Sound of Silence From A FINRA Arbitration That Says Nothing About Anything Despite Awarding $650,000

November 22, 2021

There are times when you read something and you think it says something. Then you re-read that same document and realize that you inferred quite a bit that was not stated or implied. Then your re-read that document, yet again, and realize that it doesn't actually say anything and, in truth, is pointless. All of which brings us to today's featured FINRA Arbitration Award.

Case in Point(less)

In a FINRA Arbitration Statement of Claim filed in February 2019, associated person Claimant Price asserted defamation; violation of Florida's Unfair and Deceptive Trade Practices Act; and tortious interference with contract. The FINRA Arbitration Award asserts that the "causes of action relate to Claimant's alleged wrongful termination for his whistleblower activity." In the Matter of the Arbitration Between Craig Price, v. Raymond C. Klahne and William J. Gilcher, Respondents (FINRA Arbitration Award 19-00415)

Respondents Klahne and Gilcher generally denied the allegations and asserted affirmative defenses. 

In July 2020, the Panel granted Respondents' motions for Discovery sanctions, which was reduced in half according to the Panel's finding that Respondents had not fully complied with an Order to produce the invoice for requested attorneys' fees. 

The FINRA Arbitration Panel found Respondents Klahne and Gilcher jointly and severally liable to Claimant Price, and ordered them to pay to him $650,000 in compensatory damages.

Bill Singer's Comment

As lousy a FINRA Arbitration Award as I have read in recent years because it offers no meaningful content or context. If you doubt my appraisal, please read the actual Award and see if you learn anything that rises to the level of a meaningful explanation or disclosure.

For starters, just what the hell was $650,000 awarded for as compensation? 

Was the Award rendered for defamation? 

For violation of Florida's Unfair and Deceptive Trade Practices Act? 

For Tortious Interference with Contract? 

Was there any wrongful termination of Claimant for alleged whistleblowing? 

Three FINRA arbitrators awarded $650,000 in compensatory damages without offering some comment on why -- or for what. If the Panel was concerned about disclosing some aspect of Claimant's alleged whistleblowing, then at least state that in the Award. Oh, and another thing, what was the relationship, if any, among Price, Klahne, and Gilcher -- read the Award and see if you can figure that one out. For a bonus point, see if you can learn where the Claimant and Respondents worked.

Not finding answers to my questions in the FINRA Arbitration Award, I searched online FINRA BrokerCheck disclosures as of November 22, 2021, which state under the heading "Employment Separation After Allegations" that UBS "discharged" Claimant Price on February 29, 2016, based upon allegations that:

Mr. Price was terminated after allegations were raised that he failed to disclose to the Firm his receipt of information which appeared to be material and non-public relating to a low-priced security in which he and his clients engaged in transactions; violated Firm policy by communicating with third party analysts and circulating research regarding the same low-priced security in which he and his clients invested; and violated several other Firm compliance policies. 

In response to UBS' disclosure, Claimant Price offered the following "Broker Statement":

Mr. Price denies all allegations against him, and furthermore, he has filed a whistleblower retaliation lawsuit against his ex-employer for wrongful termination under the Florida Whistleblower Act. In addition, Mr. Price has filed a claim against his ex-partners at his prior employer for defamation under FINRA arbitration. As of September 30, 2021, both cases are ongoing.

As if the FINRA Arbitration Panel's Award wasn't puzzling enough as to what it did and didn't address, consider the Syllabus in Craig D. Price, Plaintiff, v. UBS Financial Services, Inc., Defendant (Opinion, United States District Court for the District of New Jersey ("DNJ"), 17-CV-01882 / April 19, 2018)
USCOURTS-njd-2_17-cv-01882-2.pdf :

Plaintiff Craig D. Price brings this action against UBS Financial Services, Inc. ("Defendant"), alleging claims of whistleblowing retaliation under the Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), 15 U.S.C. § 78u-6, and the Florida Whistleblower Act (the "FWA"), Fla. Stat. § 448.102. This matter comes before the Court on Defendant's motion to lift the Court-imposed stay of proceedings and dismiss Plaintiff's Dodd-Frank claim with prejudice. There was no oral argument. Fed. R. Civ. P. 78(b). For the reasons set forth below, Defendant's motion is GRANTED

As to DNJ's rationale for dismissing Price's case, the Court offers, in part, this rationale:

The Supreme Court was unequivocal in holding the following:

The question presented: Does the anti-retaliation provision of Dodd- Frank extend to an individual who has not reported a violation of the securities laws to the SEC and therefore falls outside the Act's definition of "whistleblower"? We answer that question "No": To sue under Dodd- Frank's anti-retaliation provision, a person must first "provid[e] . . . information relating to a violation of the securities laws to the Commission.

Digital Realty, 138 S. Ct. at 772-73 (citations omitted). It further noted that the "core objective of Dodd-Frank's robust whistleblower program . . . is to motivate people who know of securities law violations to tell the SEC." See id. at 777 (internal quotations and citations omitted). "In sum, Dodd-Frank's text and purpose leave no doubt that the term 'whistleblower' in § 78u-6(h) carries the meaning set forth in the section's definitional provision." Id. at 778. Consequently, "[t]he disposition of this case is therefore evident: [plaintiff] did not provide information 'to the Commission' before his termination, § 78u- 6(a)(6), so he did not qualify as a 'whistleblower' at the time of the alleged retaliation. He is therefore ineligible to seek relief under § 78u-6(h)." See id. 

The same outcome must follow here. Plaintiff does not allege that he reported any information to the SEC prior to his termination. His testimony to FINRA plainly does not meet the statutory requirement and he, therefore, is not a whistleblower under Dodd-Frank. Furthermore, any attempt to amend his complaint with facts stating that he disclosed information to the SEC after his termination would be futile. As the Supreme Court made clear, the purpose of Dodd-Frank whistleblower protections is to incentivize individuals like Plaintiff to come forward and provide information of securities law violations to the SEC. See id. at 777-78. Here, Plaintiff did not come forward until well after the fact of the alleged securities violations, his testimony to FINRA and his own termination. Plaintiff had ample time between when he first learned of the violations and his termination to report the misconduct to the SEC, but he chose not to. The Court, therefore, finds that Plaintiff does not meet the definition of "whistleblower" under Dodd-Frank. Accordingly, Plaintiff's Dodd-Frank claim is DISMISSED WITH PREJUDICE.

At Page 3 of the DNJ Opinion

Here we are in 2021 and the above DNJ Opinion is from April 2018, and yet, the FINRA Arbitration Panel couldn't find a way to address the status of Price's whistleblower claims -- or the substantive facts underlying Price's claims against the Respondents?

All of which prompts me, yet again, to wonder just what the arbitrators awarded damages for -- defamation?  If so, how difficult was it to just state that plainly? Of course, in order to engage in such plain-speaking, you would likely have had to set forth the substance of the defamation. Yeah, that ain't anywhere to be found in this Award. 

Frankly, it seems to me as if Price has been through more than enough in recent years and was owed the courtesy and professionalism of an Award that says what it means and means what it says.