Federal Court Says Former Raymond James Employee Was On Notice of FINRA Arbitration

[R]espondent was served with the Claim Notification Letter dated March 2, 2018 by regular mail. The Claim Notification Letter notified Respondent that FINRA rules require parties (except pro se investors) to use the online DR Portal on a mandatory basis and that failure to register for the DR Portal will prevent him from submitting pleadings, selecting arbitrators and receiving notifications relating to case information and deadlines. 

On May 21, 2018, FINRA Office of Dispute Resolution ("ODR") issued another letter to Respondent that reiterated the requirement that all parties (except pro se investors) use the DR Portal on a mandatory basis. The letter further advised Respondent that his failure to register for the DR Portal would be indicated in the final Award. FINRA ODR sent the May 21 letter to Respondent by regular mail. 

The Arbitrator also determined that Respondent was served with an Overdue Notice dated April 26, 2018 and Notification of Arbitrator dated May 21, 2018 by regular mail. The Arbitrator further determined that Respondent was served with the Notification of Arbitrator by certified mail as evidenced by the executed signature card on file. 

Although Respondent failed to register for the DR Portal, the Arbitrator determined that Respondent was properly served and is bound by the Arbitrator's ruling and determination. 

38. Petitioner herein had no knowledge of the claim. F1NRA's failure to serve notice on the Petitioner was the reason. The award should be vacated as the arbiter exceeded his authority due to F1NRA' s numerous failures to serve process properly pursuant to FINRA §12301. Service on Associated Persons (a) and Regulatory Notice 17-03. Such a failure was a manifest disregard of the law. Given that FINRA failed to follow the agreement set forth between the parties in violation of the FAA, any such decision would render any decision that resulted from the arbiters exceeding their powers under the contract subject to being vacated by this Court. See, Encyclopaedia Universalis S.A. at 92. See also Avis at 23. Given the failure to follow the parties' agreement, the arbitrator breached the arbitration contract. Therefore, the award should be vacated. 

SIDE BAR: As set forth in part in "Dispute Resolution Party Portal / SEC Approves Amendments to the Customer and Industry Codes of Arbitration Procedure Regarding Required Use of the Dispute Resolution Party Portal, FINRA Regulatory Notice 17-03 /January 2017) 
http://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-17-03.pdf

Serving Documents 

Initial Statement of Claim 

FINRA staff will serve the initial statement of claim. FINRA will serve respondents that are not identified as customers with a Claim Notification Letter. The term "Claim Notification Letter" means the notice provided to respondents that they have been named as a party in a statement of claim. The Claim Notification Letter provides information about accessing the Party Portal to obtain a copy of the statement of claim filed by the claimants and information about the arbitration, including the hearing location selected by the Director and the deadline for filing a statement of answer. If a respondent does not access the Party Portal and view the statement of claim, FINRA staff will contact the respondent and ask if the respondent received the Claim Notification Letter. If the respondent indicates that he or she did not receive the Claim Notification Letter, FINRA staff will offer to serve the statement of claim in another manner such as by email or regular mail to afford the respondent an additional opportunity to receive the statement of claim. The transmission will include instructions on how to access the Party Portal. 

At all relevant times, Lawrence resided at 3509 20th Ave. Ct. SE, Puyallup, Washington 98372. On March 2, 2018, FINRA mailed the Claim Notification Letter and SOC to Lawrence's residential address. These mailings were not returned to FINRA as undeliverable. On May 1, 2018, RJFS's counsel sent copies of FINRA's Claim Notification Letter and SOC, via certified mail, to Lawrence's business address. Lawrence claims by sworn affidavit that he "was never served with, or received a copy of the SOC." 

On May 21, 2018, FINRA sent a Notification of Arbitrator to Lawrence's residential address via certified mail, advising him that an arbitrator was appointed in the case. FINRA sent the Notification of Arbitrator by certified mail on May 26, 2018, and a domestic return receipt, signed by Haylee Lawrence, was delivered to FINRA on May 30, 2018. Lawrence does not dispute that he received the Notification of Arbitrator.

