An irreverent Wall Street Blog
Wells Fargo Promissory Note Case Enters Its Eighth Year of Litigation
June 15, 2020
Among the more common questions asked of me as a Wall Street lawyer is the one that starts with something along the lines of: so, you're like a lawyer-lawyer, right? I mean what I tell you is confidential, right? So . . . just between us, like, you know, just askin' and all, but, what's the worst that could happen to me if I tell my former employer to shove the balance due on my promissory note? This is a free country, right? I mean if I don't got the bucks to repay the balance, they can't prevent me from working, right? Today's featured FINRA Arbitration becomes a New Jersey Court case, which becomes a FINRA Office of Hearing Officers Decision, which becomes an SEC appeal, which becomes, yet again, a FINRA Office of Hearing Officers Decision, which becomes, yet again, an SEC appeal. And finally, as if there is any meaning to "finally" in relation to this matter, we wind up in the United States Court of Appeals for the Third Circuit.
2012 Wells Fargo Arbitration Statement of Claim
From 1998 until August 2010, Keith Patrick Sequeira was registered with FINRA member firm Wells Fargo Advisors LLC and its predecessors. Wells Fargo filed a FINRA Arbitration Statement of Claim in May 2012, asserting that Sequeira had breached the terms of a promissory note. At the close of the hearing, Claimant sought $118,512 in compensatory damages. Representing himself pro se, Sequeira generally denied the allegations, asserted various affirmative defenses, and asserted a Counterclaim seeking damages, interest, fees, and costs.
August 5, 2014, FINRA Arbitration Decision
The FINRA Arbitration Panel found Sequeira liable and ordered him to pay to Wells Fargo $47,462.56 in compensatory damages plus interest, $30,000 in attorneys' fee; and $1,000 for FINRA filing fees. In the Matter of the Arbitration Between Wells Fargo Advisors, LLC, Claimant, v. Keith Patrick Sequeira, Respondent (FINRA Arbitration Decision 12-01869 / August 5, 2014)
http://www.finra.org/sites/default/files/aao_documents/12-01869-Award-FINRA-20140805.pdf 2015 New Jersey Superior Court Confirmation
On September 4, 2014, Sequeira, again acting pro se, filed a Complaint against Wells Fargo in the Superior Court for New Jersey, which issued an Order denying Sequeira's Motion for Reconsideration and Motion to Restore the Case to Active Trial List and confirming the FINRA Arbitration Award. Keith P. Sequeira, Plaintiff, v. Wells Fargo Advisors, LLC, et al., Defendants (Order, Sup. Ct. NJ, Docket No. MON-L-003393-14 / July 10, 2015) (the "2015 NJSC Order")
http://www.finra.org/sites/default/files/aao_documents/12-01869%20%28Order%20to%20Confirm%29.pdf
http://www.finra.org/sites/default/files/aao_documents/12-01869%20%28Order%20to%20Confirm%29.pdf
The 2015 NJSC Order details the largely unsuccessful efforts by Sequeira to navigate the legal system on his own, as noted in part in the 2015 NJSC Order:
2. Plaintiff claims that his Complaint in this instant matter "contained a certification pursuant to R. 4:5-1 which identified inter alia that the matters in controversy were the subject of two pending actions in the Appellate Division and one recently -- concluded arbitration under the auspices of the Financial Industry Regulatory Authority, Inc. ("FINRA").3. Plaintiff makes reference to the matters in the Appellate Division without any indication what those claims are about or how they are relevant to the within matter.4. On March 24, 2015 Plaintiff contends that he filed a motion to extend time to file and serve an amended complaint. On April 10, 2014 this Court denied Plaintiff s motionindicting [sic] on the Order,
Case was dismissed for lack of prosecution on 3/27/2014. A motion to extenddiscovery when no answer has been filed is improper. Movant has yet to file an Affidavit of Service and his telephone call to the Clerk does not suffice to protect his rights. Accordingly, the motion is denied and the matter remains dismissed.
