An irreverent Wall Street Blog
Stockbroker Sues Non Customer Customer Over Unproven Promissory Note
March 9, 2015
In today's BrokeAndBroker.com Blog we consider an arbitration featuring a customer who is not actually a customer but somehow deemed one, but, no matter, because she's being sued by a registered representative, who apparently was never assigned to handle any of her business. Then we have some companies over which FINRA's arbitration forum has no jurisdiction but those entities are involved, in a way, sort of . . . maybe? Finally, the non-customer customer filed some kind of a complaint about a promissory note, which may or may not have existed, but no one seems to have proven that condition; and, for an extra dose of idiocy, the non-customer customer apparently sued over the note but she didn't have any legal right to do so.
Hello . . . how are you? Fine? Oh, that's nice. Listen, sorry for this early interruption and digression but I wanted to give you a head's up. The FINRA Arbitration Decision that I'm analyzing struck me as among the most mystifying that I have ever read. Keep in mind that I live a pathetic and lonely life during which I literally read virtually every published FINRA Arbitration Decision; and, as such, for me to cite a particular Decision as among the least intelligible that I've ever read is a notable if not dubious honor. So, come with me, Abbott and Costello, and the Marx Brothers as we all slide down the rabbit hole and journey to the Twilight Zone.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in January 2014, registered representative Claimant Blanco sought an expungement of an online complaint filed in October 2011 by Respondent Dobarganes, who is characterized in the Arbitration Decision as "an officer/director of Respondent IMC." In the Matter of the FINRA Arbitration Between Donald Joseph Blanco, Claimant, vs. Liana Dobarganes and International Monetary Capital Corp, Respondent (FINRA Arbitration 14-00320, March 2, 2015).
Make sure that you understand that this arbitration is a bit upside down and turned inside out when it comes to what you typically read about. Pointedly, we have a registered representative in the posture of the suing Claimant -- and he's suing both a company and an individual characterized as an officer/director of the corporate respondent. Preliminarily, Claimant Blanco is seeking the expungement of an "online complaint" filed in 2011 by Respondent Dobarganes.
When the arbitrators tell us that Respondent Dobarganes filed an "online complaint," they titillate us without much relief because we aren't told what type of complaint was submitted: arbitration, litigation, regulatory, or merely a customer's initial expression of anger. All we know -- all that we're told -- is that Dobarganes filed an online complaint in 2011 and Claimant Blanco wants all reference to it expunged.
Who's On First
I'm not exactly clear what started this mess and how we got here, but things get decidedly more complicated and obtuse in Blanco as the arbitrators offer their presentation of the facts and the rationale for their findings. For starters, consider that the FINRA Arbitration Decision asserts that:
Respondent IMC Is not a member or associated person of FINRA and did not voluntarily submit to arbitration. Therefore, the Panel made no determination with respect to Claimant's claims against Respondent IMC.Respondents [sic] Dobarganes did not file with FINRA Dispute Resolution a properly executed Submission Agreement but, based upon the Panel's finding set forth below that Respondent Dobarganes acted In the capacity of a customer of Claimant when she filed the Online Complaint, is required to submit to arbitration pursuant to the Code of Arbitration Procedure (the "Code") and is bound by the determmlnation of the Panel on all Issues submitted.Respondent Dobarganes did not have an account with Claimant or Claimant's employing firm, National Securities Corporation. However, on or about December 3,2014, the Panel issued an Order which stated, in part, the following: "The Panel concluded that FINRA has Jurisdiction in this case because Respondent, Liana Dobarganes, filed the [online] complaint with FINRA and claimed to be a customer subject to FINRA's arbitration procedures."
Let's do a quick recap:
- The corporate Respondent IMC is not subject to FINRA's jurisdiction as a person or member firm and no determination is made against IMC.
- After reading and re-reading the Decision, it's not exactly clear as to who the hell is Respondent Dobarganes or what exactly she was complaining about as it involved Claimant Blanco. We are told that Dobarganes didn't officially submit to FINRA's jurisdiction.
- The arbitrators assert that Dobarganes "acted in the capacity of a customer of Claimant." How did she act in a customer capacity? Apparently, Respondent Dobarganes "filed the Online Complaint." How do you get deemed a "customer" by filing an online Complaint but not submitting to the jurisdiction of the forum with which you submitted that document? Hey, I'm as confused as you are.
- As to fleshing out the type of "customer" that Respondent Dobarganes was (or wasn't), the Decision says that she "did not have an account with Claimant or Claimant's employing firm." Ummm . . . WTF? She didn't have an account with Claimant Blanco's brokerage firm or even an account handled by Claimant Blanco but because she merely filed some online Complaint without submitting to jurisdiction, she is somehow magically transformed into a customer?
