Former Ameriprise Rep Files Lawyer Malpractice Complaint After Losing FINRA Promissory Note Arbitration

SIDE BAR: The FINRA Arbitration Award discloses under "Representation of Parties":

For Claimant Ameriprise Financial Services, Inc.: Ryan S. Nichols, Esq. and Scott A. LaPorta, Esq., Shumaker, Loop & Kendrick, LLP, Sarasota, Florida. 

For Respondent Jeffrey R. Silverman: James J. Ecceleston, Esq. and Roman B. Sankovych, Esq., Ecceleston Law, LLC, Chicago, Illinois. 

For several decades, James J. Eccleston from the Eccleston Law firm of Chicago has earned a reputation as one of the industry leading practitioners
https://www.ecclestonlaw.com/employment-and-security-attorneys/james-j-eccleston. The only two references to "Ecceleston" in the FINRA Arbitration Award misspelled both the lawyer's name and that of his law firm (wrongly adding an "e" after the second "c" and before the "l". Given James Eccleston's prominence and that of his law firm, the double error is pretty sloppy quality control by FINRRA -- oh, sorry, that should be FINRA with only one "R." 

SIDE BAR: The FINRA Arbitration Award in favor of Claimant Ameriprise adds up to the penny to Claimant's at the close of the hearing request for damages, costs, and fees:

$358,891.03 + $211,821.30 + $60,544.33 = $631,256.66 

If you subtract the $275,471.40 compensatory damages sought in the initial filing of the Statement of Claim from the $631,256.66 Award, contesting the claims and pursuing his own counterclaims cost Respondent Silverman an additional $336,015,73 (exclusive of his own costs/fees). 

Ameriprise hired Silverman in January 2016. On January 25, 2016, Silverman executed a Transition Promissory Note (the "Note") pursuant to which Ameriprise loaned him $280,190 at an interest rate of 2.05% compounded annually. Declaration of Christopher D. Warren ("Warren Decl."), Ex. B ("TPN")  ¶ 1. The Note provided that "[i]f [Silverman's] employment with Ameriprise terminates for any reason including . . . resignation . . . the unpaid balance of the principal sum, plus accrued interest, shall be due and payable as of the date of [the resignation]." TPN ¶  2. Moreover, "[i]n the event of a default by [Silverman] on this loan, or the obligations described herein, the interest rate on unpaid principle [sic] and interest shall convert to the maximum rate allowable by applicable law for both the post default, pre-judgment period, as well as any period post-judgment as allowable by law." TPN ¶ 1. 

The Note also provided that "any dispute arising between [Silverman and Ameriprise] (including but not limited to [Silverman's] default on the loan) shall be subject to arbitration pursuant to the FINRA Code of Arbitration Procedure for Industry Disputes." TPN ¶ 6. Additionally, it contained a fee-shifting clause stating that Silverman "agrees to pay all costs of collection, whether or not suit or action is filed hereon, in the event that payment is not made in accordance with the provisions of this Note. The costs of collection shall include but are not limited to reasonable attorney's fees for collection efforts before commencing any legal proceeding, in arbitration, at trial, and on appeal. If . . . arbitration is commenced, the amount of such reasonable attorney's fees shall be fixed by the arbitrator . . " TPN ¶ 9. New York law governed the Note. TPN ¶ 10. 

Silverman resigned from Ameriprise in August 2017. On August 25, 2017, Ameriprise commenced an arbitration against Silverman by filing a statement of claim for breach of the Note and unjust enrichment with FINRA's Office of Dispute Resolution. Declaration of Scott. A. La Porta ("La Porta Decl."), Ex. 2 at 1. Ameriprise sought, among other things, $275,471.40 in compensatory damages, attorneys' fees and costs, and pre- and post-award interest. La Porta Decl., Ex. 2 at 2. . . .

As shown below, under both the FAA and New York law, the Award should be vacated because (1) the Arbitrators acted in knowing, willful, and manifest disregard of the law; (2) the Arbitrators exceeded their powers, or so imperfectly executed them, or both, that a mutual, final and definite award upon the subject matter submitted was not made; and (3) the Arbitrators failed to make a full and proper disclosure of their conflicts to the Respondent. 

