An irreverent Wall Street Blog
The Divorcing Husband And Wife Stockbrokers Joint Production Team
November 17, 2016
We start with a husband and wife. We add to that state of marital bliss a joint production agreement at a brokerage firm. Love fades. Divorce ensues. And then, all hell breaks loose. Enjoy today's epic litigation battle replete with lots and lots of music videos.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2014 and as amended, Claimant Jaffe asserted breach of contract and fraudulent inducement in connection with Joint Production Agreements and a Partnership Agreement signed as part of the Marital Settlement Agreement between Claimant and Respondent. In the Matter of the FINRA Arbitration Between Alisa Jaffe. Claimant, vs. Scott Paul Strochak, Inc., Respondent (FINRA Arbitration 14-03127, November 9, 2016). In addition to requesting a declaration from the FINRA Arbitration Panel that the Partnership Agreement contained in the Marital Settlement Agreement is null and void, at the close of the hearing, Claimant requested:
- $100,000 liquidated damages;
- $172,924 partnership damages;
- $6,990.29 commissions;
- $250,000.00 lost opportunity damages;
- $544,000 fraudulent inducement damages; and
- $178,004.03 attorneys' fees.
Counterclaim
Respondent Strochak generally denied the allegations, asserted various defenses, and filed a Counterclaim asserting breach of the Partnership Agreement. At the close of the hearing, Strochak sought a valuation of lost business at 40% ($1,769,185) or 50% ($2,236,481); and attorneys' fees at 40% of the contingency.
SIDE BAR: Oh boy . . . nothing like getting into the middle of what looks like a nasty divorce and, on top of that, the break-up of a joint production team. We've got a poisonous cocktail of marital and business discord. I'm not exactly sure how a FINRA Arbitration Panel could find a Marital Settlement Agreement contained a nullity of a Partnership Agreement but, hey, there are many things that litigants ask for and may not fall within a given tribunal's jurisdiction or may need to be further litigated on appeal.
Never Mind
Not unexpectedly, his case was marked by some testy motion practice. In November 2014, Respondent filed a Motion to Dismiss based upon the FINRA Arbitration Panel's purported lack of jurisdiction. Claimant took the opposite view and moved for sanctions for Respondent's motion. In response, Respondent asserted, in pertinent part, that there was a legal and factual basis to remand the dispute to state court. By June 2015, Respondent withdrew his motion and Claimant withdrew hers.
Leave To Amend
In September 2015, Claimant filed a Motion for Leave to File Amended Statement of Claim in order to add her fraudulent inducement claim. In opposing that motion, Respondent asserted, in pertinent part, that "Claimant released her claims, including the alleged fraudulent inducement claim as to the Partnership Agreement, in the Marital Settlement Agreement." Following a telephonic hearing on the motion, the FINRA Arbitration Panel granted Claimant's motion to amend.
No Limit
In September 2016, Claimant filed a Motion in Limine to prohibit Respondent from asserting, relying on or seeking any alleged damages or allege a violation of the Revised Uniform Partnership Act ("Precluded Claim"). Claimant argued that Respondent asserted that it was onlly in a pre-hearing brief that Respondent raised for the first time the partnership act issues and that such last-minute maneuvering would be greatly prejudicial and was, in fact, raised in an untimely manner. In reply, Respondent argued that his:
pre-hearing brief provides the Panel with the law on partnership and effect of a partner's breach of the Partnership Agreement; the pre-hearing brief does not add a claim but argues what the impact of Claimant's breach was to the Partnership Agreement; and there is no industry rule governing the content of the pre-hearing brief.
Following oral argument, the FINRA Arbitration Panel denied Claimant's motion to limit.
Award
The FINRA Arbitration Panel found Respondent liable on the breach of contract claim and ordered him to pay to Claimant $272,924.00 (consisting of $100,000.00 liquidated damages and $246,000.00 additional damages less $73,076.00 additional payments) plus interest.
Pursuant to the Marital Settlement Agreement, the Panel awarded Claimant $178,004.03 in attorneys' fees.
The Panel found no liability for fraudulent inducement.
Bill Singer's Comment
According to online FINRA BrokerCheck records as of November 17, 2016, Alisa Jaffe was first registered in 2001 and has been associated with several FINRA member firms. It appears that she joined Morgan Stanley in January 2009 and, thereafter, joined UBS in October 2014.
According to online FINRA BrokerCheck records as of November 17, 2016, Scott Paul Strochak was first registered in 2000 and has been associated with several FINRA member firms. It appears that she joined Morgan Stanley in January 2009 and left the firm in March 2015. The online records assert that "This broker is not currently registered."
Under the heading of "Judgment/Lien" on Strochak's BrokerCheck records, we find a July 2012 civil judgment in favor of Citibank, NA for $30,420.45; and a May 2013 civil judgment in favor of Leinoff & Lemos, P.A. for $62,869.99.
Under the heading of "Regulatory - Final" on Strochak's BrokerCheck records, we find that on August 23, 2016, FINRA suspended him based upon the allegations that:
Respondent Strochak failed to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.