byrd's claims against FINRA's Cook, SDOH does not pull its punches:

With respect to the claims against him in his individual capacity, it is striking that the Complaint scarcely mentions Mr. Cook. The Complaint excerpts a November 16, 2020 email Mr. Cook authored, which states, in full: 

Mr. Byrd, 

There is no rule governing the confidentiality - this is a FINRA internal policy. In line with that policy, FINRA does not provide other information such as dates/times of contact. However, it appears you already have much of that in your past emails. 


Christopher Cook 

(ECF No. 4, 4) (emphasis omitted). The only other mention of Mr. Cook is in a January 21, 2021 email, in which Mr. Byrd expresses his dissatisfaction with FINRA's handling of his dispute. (Id., 7.) In short, the Complaint does not allege that Mr. Cook engaged in any conduct that might form the basis of a claim-let alone a claim sounding in fraud. Though it contains the conclusory allegation that "FINRA . . . failed to ethically investigate and patently fabricated the truth," the Complaint fails to allege any facts in support of that conclusion. As a result, Mr. Byrd's Complaint fails to assert any plausible claims against Mr. Cook in his personal capacity. . . . 

at Page 6 of the SDOH Opinion/Order

But Byrd did not merely allege causes of action against Defendant Cook in his "personal" capacity but also in his "professional" capacity.  Sadly, those charges fared no better than the personal allegations:

[F]irst, as this Court has recently explained, "FINRA is immune 'from suit for conduct falling within the scope of the SRO's regulatory and general oversight functions.' " Mohlman v. Fin. Indus. Regulatory Auth., Inc., No. 3:19-cv154, 2020 WL 905269, at *3 (S.D. Ohio Feb. 25, 2020) (Rose, J.) (quoting D'Alessio v. New York Stock Exch., Inc., 258 F.3d 93, 105 (2d Cir. 2001)) (collecting cases), aff'd on other grounds, 977 F.3d 556 (6th Cir. 2020). What's more, "FINRA's regulatory immunity extends to its employees acting within the 'aegis of the Exchange Act's delegated authority.' " Id. at *4 (quoting P'ship Exch. Sec. Co. v. Nat'l Ass'n of Sec. Dealers, Inc., 169 F.3d 606, 608 (9th Cir. 1999)). See also Standard Inv. Chartered, Inc. v. Nat'l Ass'n of Sec. Dealers, Inc., 637 F.3d 112, 115 (2d Cir. 2011) ("There is no question that an SRO and its officers are entitled to absolute immunity from private damages suits in connection with the discharge of their regulatory responsibilities."); Hurry v. Fin. Indus. Regulatory Auth., Inc., No. CV-14-02490- PHX-ROS, 2015 WL 11118114, at *5 (D. Ariz. Aug. 5, 2015) (concluding that, because regulatory immunity derives from sovereign immunity, it extends to FINRA employees carrying out their duties).

at Page 7 of the SDOH Opinion/Order

The Farnsworth Claims

Defendant Farnsworth argues that Byrd's claims involving criminal statutes must fail because there is no "private right of action" attendant to those criminal actions. Given that this is something of a bedrock legal principle, the Court made short shrift of the issue and found that Byrd could not proceed under the cited criminal statutes in a civil action for money damages.

Next, Farnsworth argued that the remaining claims raised by Byrd were time barred by the five year federal and Ohio statutes of limitation pertaining to the sale of securities; and similarly barred by the Ohio four-year limitation on common tort claims. SDOH notes that Byrd commenced his federal lawsuit on April 7, 2021, and that the underlying annuity transaction involved a 2013 purchase and emails dating up to July 14, 2014 -- dates that are beyond the four- and five-year time limits. 

Vexatious Litigator

Clearly, Byrd proved a formidable foe and a dedicated Plaintiff; however, Farnsworth argued to the Court that Byrd's zeal went too far and rose to the level of "vexatious":

[M]r. Farnsworth argues: Although obtaining dismissal of the Complaint would customarily be a satisfactory result, Mr. Byrd's prior history demonstrates that additional relief is warranted. . . . Mr. Byrd has turned pro se litigation into a hobby, and absent being deemed a vexatious litigator, will file objections, motions for reconsideration, and countless other filings that would require Mr. Farnsworth to respond and require this Court to devote needless resources to this case.

(ECF No. 7, 4.) He points out that, since 1999, Mr. Byrd has filed at least fifteen pro se civil actions in state and federal courts-all of which have been dismissed as meritless or for Mr. Byrd's failure to prosecute. (See ECF Nos. 7-1-7-44.) Underscoring Mr. Farnsworth's argument, Mr. Byrd responded to an email containing courtesy copies of motion filings by threatening to file another sanctions motion based on improper removal of the case, and "a complaint to the United States Courts, Circuit Justice Brett Kavanaugh, or FBI Corruption Division[.]" (ECF No. 22, PAGEID # 712) (emphasis omitted).

at Page 10 of the SDOH Opinion/Order

In granting Farnsworth's Motion to Declare Plaintiff a Vexatious Litigator, SDOH enjoined Byrd from;

filing any new actions without either (i) submitting a statement from an attorney licensed to practice in this Court or the State of Ohio certifying that there is a good faith basis for the claims Mr. Byrd seeks to assert, or (ii) tendering a proposed complaint for review by this Court prior to filing. He is further ORDERED to include the captions and case numbers of all of his prior actions with any complaint filed in this or any other court.

at Page 11 of the SDOH Opinion/Order

Accordingly, SDOH granted Cook's and Farnsworth's Motions to Dismiss; granted Farnsworth's Motion to Declare Plaintiff a Vexatious Litigator; overruled Byrd's objections; and denied Byrd's Motion for Sanctions and Motion to Strike.