The Arbitrators knowingly and willingly manifestly disregarded the law in at least three instances. First, the Arbitrators manifestly disregarded the terms of the promissory note ("Note" attached as Exhibit "B") wherein the parties only agreed that Respondent Silverman would "pay all costs of collection . . . of this Note. The costs of collection shall include but are not limited to reasonable attorney's fees for collection efforts." See Exhibit "B" ¶9. Emphasis added. 

Second, the Arbitrators knowingly and willingly manifestly disregarded the terms of the Promissory Note Acknowledgement Form ("Acknowledgment" attached as Exhibit "C") wherein the parties agreed that "[i]n the event that [Respondent] is in default with respect to the Note, [Respondent] hereby irrevocably authorizes and empowers FINRA to enter an award against [Respondent] on an expedited basis and in favor of [Petitioner] . . . with collection fees and cost of suit." Emphasis Added 

Finally, the Award must also be vacated because the Arbitrators exceeded their powers, or so imperfectly executed it, or both, that the mutual, final, and definite award upon the subject matter submitted was not made because the Award gives an illogical and irrational award based upon flawed interpretation of contractual provisions agreed to between the parties. The Award in the underlying FINRA matter is wholly irrational because, as further discussed below, the Arbitrators based the Award on an inconsistent construction of the contractual provisions in the Note (Exhibit "B") and the Acknowledgement Form (Exhibit "C"). This inconsistent Award is contradictory to the plain English meaning of the Note and Acknowledgement, as well as clearly drafted language plainly showing the parties intended that Respondent only be responsible for legal fees in relation to the collection of the Note, not legal fees for the entire litigation regarding claims completely unrelated to the Note.

SIDE BAR: Silverman was represented at SDNY by the Galbraith Law Firm (apparently having replaced Eccleston Law). 

SIDE BAR: An interesting bit of information provided in the Appellate Division Decision is that Jeffrey R. Silverman was "an attorney licensed to practice law in New York and a certified financial planner." We're also informed that Silverman represented himself pro se before the New York State Appellate Division. 

[I]n the third and fourth causes of action, the plaintiff failed to adequately allege a breach of the applicable standard of care. The "selection of one among several reasonable courses of action does not constitute malpractice" (Rosner v Paley, 65 NY2d 736, 738), and an attorney may not be held liable for " 'the exercise of appropriate judgment that leads to an unsuccessful result' " (Bua v Purcell & Ingrao, P.C., 99 AD3d 843, 846-847, quoting Rubinberg v Walker, 252 AD2d 466, 467). 

The fifth cause of action failed to adequately plead that, but for the defendant's alleged negligence, the plaintiff would have obtained a more favorable outcome. The plaintiff merely alleged that had the defendant shared with him information imparted by Ameriprise's attorney concerning the low rate of success of challenges to note collection proceedings, he would have insisted on settlement discussions (see Katsoris v Bodnar & Milone, LLP, 186 AD3d at 1506; Janker v Silver, Forrester &Lesser, P.C., 135 AD3d 908, 909; see also Bauza v Livington, 40 AD3d 791, 793). "Conclusory allegations of damages or injuries predicated on speculation cannot suffice for a malpractice action" . . ..

The plaintiff merely alleged that had the defendant shared with him information imparted by Ameriprise's attorney concerning the low rate of success of challenges to note collection proceedings, he would have insisted on settlement discussions . . ..

Silverman alleged that if his lawyer (Eccelston Law) had told him that the Ameriprise's lawyer (Shumaker, Loop & Kendrick) told Eccleston Law that Silverman's defense against repayment of the promissory note balance had a low rate of success, then Silverman would have insisted on settlement discussion. 

Silverman alleged that Eccelston Law was negligent because Eccelston Law allegedly did not tell him that Shumaker, Loop & Kendrick told Eccelston Law that Silverman's defense had a low rate of success; and, but for said negligence, Silverman alleged that he would have insisted on settlement discussion, and, if said settlement discussion had transpired, then Silverman further alleged he would have obtained a more favorable outcome, presumably as a result of settling for less damages than were imposed by the FINRA Arbitration Panel inclusive of interest, costs, and fees.

• FINRA
• Ameriprise
• Shumaker Loop & Kendrick
• Eccelston
• Promissory Note
• New York Supreme Court
• Malpractice
• Attorneys' Fees
• Settlement
• BrokeAndBroker
• Bill Singer