Merrill Lynch Arbitration Shows Unique Impact of Baby Boomers

May 24, 2011

As Baby Boomers enter their senior years, Wall Street increasingly faces lawsuits by customers who were born between 1946 and 1964.  That demographic comprised some 76 million Americans and it is estimated that this generation controls about 80% of our nation's personal assets and accounts for more than half of our discretionary spending.

In my own law practice, I have noticed an increase in questions and concerns about Baby Boomer issues - particularly the health of parties involved in court proceedings or arbitrations, and the ramifications of their medical incapacity or death. As Baby Boomers age, such issues will loom larger.  

In some situations, the death of a key witness or party forecloses further litigation; but quite often, in the case of a party, the solution is to substitute the Estate as the named party.  The incapacity or death of a key witness raises different concerns that may prove fatal to a case if such testimony has not been memorialized (e.g., videotape, affidavit, etc.)  in a manner that a court or arbitration panel would deem admissable. The mere recording of a proposed witness's testimony may not satisfy constitutional and procedural requirements, particularly the rights of controntation or impeachment.

SIDE BAR: You should retain competent, independent legal counsel to fully explore these issues to ensure that you fully understand the ramifications if you are involved in pending or ongoing litigation where this issue could become a factor.

Case in Point

During a recent FINRA arbitration, the Arbitrators were advised of the death of one of the two Claimants.  Although the claims in the matter are fairly garden-variety, I thought it may be instructive to show how a litigation can proceed following the death of a party.

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in December 2009, Claimants Robert Postell and Joan Postel asserted breaches of contract and fiduciary duty against Respondent Merrill Lynch arising from the latter's alleged failure to adequately monitor the Claimants' accounts. The Claimants sought $640,633.00 in compensatorydamages plus attorneys' fee and costs.  In the Matter of the Arbitration Between Estate of Robert C. Postell and Joan P. Postell, Claimants, vs. Merrill Lynch, Pierce, Fenner & Smith Inc., Respondent  (FINRA Arbitration 09-07121, May 19, 2011).

Respondent generally denied the allegations and asserted various affirmative defenses.

Substitution of Estate

At the final Arbitration hearing, the FINRA Arbitration Panel was informed that Claimant Robert  Postell had died (subsequent to his filing of the Statement of Claim).  The Panel amended the pleadings to substitute the Estate of Robert Postell as a Claimant (Claimant Joan Postell had been named the Executor).

Panel's Decision

The FINRA Arbitration Panel found Respondent Merrill Lynch liable to and ordered the firm to pay to Claimants $442,794.00 in compensatory damages plus interest at the rate of 7% per annum from November 6, 2008 until May 6, 2011 in the amount of $77,489.00.