- Adding a bit more mystery to the alchemy of this case, the arbitrators offer the further explanation that Respondent Dobarganes was deemed a customer because, in essence, she "claimed to be a customer subject to FINRA's arbitration procedures." Yeah but I thought the arbitrators also told us that she failed to execute a bona fide Submission Agreement and, more to the point, she never had an account with Claimant Blanco or his employer brokerage firm. From what I infer and seems to be implied, Dobarganes may have claimed to be a "customer" but she didn't claim to be subject to FINRA's arbitration procedures because she failed to submit an executed Submission Agreement. I need a handful of aspirins.
- Ultimately, the arbitrators seem to be offering us the proposition that if a person isn't a customer but files a complaint in a customerly (is that a word?) manner, then the person may be deemed a customer by virtue of having claimed to be a customer by filing a complaint even if she fails to agree to submit to jurisdiction at the arbitration forum where her status as a customer may or may not be an issue. If my aunt were a man, she'd be my uncle?
Panel Recommends Expungement
Somehow, for some reason, based upon something, the FINRA Arbitration Panel recommended the expungement of Claimant Blanco's Central Registration Depository records ("CRD"). Frankly, the arbitrators should have given Blanco an award with oak clusters, free validated parking for a year, and apologized to him for his having been subjected to . . . well, you know, I'm not really sure what he was subjected to but I think I read about this all in a short story by Kafka. In recommending expungement, the Panel offered, in part, this rationale [Ed: "ACC" is American Capital Corporation]:
The Statement of Claim requested expungement of Claimant's CRD records as it relates to the Online Complaint pertaining to a promissory note dated November 3, 2005 and issued to International Monetary Corporation ("IM") from Shampon Lamport, LLC ("SL"), which is partially owned by Claimant. No valid promissory note was presented to the Panel. An unsigned draft of a promissory note was submitted by Respondent Dobarganes.
IM never extended a loan to SL, and has no standing to file a claim. Claimant Is one of four equal partners associated with SL, but does not control SL.A promissory note dated September 1, 2004, issued from SL to ACC was also presented in evidence. Respondent Dobarganes alleged that she was entitled to collect on the promissory note because she inherited control of ACC upon her husband's (Mr. Harrington's) death In 2010. ACC was dissolved by the bankruptcy court in 2006. The bankruptcy court ruIed that ACC had no assets. Respondent Dobarganes has no right to file a complaint on behalf of a company which ceased to exist prior to her husband's death.
Perhaps A Promissory Note . . . Possibly?
A promissory note was purportedly issued to Respondent IMC (yeah, I know, in one part of the FINRA Arbitration it's "IM" and in another it's "IMC." Listen, I didn't come up with that acronym reference, so I'm just going to go with "IMC."). Respondent IMC is not subject to FINRA arbitration jurisdiction -- and regardless of just what the hell IMC is or isn't, the Arbitration Decision explains that no party submitted proof of an executed promissory note and given that circumstance, the arbitrators apparently concluded that they would not find that a "valid" promissory note even existed.
Ummm . . . lemme see here. This case is largely about a dispute over a promissory note but, at the end of the day, there's no proof that a valid promissory note even existed?
Then there is an allusion -- a swipe at one, at best -- to yet another promissory note dated 2004 and issued to an entity known as American Capital Corporation or "ACC," which apparently was dissolved in bankruptcy back in 2006, as in 9 years ago! Respondent Dobarganes apparently argued that she was entitled to collect on that promissory note, which she alleged that she had inherited from her deceased husband in 2010. READ about the ACC class action lawsuit for further details concerning this arbitration.
No Right And No Company
As if we needed more smoke, clouds, and mud, the arbitrators offer us this wonderful nugget, which I suspect they truly believed offered some clarity:
Respondent Dobarganes has no right to file a complaint on behalf of a company which ceased to exist prior to her husband's death.
For an alternative explanation of the parties, individuals, and entities involved in this FINRA Arbitration, please watch this video:
He Was Not And Did Not
Just in case you missed it, here's what the FINRA Arbitration Panel found:
Claimant stated that he was not the salesperson involved in the sale of the SL promissory note to ACC in 2004, although Claimant did act as broker for Mr. Harrington on other unrelated transactions.Claimant further testified that he did not forge, steal or misappropriate the funds from the 2004 promissory note.
Okay. Wonderful. That clears this whole thing up . . . right?
In ruling in Claimant's favor, the arbitrators found that Respondent Dobarganes had failed to present evidence that Claimant Blanco had acted as salesperson in connection with the September 1, 2004, promissory note. The arbitrators further held that no evidence had been presented showing that
- ACC still exists;
- Respondent Dobarganes had any rights to file claims on ACC's behalf; or
- Claimant Blanco took funds from the original loan for his personal use.
Finally, the arbitrators concluded that the promissory note dated November 3, 2005, was never executed and has no validity.
For a clandestine video of the behind-the-scenes legal negotiations involved in the drafting of the disputed promissory notes, watch: