Surprise, Surprise, Surprise In FINRA Intra-Industry Defamation Arbitration

August 27, 2021

Given my advanced age and decades of lawyering, there isn't much that surprises me anymore. Be that as it may, I came across a FINRA intra-industry arbitration in which an associated person was pitted against another associated person, a non-associated person, and a non-associated company. Get yer scorecards here! At the heart of the dispute was an apparently nasty break-up with allegations of defamation. The former employee won. The former employee lost. It's a long story. There's a surprising twist involved. Read about it below.

Case In Point

In a FINRA Arbitration Statement of Claim filed in July 2020, associated person Claimant Womack asserted anticipatory breach and breach of contract; defamation (libel and slander); intentional interference with contractual relationships; and invasion of privacy and dissemination of private information. Claimant sought in excess of $10 million in compensatory and punitive damages plus costs and fees. In the Matter of the Arbitration Between James A. Womack, Jr., Claimant, v. Luke McKelvy, Jennifer McKelvy, and McKelvy Wealth Management, LLC  (FINRA Arbitration Award 20-02252)

Respondent Jennifer McKelvy is not a member or associated person of FINRA and did not file an Answer, sign a Submission Agreement, or voluntarily submit to arbitration. Therefore, the Panel made no determination with respect to the claims against her. 

Respondent McKelvy Wealth Management is not a member or associated person of FINRA and did not file an Answer, sign a Submission Agreement, or voluntarily submit to arbitration. Therefore, the Panel made no determination with respect to the claims against the company. 


Respondent Luke McKelvy generally denied the allegations, asserted various affirmative defenses, and filed a Counterclaim in which he asserted breach of contract; breach of implied covenant of good faith and fair dealing; fraud; negligent misrepresentation; constructive fraud; unfair and deceptive trade practices; computer trespass/conversion; and tortious interference with contract. Counterclaimant McKelvy sought in excess of $1 million in compensatory, punitive, and treble damages plus interest, costs and fees. 

The Lawyers

The FINRA Award indicates the following "Representation of Parties":

For Claimant James A. Womack, Jr.: Michael E. Ciochina, Esq., Watson Bailey Ciochina, LLP, Asheville, North Carolina.

For Respondent Luke McKelvy: Connie M. Fickel, Esq. and Hakop Stepanyan, Esq., Lewis Brisbois Bisgaard & Smith, LLP, Los Angeles, California.

Covid Teleconference Hearings

The FINRA Award characterizes the underlying dispute as relating to a Buy-Sell Agreement of Purchase/Sale of Practice between Claimant Womack and Respondent Luke McKelvy. Respondent McKelvy filed a Motion for Virtual Final Hearing, which was consented to and the evidentiary hearings were conducted via teleconference. 

Motion for Sanctions

During the hearings phase, Respondent McKelvy filed a Motion for Entry of Sanctions Against Claimant and Claimant's counsel, which was denied by the FINRA Arbitration Panel except for the request for monetary sanctions in the form of attorneys' fees and forums fees, which the Panel deferred until the Award. 


The FINRA Arbitraiton Panel found Respondent Luke McKelvy liable for defamation and ordered him to pay to Claimant Womack $5,000 in compensatory damages.

But not so fast, we're not done yet. Additionally, the Panel ordered as follows:

Claimant and Claimant's counsel represented to the Panel that Claimant was not using a script or notes while testifying during the evidentiary hearing, which was later determined to be untrue. The Panel is therefore awarding sanctions against Claimant. As such, Claimant is liable for and shall pay to Respondent Luke McKelvy a monetary sanction in the amount of $10,000.00. Though the Panel does not have jurisdiction to award sanctions against counsel, the Panel believes that Claimant's counsel was largely responsible for this misconduct.

Bill Singer's Comment

Didn't see that last part comin'. Wow. And wow again.

Just doin' the basic math, lemme get out my calculator here, we got a $5,000 defamation award to Claimant Womack, you sure as hell don't see that everyday, and then we got a $10,000 sanction against Claimant Womack for using script/notes while testifying, and, okay, that's $5,000 minus $10,000, and, ummm, you carry the 5 and then, what, oh, maybe use the square root, and . . . damn, my calculator not's working. Then again, nothing is working lately, right? In any event, the sum total of Claimant Womack's litigation seems to be that he emerges from over two years of arbitration with a minus-$5,000 for his efforts. Ouch!

Somewhat lost in the FINRA Award's explanation of the $10,000 sanction for script/notes usage is what actually transpired. Pointedly, we are told that Claimant and his counsel "represented to the Panel that Claimant was not using a script or notes . . ." Okay, but why wasn't that apparent to the arbitrators and respondents? I'm guessing that it's because the hearings were not conducted "live" with everyone sitting around a table but were conducted in the fashion of these Covid days -- namely by teleconference. Accordingly, maybe the script/notes at issue were not within the framing of Respondent's video camera? Which would mean that someone may have noticed that Respondent was looking down at something while testifying but that same someone could not quite see what was being looked at because it was out of the frame?

Frankly, I don't like being titillated in a FINRA Award. Not the place for it. I would have preferred that the Panel say what it means and means what it says. It is such a rare, unusual, and virtually unheard of accusation that a claimant and his counsel misrepresented the used of a script or notes during testimony that the allegations should have been parsed out in far more detail. To be even more blunt, it's just not an acceptable rationale for three arbitrators to explain the basis of imposing a $10,000 sanction on a prevailing claimant because something "was later determined to be untrue."