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The Wife, The Husband, The Divorce, Edward Jones, The Stockbroker, and The Messy FINRA Arbitration
June 26, 2019
The ex-wife alleges that FINRA member firm Edward Jones wrongfully disbursed funds to her ex-husband. What follows is a list of things that the wife alleges Edward Jones should have done but didn't, or, did do but shouldn't have. Add into that mix a demand for $5 million in damages and we've set the stage for some fireworks. Boy, does the sky light up with litigation pyrotechnics!
Case in Point
In a FINRA Arbitration Statement of Claim filed in February 2015 and as amended, public customer Claimants asserted inappropriate and unsuitable investments; breach of fiduciary duty; churning; fraudulent transfers; forgery; omission of material facts; unauthorized activity, including trades,deposits, and withdrawals; and discrimination due to marital status; intentional and negligent breach of fiduciary duty, negligence, civil conspiracy, violation of FINRA rules, failure to supervise, and respondeat superior; aiding and abetting the breach of fiduciary duty and breach of contract claims. The claims allegedly arose during Claimant Sandra Hendricksen Martire's divorce proceedings, at which time Respondents allegedly "disbursed marital funds to her former husband from a restricted account, without her knowledge or authorization, and also unreasonably withheld marital assets awarded to her." Further, Claimants alleged that Respondents negligently failed to terminate life insurance policies in custodial accounts held in trust at Respondent Edward Jones (Claimant Delise Morgan Martire was purportedly a beneficiary) resulting in the depletion of the cash value of the custodial accounts. Claimants sought between $1 and $5 million in compensatory damages, costs, and fees. In the Matter of the Arbitration Between Sandra Hendricksen Martire and Delise Morgan Martire, Claimants, v. Edward Jones and Troy Michael Nelson, Respondents (FINRA Arbitration Decision 15-00038)
http://www.finra.org/sites/default/files/aao_documents/15-00038.pdf
http://www.finra.org/sites/default/files/aao_documents/15-00038.pdf
Respondents Edward Jones and Nelson generally denied the allegations, asserted various affirmative defenses, and sought the expungement of the matter from Respondent Nelson's Central Registration Depository record ("CRD").
Objecting to Expungement
In October 2016, Claimants requested dismissal without prejudice of the claims against Respondents, which the Panel granted in November 2015 while allowing the case to remain open in order to consider the pending expungement motion. Thereafter, in part, the FINRA Arbitration Decision asserts that:
On or about August 5, 2017, Claimants filed their opposition to Respondents' request for expungement.On or about August 7, 2017, Respondents withdrew Nelson's request for expungement. On or about August 8, 2017, Claimant filed an opposition to Respondents' notice of withdrawal of expungement. On the same day, Respondents filed a response to Claimants' opposition. On or about August 14, 2017, Claimants requested that the expungement hearing proceed or, in the alternative, that their claims (as amended) be reinstated. On or about August 15, 2017, Respondents filed an opposition objecting to Claimants' request to reinstate their claims against Respondents. Claimants filed a reply to Respondents' opposition on the same day. On August 17, 2017, the Panel ordered the scheduled hearing to proceed for oral arguments on the parties filings.On August 25, 2017, the Panel heard oral arguments on Claimants' objection to Respondents' withdrawal of expungement and request to reinstate their claims. The parties stipulated on the record to Claimants' reinstatement of the claims against Respondents and that expungement would be addressed at the final hearing on the merits. Claimants also orally moved to amend the First ASOC. Respondents did not object. In an order dated August 30, 2017, the Panel granted Claimants' motion to amend the First SOC, confirmed the parties' stipulations, and set the matter for final hearing. On or about September 16, 2017, Claimants filed their Second ASOC. On or about December 7, 2017, Respondents filed a second Motion to Dismiss (the "Second Motion to Dismiss"). On or about January 3, 2018, Claimants filed their opposition to the Second Motion to Dismiss. On or about January 5, 2018, Respondents filed a reply in support of the Second Motion to Dismiss. On January 10, 2018, the Panel heard oral arguments on the Second Motion to Dismiss. In an order dated the same day, the Panel took the Second Motion to Dismiss under advisement pending conclusion of the evidentiary hearing and granted Respondents leave to renew the motion at that time.