Here, the FINRA rules empower the arbitrator to rule on the issue of service. FINRA Rule 13413 provides that "the panel has the authority to interpret and determine the applicability of all provisions under the Code. Such interpretations are final and binding upon the parties." Murray v. UBS Sec., LLC, No. 12 Civ. 5914, 2014 WL 285093, at *13 (S.D.N.Y. Jan. 27, 2014) ("FINRA Rule 13413 ‘clearly and unmistakably evinces an intent to submit any disputes over the interpretation of the Code rules to arbitration.'") (citing Alliance Bernstein Inv. Research and Mgmt., Inc., 445 F.3d 121, 127 (2d Cir. 2006)). Rule 13413, therefore, gives the arbitrator power to interpret and determine the applicability of FINRA Rules 13300, 13301 and 13302 governing service. Because the parties consented to FINRA rules, which empower the arbitrator to make determinations regarding the sufficiency of service, the arbitrator acted within the scope of his authority in determining that Lawrence was properly served. See T.Co Metals, LLC, 592 F.3d at 346.

[L]awrence references FINRA Regulatory Notice 17-03, which states that "if the respondent indicates that he or she did not receive the Claim Notification Letter, FINRA staff will offer to serve the statement of claim in another manner such as by email or regular mail to afford the respondent an additional opportunity to receive the statement of claim." The Claim Notification Letter was mailed to Lawrence's residential address in compliance with FINRA Rule 13301(a), which provides that the Claim Notification Letter should be served on Lawrence "directly at the person's residential address or usual place of abode." Neither Regulatory Notice 17-03 nor the FINRA rules contain any requirement that the documents be sent to a party via certified mail.

Regardless of whether regular mail constitutes sufficient service of process, Lawrence was on notice of the arbitration proceedings because he received the Notification of Arbitrator at his residence via certified mail. The return receipt from the Notification of Arbitrator bears a delivery date of May 26, 2018, and Lawrence admits that he received the notification. That Lawrence received certified mail at his home address is strong circumstantial evidence that he received the other arbitration related documents that were sent to his home via regular mail. The arbitrator had at least a "barely colorable justification" for finding that Lawrence had adequate notice of the arbitration proceedings. Wallace v. Buttar, 378 F.3d 182, 190 (2d Cir. 2004). 

Lawrence relies on an "unpublished / nonciteable" California case for the proposition that failure to effect proper service under the FINRA rules constitutes grounds for vacating the Award. See Hansalik v. Wells Fargo Advisors, LLC, No. B232151, 2012 WL 1423014, at *5 (Cal. Ct. App. Apr. 25, 2012). Hansalik is easily distinguishable. In Hansalik, Hansalik moved from California to Switzerland before Wells Fargo initiated a FINRA arbitration to collect an unpaid promissory note. Id. at *1. Wells Fargo mailed its statement of claim and other arbitration documents to Hansalik's California residence, despite receiving notification of Hansalik's forwarding address in Switzerland. Id. at *1. Unlike in Hansalik, Lawrence here occupied the same residence throughout the relevant period, and FINRA and RJFS both sent arbitration documents to that residence, as least one of which Lawrence admits receiving. The California Court of Appeal affirmed vacatur of the arbitration award in Hansalik, in part, because of Hansalik's lack of actual notice. Id. at *5. Here, the certified mail return receipt from the Notification of Arbitrator demonstrates actual notice.

Regardless of whether regular mail constitutes sufficient service of process, Lawrence was on notice of the arbitration proceedings because he received the Notification of Arbitrator at his residence via certified mail. . .

Securities Industry Commentator
A legal, regulatory, and compliance feed curated
by veteran Wall Street lawyer Bill Singer
http://www.rrbdlaw.com/4385/securities-industry-commentator/

Misguided Unsuitability Allegations Expunged In the Matter of the Arbitration Between Richard M. Del Monte, Claimant, vs. Securities America, Inc., Respondent (FINRA Arbitration)

Federal Court Says Former Raymond James Employee Was On Notice of FINRA Arbitration

(BrokeAndBroker.com Blog)

Creative Writing 101: How to Explain Mistaken IRA Deposit In the Matter of Mark Isidore Lamendola, Respondent (FINRA AWC) 

Four Years of Discretionary Trading -- No one (and I mean "no one") noticed In the Matter of Donald Logan, Respondent (FINRA AWC)

• FINRA
• Arbitration EFL
• Promissory Note
• Raymond James
• Claim Notification Letter
• DR Portal
• Rule 13413
• Rule 12301
• Notice 17-03 Certified Mail
• FAA
• Manifest Disregard
• BrokeAndBroker
• Bill Sionger