There's Something Happening Here (at a FINRA Arbitration ) But What It Is Ain't Exactly Clear

November 8, 2021

In 1966, the Buffalo Springfield sang that there's something happening here but what it is ain't exactly clear. Much could be said of a recent intra-industry FINRA arbitration, which seems to have had something to do with the termination of the associated person Claimant's employment. After some six years of litigation, however, Claimant walked away with only about 3% of the damages that he had sought. As to what exactly was in dispute, oddly, that remains a mystery despite a somewhat detailed FINRA Arbitration Award. All of which reminds us that there's battle lines being drawn, nobody's right if everybody's wrong.

Case in Point

In a FINRA Arbitration Statement of Claim filed in November 2015 and as amended, associated person Claimant Anthony C. Pintsopoulos asserted negligent misrepresentation; intentional misrepresentation; false promise; suppression and concealment; breach of fiduciary duty; breach of written contract; breach of oral contract; promissory estoppel; detrimental reliance; quantum meruit; wrongful termination; labor code violations; and advancement and indemnity. In the Matter of the Arbitration Between Anthony C. Pintsopoulos, Claimant, v. WestPark Capital, Inc. and Richard Alyn Rappaport, Respondents (FINRA Arbitration Award 15-03293)

https://www.finra.org/sites/default/files/aao_documents/15-03293.pdf

The FINRA Arbitration Award asserts that Claimant Pintsopoulos' "causes of action relate to the alleged failure of Respondents to pay sums due to Claimant pursuant to Claimant's employment agreement, as well as Claimant's termination of employment, and indemnification." By the close of the hearing, Claimant sought $6,462,373 in damages.

Espionage, Theft, Whistleblowing, Blackmail, Extortion, etc.

Respondents generally denied the allegations and asserted various affirmative defenses including causes of action asserting theft; conversion; violation of privacy laws; violation of California Penal Code Section 496; civil theft under Florida Law, Florida Statutes Section 771.11; corporate espionage and malicious and willful theft of trade secrets; negligence; defamation and slander; malicious use of the arbitration process; forgery; breach of implied covenant of good faith and fair dealing; blackmail; breach of duty to be a whistleblower using false information to blackmail and extort Respondents; tortious interference with prospective economic advantage; civil conspiracy; breach of contract; and unjust enrichment. At the close of the hearing, Respondents sought $192,000 for allegedly overpaid equity.

Claimant's Motion to Change Venue

In June 2016, Claimant filed a Motion to Change Venue from Boca Raton, FL to Los Angeles, CA, to which the Respondents objected and the FINRA Arbitration Panel denied.

Claimant's Motion to Disqualify Attorney

Following the Panel's denial of the Motion to Change Venue, Claimant filed a Motion to Disqualify Julie Kamps, Esq., who was an attorney of record for the Respondents. As set forth in the FINRA Award:

[C]laimant asserted that, among other things, Ms. Kamps had a conflict of interest based upon her previous representation of Claimant and her current representation of Respondents in this matter, as well as her role as a witness in this matter. In their Opposition, Respondents stated that the Motion to Disqualify should be rejected because, among other things, motions to disqualify are strongly disfavored and disqualification is a drastic remedy; Claimant legally waived any purported conflict of interest; Claimant misstates the legal standard for disqualification motions; and Ms. Kamps is not a witness in this matter. Respondents requested, among other things, sanctions and attorneys' fees in connection with the Motion to Disqualify. In his Reply, Claimant stated that, among other things, Ms. Kamps has violated multiple Labor Code statutes and disqualification is required when necessary to maintain the ethical standards of professional responsibility. On or about August 23, 2016, following a telephonic conference with the parties, the Panel issued an Order that denied Claimant's Motion to Disqualify.

at Page 3 of the Award

Respondents' Motion for Sanctions

Following the Panel's denial of the Motion to Disqualify, Respondents filed a Motion for Sanctions citing what the characterized as Claimant's bad faith filing of the Motion to Disqualify. As set forth in the FINRA Award:

[S]pecifically, Respondents state that the Motion to Disqualify misstated facts and law, and that the sole purpose of the Motion to Disqualify was to harass and encumber Respondents. In his Response to the Motion for Sanctions, Claimant stated, among other things, that: Respondents improperly assume they are entitled to reconsideration of a rejected request; the Motion for Sanctions is untimely because Respondents ignored the "Safe Harbor" rule that requires a motion for fees to be made before a decision on the underlying motion has been rendered in order to allow the moving party to withdraw their underlying filing; there is no legal basis for sanctions; substantial evidence supported disqualification; and the fee request is outrageous. On or about October 5, 2016, following a telephonic conference with the parties, the Panel issued an Order that denied Respondents' Motion for Sanctions.

at Page 4 of the Award

Claimant's Second Motion to Compel Discovery

The calendar moves forward from October 2016 to June 2018, at which time Claimant apparently filed what the Award describes as a "Second Motion for [sic] Compel Discovery." As to what delayed the proceedings just shy of two years is not explained in the Award; however, we are informed that the June 2018 discovery motion was apparently brought on because:

