FINRA Arbitration Combines Circular Logic With a Nested Loop and a Mobius Strip in Wage Dispute

In the Amended Statement of Answer and Counterclaim/Third Party Claim, Respondent requested that the Panel declare and find the following: the SightLine deal is covered by the Agreement and Claimant should pay Respondent all sums owed in accordance with the Agreement prospectively; Claimant and Third Party Respondent Easterly Capital, LLC violated the Massachusetts Wage Act, M.G.L. c. 149, §§ 148 and 150, when they deprived Respondent of wages due and owing; Claimant and Third Party Respondent Easterly Capital, LLC violated the Massachusetts Wage Act, M.G.L. c. 149, §§ 148 and 150, when they retaliated against Respondent for requesting his unpaid wages; Claimant and Third Party Respondent Easterly Capital, LLC misclassified Respondent as an independent contractor in violation of M.G.L. c. 149, § 148B; Claimant and Third Party Respondent Easterly Capital, LLC violated the Massachusetts Minimum Wage Law by their failure to pay Respondent during his employment; Claimant and Third Party Respondents are jointly and severally liable for the aforementioned violations of law; unpaid wages and expenses; mandatory treble damages; emotional distress damages; interest; costs; and, attorneys' fees,

[A]n award of $27,111,603.00, if the Panel finds him to be an "employee" under the Massachusetts Wage Act, or $11,615,365.00, if the Panel finds him to be an "independent contractor". 

[R]espondent Thomas R. Bassinger's Independent Contractor Agreement with Easterly Securities LLC does not apply to the joint venture between SightLine Partners LLC and Easterly Partners Group LLC.

The SightLine Joint Venture: 

The Independent Contractor Agreement between Easterly Securities LLC and Respondent/ Third Party Claimant Bassinger (the "IC Agreement") does not encompass the investment management and promote/carried interest fees earned by Easterly Partners Group LLC, pursuant to the joint venture with SightLine Partners LLC. The IC Agreement provides, in pertinent part, in Section 1 (a): Engagement of Independent Contractor: "The Company [hereinafter, Easterly Securities LLC] hereby engages the Independent Contractor as a limited agent of the Company to solicit purchases of certain securities and investments offered through the Company in its capacity as broker-dealer." Respondent's claim for investment management and promote fees related to the SightLine joint venture are outside of the scope of his engagement, as set forth in Section 1(a) of the IC Agreement and were not contemplated as part of his compensation by the Company, pursuant to Section 4(a) and Schedule A thereto. 

The SightLine joint venture involved the creation and management of private investment funds. The revenues from the joint venture were comprised of management fees and carried interest for investment advisory services provided by Easterly Partners LLC, and were not compensation for the sale of securities. Such management and carried interest fees were not paid to Easterly Securities LLC, but were paid to its parent, Easterly Partners Group LLC, which was not a party to the IC Agreement. Pursuant to the IC Agreement, Mr. Bassinger's entitlement to commissions was based on a percentage of Easterly Securities LLC's "Net Proceeds". "Net Proceeds" was defined with respect to any Transaction as : "(i) all net revenues received by the Company for the sale of Securities pursuant to an engagement agreement or placement agreement between the Company and an issuer, less (ii) unreimbursed out-of-pocket expenses of the Company related to the sale of such Securities; provided that, if any fees from a Transaction constitute Securities issued to the Company, then such fees shall only constitute Net Proceeds upon a sale or disposition of such Securities by the Company, the timing and manner of which such sale or disposition shall be determined by the Company (i.e., the applicable percentage commission will be payable when the Company receives cash in exchange for such Securities)." There were no engagement or placement agreements between Easterly Securities and the SightLine funds, which were the issuers of the securities. Accordingly, we find that there were no "Net Proceeds" related to the SightLine joint venture received by Easterly Securities on which Mr. Bassinger was entitled to commissions, pursuant to his IC Agreement. Additionally, we find that the issuance of Class B shares to Easterly Securities LLC pursuant to the Contribution and Services Agreement did not give rise to an entitlement to commissions to Mr. Bassinger under the IC Agreement. 

Although we find that the IC Agreement does not encompass the payment of commissions to Mr. Bassinger in connection with the SightLine joint venture, the Panel has determined that, in the interests of justice and equity, Mr. Bassinger should be paid an award of $308,686.00 as compensation for his introduction of Sightline to Easterly and his other efforts in connection with the SightLine joint venture. We also note that Mr. Bassinger previously was paid $141,313.90 by Easterly Partners Group LCC for SightLine management fees through Q1 2019, to which he was not entitled under the terms of the IC Agreement. 

Non-IC Originated Transactions: 

The Panel also finds that the IC Agreement does not afford Bassinger a right to 35% of all Net Proceeds from the sale of Securities by Easterly Securities LLC. Schedule A, paragraph 2, must be read in conjunction with the entire IC Agreement, and Sections 4(a) and 1(a), in particular. Section 4(a) of the IC Agreement, which governs the payment of compensation and expenses to Mr. Bassinger, states in pertinent part: "Independent Contractor understands that his right to earn a commission does not arise until such time as such transaction is Settled. "Settled" shall mean: (i) such commission income is generated and remitted to the Company with respect to any transactions with Covered Parties set forth in Schedule A, and (ii) the Company receives confirmation of cleared funds with respect to such commissions." Section 1(a) of the IC Agreement defines the terms of Mr. Bassinger's engagement with the Company: "The Company hereby engages the Independent Contractor as a limited agent of the Company to solicit purchases of certain securities and investments offered through the Company in its capacity as broker-dealer." 