Award
The FINRA Arbitration Panel found Respondent Edward Jones liable and ordered it to pay to Claimants $125,000 in attorneys' fee; and to further pay to:
Claimant S. Martire: $380,862.62 in compensatory interest plus interest and $600 in FINRA filing feesClaimant D. Martire: $7,253 in compensatory damages plus interest
The FINRA Panel denied Respondent Nelson's requested expungement.
Bill Singer's Comment
We seem to have Claimants asking in October 2016 for the dismissal without prejudice of their claims, and the Panel granted the motion in November 2016. As set forth in the FINRA Arbitration Decision:
[T]he Panel confirmed Claimants' dismissal of claims against Respondents without prejudice and granted Respondents' request for a hearing on expungement. Thereafter, Respondents' First Motion to Dismiss became moot and the Panel made no determination on the motion.
It's the top of the 7th inning and this is a recap of play: On November 11, 2016, the Panel dismissed without prejudice Claimants' claims. One out. Then the Panel granted Respondents motion for an expungement hearing. Two outs. Then "Respondents' First Motion to Dismiss became moot and the Panel made no determination on the motion." Three outs.
Despite having been granted their requested dismissal, the Claimants opposed Nelson's request for an expungement, but two days after Claimants made their displeasure known, Nelson withdrew his requested for expungement on August 7, 2017. Great -- now that should bring an end to this sideshow. Except, you know, it didn't. On August 8th, the Claimants opposed Nelson's request to withdraw his motion for expungement.
As we enter the bottom of the 7th inning: The FINRA Arbitration Panel granted Claimants motion to dismiss. Nelson wants his expungement petition heard but Claimants object, and, in response, Nelson withdraws his request. Case closed . . . but . . . apparently there is a motion "in the alternative" by Claimants that a) Claimants must be permitted to oppose Nelson's withdrawal of his expungement motion during an evidentiary expungement hearing; or, b) in the alternative, that their dismissed claims be reinstated and the plenary arbitration proceed. And, yes, I know that Claimants had requested dismissal without prejudice -- so I'm not stating that they lacked the ability to re-file their claims. On or about August 15, 2017, Respondents objected to reinstating the claims that were previously dismissed. Claimants opposed that motion. In response, the Panel held oral argument at which time the parties stipulated on the record to Claimants' reinstatement of the claims against Respondents and that expungement would be addressed at the final hearing on the merits. As such, we can't wholly blame the arbitrators for this on again, off again, on again arbitration because the parties stipulated to setting the case down for a final hearing.
In case you were curious, the Decision asserts that there were 22 hearing sessions conducted from May 8, 2018, through May 9, 2019, and that Edward Jones was assessed the full $24,750 cost plus another $8,325 for 8 pre-hearing sessions. Note that the hearings lasted over one year.
Don't get me wrong. My befuddlement is NOT with the substance of the underlying allegations. Clearly, the Claimant wife seems to have been victimized by the shenanigans of her husband. Further, it may well have been that the wife demonstrated that she suffered financial harm because of Respondent Edward Jones' negligence or lack of supervision. Keep in mind that these arbitrators put in over a year's service during which they conducted 22 evidentiary hearing sessions. As such, justice may well have been done when the arbitrators awarded Claimants $125,000 in attorneys' fee plus nearly $400,000 in damages.
Online FINRA BrokerCheck records as of June 26, 2019, disclose that Respondent Nelson was first registered in 1998 with FINRA member firm Edward Jones. The above arbitration with the Martires is more fully referenced in BrokerCheck under the heading "Customer Dispute -- Pending," which provides the following characterization of the allegations:
Claimant is a divorcee who alleges that Edward Jones allowed her ex-husband to misappropriate and withdraw funds to which she claims she is entitled. She further alleges that Edward Jones assisted her husband in opening accounts without her consent or signature and against her best interest and did not provide her with information and statements relating to certain accounts. She further alleges that Edward Jones should have frozen the accounts and/or withdrawn as the financial advisor for her ex-husband given the pendency of the divorce proceedings. She further claims that the investments in the accounts did not perform as wells as the overall market. Claimant also alleges that the financial advisor and Edward Jones obfuscated their efforts to obtain the cash value of life insurance policies held in irrevocable life insurance trusts for the benefit of claimant and her siblings, and should have terminated the trusts, surrendered the policies, and distributed the cash values to the beneficiaries.