[C]laimant stated that Respondents failed to comply with the Panel's November 29, 2017 discovery Order compelling Respondents to produce documents and information by January 30, 2018. In their Response, Respondents stated that the parties have been working in good faith to resolve the outstanding discovery and Claimant is using his Motion as an improper attempt to re-litigate issues that were previously addressed and ruled upon. In his Reply, Claimant stated that significant discovery issues still remain despite the Panel's Order, Claimant's professional courtesies and extensions, telephonic conference calls and assurances from Respondents. Claimant further stated that Respondents are blatantly attempting to successfully delay the inevitable evidentiary hearing. In his Supplemental Reply, Claimant stated, among other things, that Respondents' counsel tardily produced hundreds of thousands of pages of documents, imposing an enormous burden on Claimant. On or about July 26, 2018, following a telephonic conference with the parties, the Panel issued an Order that directed the parties to further meet and confer regarding discovery.

at Page 4 of the Award

Claimant's Emergency Motion

Claimant filed his claim in November 2015 but in July 2018, the FINRA Arbitration Panel is still directing the parties to meet and greet and, hey guys, can't we all just get along here and resolve Discovery? It should come as no surprise that in January 2019, Claimant files an Emergency Motion seeking to strike Respondents' affirmative defenses; find that Respondents owe compensation to Claimant; strike Respondents' counterclaim; order Respondents to produce past-due documents; clarify an earlier December 2018 Order; award sanctions; and grant further relief. As we pick up the action (or inaction):

[I]n his Motion, Claimant stated, among other things, that the relief requested is warranted by Respondents' continued failure to comply with discovery orders. In their Response and Opposition, Respondents stated that there is no legal or factual support for Claimant's requested relief because there has been no intentional and material failure to comply with a discovery order of the Panel, and there have been no prior warnings or sanctions imposed, as required by Rule 13511 of the Code of Arbitration Procedure (the "Code"). In his Reply, Claimant stated that his Motion should be granted because, among other things, Respondents submitted only argument of counsel and no admissible evidence, and Respondents have been deceptive and contemptuous. On or about January 31, 2019, following a telephonic conference with the parties, the Panel issued an Order that denied all of Claimant's requests, with the exception of the request for Respondents to produce certain compensation and tax return documents previously ordered by the Panel.

at Page 4 of the Award

Claimant's Second Emergency Request

So . . . waddya think happened shortly after the FINRA Panel denied Claimants' request? Not surprisingly, in February 2019, Claimant filed a Second Emergency Motion seeking to strike Respondents' Answer, enter defaults, find that Respondents violated FINRA Rule 2010 and owe compensation to Claimant, strike the counterclaim, award sanctions, and grant further relief. A likely beleaguered group of FINRA arbitrators explained in the Award that:

[I]n his Motion, Claimant asserted that, among other things, Respondents continue to violate the Panel's discovery orders. In their Response, Respondents stated that they have not willfully or intentionally disregarded the Panel's orders and that there is no legal or factual support for the relief sought by Claimant. At the outset of the evidentiary hearing on February 11, 2019, the Panel heard oral arguments from the parties and thereafter denied Claimant's Motion.

at Page 5 of the Award

Award

Here we are, November 2021, and the arbitration proceedings limp towards the finish line when the Panel finds that Respondents are jointly and severally liable to Claimant Pintsopoulos for $250,205.50 in compensatory damages. Compensation for just what exactly? Ahhhh, that's not really explained in the Award in any meaningful manner. Perhaps the arbitrators were just happy to get out of town and recapture six lost years.

Bill Singer's Comment

Before us is a FINRA Arbitration, which started with the November 2015 filing of a Statement of Claim that ultimately sought about $6.5 million in damages. In November 2015, Barack Obama was President. In November 2021, when the Award was issued, Joseph Biden is President. The bulk of this litigation was waged when Donald Trump was President. There were two pre-hearing sessions before one arbitrator; 13 pre-hearing sessions before the three-arbitrator Panel; and 59 hearing sessions. Put into perspective, Claimant waged a nearly six-year war through three presidential administrations and wound up winning about $250,000. Set off against that award are some $94,500 in hearing session fees, which the Panel divided evenly between Claimant and Respondents in the respective amount of $47,250.

If you deduct $47,250 from Claimant's $250,205.50 award, you wind up with $202,955.50. If we round that amount up to $203,000, that's quite a ways from Claimant's roughly $6.5 million demand -- it's not much more than about 3% of the damages sought. And who the hell knows what some six years of lawyer by Claimant's lawyer wound up costing.

Finally, and most unfortunately, we truly know jack about the substantive aspects of this arbitration. Somewhat lost in the mix is that this was NOT a customer dispute but, to the contrary, a matter characterized in the Award as:

Nature of the Dispute: Associated Person vs. Member and Associated Person

Notwithstanding the errant references in the Award to alleged labor code violation and an employment agreement, notwithstanding further titillation about corporate espionage, theft of trade secrets, whistleblowing via alleged blackmail and extortion, the Award tells us virtually nothing of substance about just what the hell went wrong among the parties. About all that we know is that six years of arbitration involved something to do with "the alleged failure of Respondents to pay sums due to Claimant . . ." For what it's worth, that explanation isn't worth much.