A Moving Experience
So. . . remember waaaay back in August 2014 when a FINRA Arbitration Panel found Sequeira liable and ordered him to pay to Wells Fargo $47,462.56 in compensatory damages plus interest, $30,000 in attorneys' fee; and $1,000 for FINRA filing fees? Apparently, before the FINRA arbitrators rendered their decision, Sequeira had filed some motion with the NJSC, which was denied by that Court on April 10, 2014. Except, the 2015 NJSC Order noted that Sequeira's "case" had been dismissed earlier, on March 27, 2014, for lack of prosecution. Somehow, Sequeira was still arguing something before the NJSC in the apparent for of another motion for reconsideration, which was denied by NJSC on July 10, 2015. Apparently not one to take a hint, subtle or otherwise, on September 8, 2016, Sequeira filed a new motion with the New Jersey courts, which was apparently denied on September 30, 2016.
SIDE BAR: Hey, how are you? Me? I'm doing fine all things considered. Thanks for asking. Listen, I don't have any idea as to what the last paragraph above means. No . . . I'm not kidding. Sequeira was enmeshed in a FINRA arbitration. Then he seems to have filed a state court Complaint. As best I understand it (and, trust me, I'm just shootin' the breeze here), he failed to prosecute his Complaint, which was dismissed. Funny thing about "dismissed," it apparently doesn't mean what I think it does because it looks like there were two or three other motions floating around NJSC. Motions about a dismissed case? Maybe in the form of a Motion for Reconsideration? I'm gonna have to go with that but don't hold me to it. In any event, stay safe.
2016 FINRA OHO Decision
On September 15, 2016, sort of in the midst of Sequeira's most recent foray into the New Jersey court system, FINRA the regulator conducted a hearing concerning whether Sequeira would be suspended for non-payment of the 2014 Wells Fargo FINRA Arbitration Award. FINRA Regulatory Operations, Complainant, v. Keith Patrick Sequeira, Respondent (Decision, FINRA Office of Hearing Officers, Expedited Proceeding No. ARB160035; STAR No. 20160510627 / November 18, 2016) (the "2016 FINRA OHO Decision")
http://www.finra.org/sites/default/files/OHO_Sequeira_ARB160035_111816_0.pdf
SIDE BAR: FINRA Rulebook:FINRA By-Laws Article VI, Section 3: Suspension or Cancellation(a) The Corporation after 15 days notice in writing, may suspend or cancel the membership of any member or the registration of any person in arrears in the payment of any fees, dues, assessments, or other charges or for failure to furnish any information or reports requested pursuant to Section 2.(b) The Corporation after 15 days notice in writing, may suspend or cancel the membership of any member or suspend from association with any member any person, for failure to comply with an award of arbitrators properly rendered pursuant to the Corporation's Rules, where a timely motion to vacate or modify such award has not been made pursuant to applicable law or where such a motion has been denied, or for failure to comply with a written and executed settlement agreement obtained in connection with an arbitration or mediation submitted for disposition pursuant to the Corporation's Rules.FINRA Rule 9554: Failure to Comply with an Arbitration Award or Related Settlement or an Order of Restitution or Settlement Providing for Restitution(a) Notice of Suspension or CancellationIf a member, person associated with a member or person subject to FINRA's jurisdiction fails to comply with an arbitration award or a settlement agreement related to an arbitration or mediation under Article VI, Section 3 of the FINRA By-Laws or a FINRA order of restitution or FINRA settlement agreement providing for restitution, FINRA staff may provide written notice to such member or person stating that the failure to comply within 21 days of service of the notice will result in a suspension or cancellation of membership or a suspension from associating with any member. When a member or associated person fails to comply with an arbitration award or a settlement agreement related to an arbitration or mediation under Article VI, Section 3 of the FINRA By-Laws involving a customer, a claim of inability to pay is no defense.. . .(g) Request for Termination of the SuspensionA member or person subject to a suspension under this Rule may file a written request for termination of the suspension on the ground of full compliance with the notice or decision. Such request shall be filed with the head of the FINRA department or office that issued the notice or, if another FINRA department or office is named as the party handling the matter on behalf of the issuing department or office, with the head of the FINRA department or office that is so designated. The appropriate head of the department or office may grant relief for good cause shown.