Mr. Bassinger's claim for commissions for all of Easterly Securities LLC's Non-IC originated securities transactions under Schedule A, paragraph 2, would construe Schedule A, para. 2, without reference to the governing contractual provisions, rendering the language therein superfluous. Reading the IC Agreement as a whole, the Panel finds that Respondent's claim for Non-IC commissions from the revenues for all of Easterly Securities LLC's sales in which he did not participate would produce a result that is both commercially unreasonable and contrary to the reasonable expectations of the parties. 

Since the evidence adduced at the hearing demonstrated that there were no Non-IC originated securities transactions in which Mr. Bassinger participated, he is not entitled to commissions under this provision. 

Cerapedics Commission Holdback: 

The Panel has found that Mr. Bassinger is entitled to an award of the $150,000 in commissions earned in connection with the Cerapedics deal, withheld by Easterly Securities, LLC in violation of Section 4(d) of the IC Agreement, with applicable statutory interest from June 29, 2018. This award encompasses Mr. Bassinger's claim for any pay and benefits that were deducted from the Cerapedics commission by Easterly. 

Massachusetts Wage Act Claims: 

The Panel further finds that Mr. Bassinger was properly classified as an independent contractor and thus, the Massachusetts Wage Act does not apply to his claims for commissions at Easterly. The Panel has applied Massachusetts law, which requires that the presumption of employee status must be rebutted by an employer seeking to establish independent contractor status by proof of each of the following three prongs: (1) the independent contractor is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; (2) the service is performed outside the usual course of the business of the employer; and (3) the independent contractor is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed. 

In this regard, the Panel finds that Easterly Securities LLC and the Third-Party Respondents have met their burden of proof as to each of those elements: (1) Mr. Bassinger had autonomy in connection with his business dealings at Easterly and was supervised as required by securities regulations; (2) Easterly Securities LLC was set up to assist its parent company, Easterly Partners Group LLC, in raising capital for the affiliate funds that they managed as part of its investment advisory business, as its registered broker-dealer. In contrast, Bassinger's engagement was to sell securities pursuant to an engagement or placement agreement between Easterly Securities and an issuer, i.e., third-party capital raising, which was not a part of Easterly's core investment advisory business, and; (3) Mr. Bassinger was engaged to operate as an entrepreneur, using Easterly Securities' broker dealer platform to service his existing stable of clients, which were his and not Easterly's (See e.g., IC Agreement at Schedule B). Pursuant to Section 2(c) of the IC Agreement, Mr. Bassinger could have engaged in the performance of his customary securities business with another registered broker-dealer "in accordance with the policies and procedures of the Company, or alternatively upon receipt of written approval from the Company", as FINRA rules permit such arrangements. 

Retaliation: 

The Panel finds that Respondent has failed to prove his claim of retaliation under Massachusetts law.

Although we find that the IC Agreement does not encompass the payment of commissions to Mr. Bassinger in connection with the SightLine joint venture, the Panel has determined that, in the interests of justice and equity, Mr. Bassinger should be paid an award of $308,686.00 as compensation for his introduction of Sightline to Easterly and his other efforts in connection with the SightLine joint venture. We also note that Mr. Bassinger previously was paid $141,313.90 by Easterly Partners Group LCC for SightLine management fees through Q1 2019, to which he was not entitled under the terms of the IC Agreement. 

[R]espondent's claim for Non-IC commissions from the revenues for all of Easterly Securities LLC's sales in which he did not participate would produce a result that is both commercially unreasonable and contrary to the reasonable expectations of the parties. 

Since the evidence adduced at the hearing demonstrated that there were no Non-IC originated securities transactions in which Mr. Bassinger participated, he is not entitled to commissions under this provision. 

If Bassinger is acting as an IC, he's covered under the IC Agreement, but if he's not acting as an IC, then he's not covered under the IC Agreement because there wasn't any non-IC transaction in which Bassinger participated, and, as such, he's not entitled to non-IC commissions for not having participated in any non-IC transactions, which didn't arise anyway. 

In this regard, the Panel finds that Easterly Securities LLC and the Third-Party Respondents have met their burden of proof as to each of those elements: (1) Mr. Bassinger had autonomy in connection with his business dealings at Easterly and was supervised as required by securities regulations; (2) Easterly Securities LLC was set up to assist its parent company, Easterly Partners Group LLC, in raising capital for the affiliate funds that they managed as part of its investment advisory business, as its registered broker-dealer. In contrast, Bassinger's engagement was to sell securities pursuant to an engagement or placement agreement between Easterly Securities and an issuer, i.e., third-party capital raising, which was not a part of Easterly's core investment advisory business, and; (3) Mr. Bassinger was engaged to operate as an entrepreneur, using Easterly Securities' broker dealer platform to service his existing stable of clients, which were his and not Easterly's (See e.g., IC Agreement at Schedule B). Pursuant to Section 2(c) of the IC Agreement, Mr. Bassinger could have engaged in the performance of his customary securities business with another registered broker-dealer "in accordance with the policies and procedures of the Company, or alternatively upon receipt of written approval from the Company", as FINRA rules permit such arrangements. 

• FINRA
• Arbitration
• Easterly Securities
• Sightline
• Independent Contractor
• IC
• Declaratory Judgment
• BrokeAndBroker
• Bill Singer