by Bill Singer
Whistleblower Wins FINRA Arbitration
October 20, 2010
In a Statement of Claim filed in August 2008, Michelle Ford asserted the following causes of action:
- violation of the New Jersey Conscientious Employee Protection Act
- wrongful discharge in violation of public policy,
- unlawful interference with contractual relations,
- unlawful interference with prospective economic advantage,
- intentional infliction of emotional distress,
- retaliation pursuant to New Jersey Conscientious Employee Protection Act, and
- defamation.
Claimant Ford ultimately sought at least $1 million in compensatory damages, plus punitive damages, attorneys' fees, interest, expenses, costs and any other relief the Panel deems just and proper.In the Matter of the Arbitration Between: Michelle L. Ford, Claimant, v. Affinity Investnnent Services, LLC, Affinity Federal Credit Union, Affinity Financial Services, LLC, and Mark Dubei, Respondents, v. Securities America, Inc., Securities America Advisors, Inc., Vantage Point Financial Services, and Vantage Point Bank, Third Party Respondents (FINRA Arbitration 08-02782, October 13, 2010)
Respondents Up the Ante
Respondents generally denied the allegations made in the Statement of Claim, asserted various affirmative defenses, asserted a Counterclaim, and asserted a Third Party Claim. In their Counterclaim and Third Party Claim, Respondents asserted causes of action, including, breaches of contract, fiduciary duty, trust, and duty of due care. Respondents also asserted additional causes of action including, wrongful conversion of confidential and proprietary business information and trade secrets, misappropriation of trade secrets and confidential and proprietary business information.
In their Answer, Counterclaim and Third Party Claim, Respondents requested:
(1) compensatory damages in the amount of $1,000,000.00;
(2) punitive damages in the amount of $1,000,000.00;
(3) a preliminary and permanent injunction enjoining Claimant and Third Party Respondents from use of Respondents' confidential and proprietary business information and trade secrets;
(4) an accounting of all monies derived from the wrongful and illegal use of Respondents' confidential and proprietary business information and trade secrets;
(5) a constructive trust on all monies derived from the wrong and/or illegal use of Respondents' confidential proprietary information and trade secrets;
(6) disgorgement and payment to Respondents of all monies and profits stemming from the wrongful and illegal use of Respondents' confidential and proprietary information and trade secrets;
(7) interest, costs of arbitration, attorneys' fees, and sucli other relief as the Panel may deem to be just and proper.
Lack of Jurisdiction Over 3rd Parties
Third Party Respondents Vantage Financial and Vantage Bank are not members of FINRA and did not voluntarily submit to arbitration. Therefore, the Panel made no determination with respect to the Third Party Claim against them.
By letter dated September 17, 2009, Respondents withdrew the Third Party Claim against Third Party Respondents Securities America and Securities Advisors.
The Panel Decides
Claimant made a Motion for Sanctions for Discovery Abuse and Respondents opposed the Motion. After due deliberation, the Panel granted the Motion.
The FINRA Arbitration found that
1. Respondents Affinity Investment, Affinity FCU, and Affinity Financial are jointly and severally liable for and shall pay to Claimant compensatory damages in the amount of $825,000.00 plus interest at the rate of 4% per annum from 30 days after the date of this award until the award is paid in full.
2. Respondents Affinity Investment, Affinity FCU, and Affinity Financial are jointly and severally liable for and shall pay to Claimant the sum of $100,000.00 as a sanction for discovery abuse.
3. The Panel recommended the expungement of the reason for termination in Section 3 of Claimant Ford's Form U5 dated March 5, 2007, filed by Respondent Affinity Investment Services, LLC and maintained by the Central Registration Depository ("CRD") based on the defamatory nature of the information.
The current reason for termination "Voluntary" should be expunged and replaced with "Discharged." The termination comment "Terminated Without Cause" should be inserted into Section 3. Further, the Panel recommended that based on the defamatory nature of the information, the "Yes" answer to Section 7B Internal Review Disclosure be expunged and changed to "No" and the Internal Review Disclosure Reporting Page be deleted in its entirety.
This recommendation applies to the Form U5 dated March 5, 2007 and any subsequent disclosures including but not limited to the Amended Form U5 dated April 27, 2007. The Form U5 is not automatically amended to include the changes indicated above. Claimant Ford must forward a copy of this award to FINRA's Registration and Disclosure' Department for the amendments to be incorporated into the Form U5.
Bill Singer's Comment: The New Jersey Conscientious Employee Protection Act provides protection from retaliatory action to employees who seek to assert their rights under a variety of statutes. It is commonly known as the "whistle blower act," and its purpose is to encourage employees to report illegal or unethical work place activities and discourage public and private sectors from engaging in such conduct.