Brokerage Firm Sues Former Stockbroker for Indemnity After Paying Customer Settlement

November 17, 2022

After receiving the other side's last-best-settlement-offer, a client says "no;" and then he tells his lawyer that he will fight on as a "matter of principle." Having heard that line before, the client's lawyer responds with the warning that "principle comes with interest." The client doesn't quite get the joke. Of course once you have to explain why something's funny, it isn't funny anymore. Speaking of something not be funny anymore, read about a recent FINRA arbitration in which a stockbroker declined to indemnify his former brokerage firm for a customer settlement. You got principle. You got a whopping amount of interest.

Case in Point

In a FINRA Arbitration Statement of Claim filed in December 2021, FINRA member firm Newbridge Securities Corp. asserted indemnification and breach of contract against associated person Respondent Doyle. As set forth in the FINRA Arbitration Award, Claimant sought:

compensatory damages in an amount no less than $60,000.00, calculated as follows: $38,002.15, representing the amount due to Claimant from Respondent on account of the settlement of the Rogers Arbitration, including the settlement amount of $14,999.00; the attorneys' fees and costs relating to the defense of Rogers arbitration amounting to $23,003.15; and all attorneys' fees and costs relating to the commencement and prosecution of this arbitration proceeding estimated to be no less than $22,000.00, including but not limited to, the FINRA filing cost of $2,850.00 to commence this action, pre-and post-award interest; and such other and further relief as may be deemed just and proper.

In the Matter of the Arbitration Between Newbridge Securities Corp., Claimant, v. Kevin Doyle, Respondent (FINRA Arbitration Award 21-02981)

https://www.finra.org/sites/default/files/aao_documents/21-02981.pdf

Respondent Doyle generally denied the allegations and asserted affirmative defenses.

At the end of the FINRA Arbitration hearing, Claimant had requested $74,564.77 in damages.

Award

The sole FINRA Arbitrator found Respondent Doyle liable to and ordered him to pay to Claimant Newbridge $47,378.65 in attorneys' fees incurred in both the prior Rogers arbitration and the current arbitration plus $19,136.62 in costs and expense incurred during both arbitration with interest on the fees, costs, and expenses; and, finally, $1,000 in filing fees. Additionally, the Arbitrator awarded $1,125 in hearing session fees against each of the Claimant and Respondent.

Bill Singer's Comment

Online FINRA BrokerCheck records as of November 17, 2022, disclose that Doyle was first registered in 1991. Under the BrokerCheck heading "Customer Dispute - Settled" are three reported matters. In the only matter attributed to Doyle's tenure at Newbridge Securities, that firm reported that on December 12, 2019, a customer alleged "breach of fiduciary duty, breach of contract, and negligence: and sought $125,000 per a FINRA Arbitration #19-03653, which subsequently was reported as having settled on April 22, 2022, for $14,999. The "Broker Statement" in response to the above disclosures states:

The complaint is from my clientâ??s [sic] daughter and is without merit. At all times I handled the accounts in accordance with my clientâ??s [sic] investment goals and objectives. The client was a long time investor who was very satisfied with how I handled his accounts. The clientâ??s [sic] daughter did not name me in the arbitration, and raised allegations solely against the broker dealer. The broker dealer chose to settle this meritless claim apparently to avoid the cost of litigation and I was not a party to the settlement, did not contribute to the settlement, and do not know the terms of the settlement.

When the Rogers FINRA Arbitration settled in April 2022, the tab paid by Newbridge was $14,999. Perhaps Newbridge had asked Doyle to chip in to the settlement or maybe pay the bill in full. Doyle opted not to contribute and as the BrokerCheck statement asserts, he deemed the customer's claim to be "meritless" and that he did "not know the terms of the settlement."

Such is the stuff of a lawsuit. One side asks for money. The other side says no. The two sides hash it out in a lawsuit. And wow, did Doyle get sliced, diced, chopped, and grilled by Newbridge's version of hash! Not only did the firm demand indemnification for its $14,999 settlement payment to the customer but then it asked for some $60,000 in fees and costs. As the parties headed to a hearing, Doyle faced a bill for about five time the actual customer settlement.

In Newbridge Securities v. Doyle, the total dollars awarded to Newbridge totaled $65,515.27, plus 9% interest on $64,515.27 (not on the $1,000 filing fee portion) and an add-on of $1,125 in hearing fees -- so Doyle's bill is now $66,640.27 plus interest. Oh, and one more thing, the FINRA Arbitration Award does not disclose what Doyle's lawyer charged him or what he ran up in terms of costs/expenses/fees, but, by way of reference, let's just plug in about another $50,000 more or less. What we got in Newbridge v. Doyle is the living, breathing, embodiment of that sardonic joke about how a lawyer warning the client that "principle comes with interest." The interest that got charged against Doyle's principle for not settling with Newbridge may well have risen to over $100,000 versus the $14,999 Rogers settlement.