2016 FINRA Suspension for Non-Payment of Arbitration Award
The OHO Panel found that Sequeira had not established a valid defense against suspension for non-payment; and, accordingly, the 2016 FINRA OHO Decision states the following in its Syllabus:
Respondent is suspended from associating in any capacity with any FINRA member firm for his failure to pay an arbitration award. The suspension will automatically convert to a bar if he fails to provide sufficient documentary evidence to FINRA Regulatory Operations within 30 days after the date of this decision, showing: (1) he paid the award in full; (2) he entered into a written settlement agreement with Wells Fargo, and he is current in his obligations under the terms of the settlement agreement; or (3) he filed a bankruptcy petition in U. S. Bankruptcy Court pursuant to Title 11 of the United States Bankruptcy Code and the case is pending before the Bankruptcy Court (or the Bankruptcy Court has discharged the debt representing the award)
As set forth in "Disciplinary and Other FINRA Actions" (FINRA, January 2017)
http://www.finra.org/sites/default/files/publication_file/January_2017_
Disciplinary_Actions.pdf under the heading "Individuals Suspended for Failure to Comply with an Arbitration Award or Settlement Agreement Pursuant to FINRA Rule 9554" Sequeira was suspended on November 18, 2016.
http://www.finra.org/sites/default/files/publication_file/January_2017_
Disciplinary_Actions.pdf under the heading "Individuals Suspended for Failure to Comply with an Arbitration Award or Settlement Agreement Pursuant to FINRA Rule 9554" Sequeira was suspended on November 18, 2016.
As set forth in "Disciplinary and Other FINRA Actions" (FINRA, February 2017) http://www.finra.org/sites/default/files/publication_file/February_2017_
Disciplinary_Actions.pdf under the heading "Individuals Suspended for Failure to Provide Information or Keep Information Current Pursuant to FINRA Rule 9552(d)" Sequeira was suspended from November 18, 2016 - December 17, 2016)
Disciplinary_Actions.pdf under the heading "Individuals Suspended for Failure to Provide Information or Keep Information Current Pursuant to FINRA Rule 9552(d)" Sequeira was suspended from November 18, 2016 - December 17, 2016)
2017 SEC Remand
Faced with a FINRA suspension that could "automatically convert to a bar,"Sequeira, again acting pro se, appealed the 2016 FINRA OHO Decision finding that he did not establish a cognizable defense for his failure to pay the arbitration award. In the Matter of the Application of Keith Patrick Sequeira For Review of Action Taken by FINRA (SEC Opinion, '34 Act Release No. 81786; Admin. Proc. File No. 3-17734 / September 29, 2017) (the "2017 SEC Remand Opinion")
https://www.sec.gov/litigation/opinions/2017/34-81786.pdf
At this point, I expected that the SEC would roll its eyes, pull out its rubber-stamp, and ink "DISMISSED" on pro se litigant Sequeira's Petition. What do I know? Surprisingly, the SEC remanded the case to FINRA and requested an explanation from the self-regulatory-organization as to the nature of and basis for the suspension/bar imposed upon Sequeira for failure to timely pay the arbitration award. In language that barely disguised the federal regulator's unhappiness with FINRA's adjudicatory conduct, the 2017 SEC Remand Order states in part [Ed: footnotes omitted] that the 2016 FINRA OHO Decision:
appears to impose sanctions on a basis that is inconsistent with the rationale we have articulated for reviewing suspensions imposed for failure to pay arbitration awards under the Section 19(f) standard. Unlike in other arbitration cases we have reviewed, the hearing officer imposed a suspension that automatically converted into a bar. The hearing officer's decision suggests that he did so to sanction Sequeira for conduct inconsistent with just and equitable principles of trade. These factors support a conclusion that the hearing officer considered the sanction to be disciplinary in nature and necessary to sanction Sequeira for misconduct rather than designed to influence Sequeira to comply with the arbitration award.
We are reluctant, however, to resolve the issue of the standard of review based on the record before us. Where FINRA does not clearly explain the bases for its conclusions and the sanctions it imposes, "we cannot discharge properly our review function" and remand is appropriate. So too here. In his decision, the hearing officer addressed the basis for the suspension and bar only in passing in a brief footnote. And although the hearing officer provided that the suspension would convert to a bar if certain events did not happen within 30 days of his decision, he did not discuss whether either the suspension or bar would terminate automatically upon the occurrence of those events. The hearing officer thus failed to clearly explain the precise terms of the sanction and the basis for it.
Page 7 of the 2017 SEC Remand Opinion
2017 FINRA OHO Remand Decision
Following the SEC's remand, Sequeira once again represented himself pro se during the ensuing 2017 FINRA OHO remand hearing. FINRA Regulatory Operations, Complainant, v. Keith Patrick Sequeira, Respondent (FINRA Office of Hearing Officers, Expedited Decision Following Remand, Expedited Proceeding No. ARB160035; STAR No. 20160510627 / December 21, 2017) (the "2017 FINRA OHO Remand Decision").
https://www.finra.org/sites/default/files/OHO-Sequeria-ARB160035-122117_0.pdf states in its Syllabus:
Respondent is suspended from associating in any capacity with any FINRA member firm for his failure to pay an arbitration award. The suspension shall continue until he provides sufficient documentary evidence to FINRA showing that: (1) he paid the award in full; (2) he entered into a written settlement agreement with Wells Fargo, and he is current in his obligations under the terms of the settlement agreement; or (3) he filed a bankruptcy petition in U. S. Bankruptcy Court pursuant to Title 11 of the United States Bankruptcy Code and the case is pending before the Bankruptcy Court (or the Bankruptcy Court has discharged the debt representing the award).
The 2017 FINRA OHO Remand Decision found that Wells Fargo's arbitration award against Sequeira had become "final" pursuant to the New Jersey Superior Court's March 27, 2015, dismissal of Sequeira's Complaint seeking to have the FINRA Arbitration Award vacated, and payment in full was then immediately due under FINRA's rules. In pertinent part, the 2017 FINRA OHO Remand Decision found that:
Article VI, Section 3(b) of FINRA's By-Laws provides in pertinent part that FINRA may, upon written notice, suspend the registration of an associated person who fails to comply with an arbitration award when the person has not made a timely motion to vacate or modify the award, or when such a motion has been denied.In the expedited hearing of this matter, Sequeira conceded that the New Jersey court dismissed the suit he filed to vacate the award. Nonetheless, he insisted that the dismissal did not adjudicate the merits of his claims, and therefore the suit he had filed was still "pending" before the court.
Page 5 of the 2017 FINRA OHO Remand Decision
Finally, the 2017 FINRA OHO Remand Decision leaves little room for further doubt or second guessing by the SEC:
The purpose of this decision is to make clear that the sanction imposed is not disciplinary in nature, but, consistent with other expedited proceedings instituted under FINRA Rule 9554, is "designed to influence Sequeira to comply with the arbitration award." Therefore, the sanction is modified as set forth below.
Page 3 of the 2017 FINRA OHO Remand Decision
2019 SEC Opinion
Why am I still writing and why are you still reading at this point? Take a guess?
Bingo!!!
Sequeira appealed the 2017 FINRA OHO Remand Decision to the SEC. In the Matter of the Application of Keith Patrick Sequeira For Review of Action Taken by FINRA (SEC Opinion, '34 Act Release No. 85231; Admin. Proc. File No. 3-17734r / March 1, 2019) (the "2019 SEC Opinion")
https://www.sec.gov/litigation/opinions/2019/34-85231.pdf
The SEC dismissed Sequeira's application for review after finding that that FINRA had properly rested its determination to suspend Sequeira under Rule 9554 on three findings: (1) the Award was entered, (2) Sequeira did not pay it, and (3) Sequeira failed to establish a recognized defense for his failure to pay. Sequeira concedes the first two grounds but contends that he established a cognizable defense. Perhaps in a gentle nod to the somewhat damaged collegial feelings engendered by its former slap at FINRA, the 2019 SEC Opinion concluded with this:
In sum, we find that the specific grounds on which FINRA based Sequeira's suspension exist in fact, that the suspension was imposed in accordance with FINRA's rules, and that those rules are, and were applied in a manner, consistent with the purposes of the Exchange Act. Accordingly, we dismiss Sequeira's application for review.
2020 3Cir Opinion
As a long time practitioner of the martial arts, I always respected an opponent against whom I landed a daunting blow to the jaw and, immediately after, I watched him taste his own blood, spit it out, smile, and then turn to face me for more -- as if nothing had happened. There are just some combatants who answer the bell for the 13th Round of a 12 Round bout. That sort of sums up Sequeira.
After losing his SEC appeal on March 1, 2019, Sequeira tastes, spits, smile, and files an appeal on May 11, 2020, with the United States Court of Appeals for the Third Circuit (the "3Cir"). Keith P. Sequeira, Petitioner, v. Securities & Exchange Commission (Opinion, 3Cir, No. 19-1997) (the "2020 3Cir Opinion")
http://brokeandbroker.com/PDF/Sequuiera3CirOp200611.pdf
http://brokeandbroker.com/PDF/Sequuiera3CirOp200611.pdf
In summing up Sequeira's tortured route to the Circuit Court's steps, the Court offers this fairly succinct version of events:
[A] FINRA arbitration panel awarded Wells Fargo compensatory damages, plus interest, as well as attorneys' fees. In the August 5, 2014, letter notifying Sequeira of the decision, FINRA explained that it could suspend his registration if he failed to comply with the award.Sequeira did not pay the award. Instead, he filed in action in the Superior Court of New Jersey seeking to vacate the arbitration award. But because he failed to properly serve the summons and complaint on the defendants, the state court dismissed the action without prejudice for lack of prosecution on March 27, 2015. Thereafter, Sequeira unsuccessfully sought to have the case reinstated. 1= = = = =Footnote 1: In particular, Sequeira moved for an extension of time to file and serve an amended complaint, but the Superior Court denied his request. Later, the Superior Court denied Sequeira's motion to reconsider the denial of the motion for an extension of time, noting that the case "remains closed." Undeterred, Sequeira attempted to reinstate the action by serving his original complaint on Wells Fargo. On September 30, 2016, the Superior Court concluded that Sequeira failed to provide either good cause or exceptional circumstances for his failure to prosecute the action, and again stated that the case "remains closed." The Superior Court's orders were affirmed. See Sequeira v. Wells Fargo Advisors, LLC, Docket No. A-1995-16T1, 2018 WL 3018882 (N.J. Super. Ct., App. Div., June 18, 2018).
The 3Cir Opinion then goes through the whole procedural background of FINRA suspension, SEC appeal, SEC remand, FINRA remand hearing and ensuing suspension, SEC remand appeal and affirmation of FINRA's Remand Decision; and, lemme catch my breath here for a sec, okay, thanks, all of which bring us to Sequeira apparently arguing to the 3Cir that the SEC had abused its discretion when affirming FINRA's suspension. In putting Sequeira's arguments into some shape and order, the 3Cir offers this initial perspective:
[A] party who does not comply with an award issued by FINRA may avoid suspension by demonstrating, inter alia, that he has filed a timely motion to vacate or modify the award and the motion has not been denied. See FINRA Regulatory Notice 10-31, 2010 WL 2712571, at *2 (effective July 2, 2010). Sequeira contends that this defense should have shielded him from suspension because, although the New Jersey Superior Court dismissed his action to vacate the award, it did so without prejudice, rather than "on the merits."
3Cir was not buying Sequeira's appellate arguments and found that the SEC had properly rejected them. The Court found that FINRA's rules do not require that a motion to vacate an arbitration award be adjudicated by a court via the magic words of "on the merits" or "with prejudice." Further, even if, arguendo, Sequeira's state court action could be reinstated, that, in and of itself, does not alter the denial of the motion to vacate the arbitration award. Ultimately, 3Cir rejected each and every of Sequeira's arguments that:
- FINRA lacked jurisdiction to compel the subject arbitration;
- FINRA's Initial OHO Decision was libelous; and
- there was no basis for his suspension after Wells Fargo wrote off the value of the Arbitration Award in its 2018 tax filings.
And here we are. Ten years after Sequeira left Wells Fargo. Eight years after Wells Fargo filed its FINRA Arbitration Statement of Claim. Six years after a FINRA Arbitration Panel issued its Award. Five years after NJSC confirmed the arbitration Award. Four years after FINRA's OHO suspended Sequeira for non-payment of the arbitration Award.
Is this the end?
Perhaps -- but I'm not betting on it. In any event, 3Cir denied Sequeira's Petition for Review of the SEC's Decision and his Motion to Supplement the Record. I think that he hears the bell for the 13th Round.