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A Bankruptcy, a Voluntary Dismissal, and a Death
January 20, 2022
As Woody Allen so famously quipped "I'm not afraid to die, I just don't want to be there when it happens." Ah yes, death is traumatic and inconvenient, especially our own. Be that as it may, a recent FINRA public customer arbitration highlights what happens when a party to a lawsuit dies before the case concludes and a verdict rendered.
Case in Point
In a FINRA Arbitration Statement of Claim filed in December 2020, public customer Claimant Struwe asserted unauthorized trading and unauthorized use of margin; qualitative and quantitative unsuitability; failure to supervise; breach of fiduciary duty; breach of contract; negligent misrepresentation and omissions. Claimant Struwe sought $278,633.28 plus interest in damages, $66,097.83 in disgorgement, and costs. In the Matter of the Arbitration Between William Struwe, Claimant, v. First Standard Financial Company LLC, Carl George Antaki, and Carmine Anthony Berardi, Respondents (FINRA Arbitration Award 20-04098)
https://www.finra.org/sites/default/files/aao_documents/20-04098.pdf
As set forth in part in the FINRA Arbitration Award:
The causes of action relate to stock in Abeona Therapeutics, Inc. and other unspecified securities in Claimant's account.
Respondents First Standard Financial, Antaki, and Berardi generally denied the allegations and asserted various defenses.
First Standard's Bankruptcy
In March 2021, Respondent First Standard filed for bankruptcy and that resulted in a stay of the claims against that firm. Accordingly, the FINRA Arbitration Panel rendered no determination at against Respondent First Standard.
Antaki Dismissed
In May 2021, Claimant voluntarily dismissed with prejudice his claims against Respondent Antaki, which prompted the Panel to make no determination as against said Respondent.
August 2021: Tentative Settlement
In August 9, 2021, the FINRA Arbitration Panel conducted a teleconference evidentiary hearing between Claimant Struwe and Respondent Berardi, who is indicated as having represented himself pro se. On August 10, 2021, Claimant Struwe and Respondent Berardi requested an adjournment of further arbitration hearings because they had reached a tentative settlement. The Panel granted the request and adjourned the hearings.
Evidentiary Hearings Scheduled for January 2022
The thing about characterizing something as "tentative" is that it acknowledges that there are loose ends. Sometimes, loose ends get tied up into a tidy knot. Sometimes, not. This time, we got a "not." At this juncture in the fact pattern, we are informed that:
Claimant did not withdraw the claim, indicating to the Panel that no settlement was reached. Additional evidentiary hearing dates were scheduled for January 10-12, 2022.
Alas, Claimant Struwe and Respondent Berardi had their chances to seal the deal via settlement but perhaps had second thoughts or balked at some last minute changes. Life and litigation have a way of upsetting our expectations. Oh well, y'know, no big deal, right? There's still those January 2022 evidentiary hearings the FINRA Arbitration Panel scheduled. Except, we got this to contend with:
On November 29, 2021, FINRA received notice that Berardi had passed away. . . .
Closing Arguments
As the FINRA Arbitration Award picks up the events, this is what we're told:
[O]n December 14, 2021, the Panel requested a brief from Claimant regarding whether the Panel had jurisdiction to render a final award in this matter. On December 21, 2021, Claimant filed a Memorandum Regarding Panel's Authority to Rule Regarding Respondent Carmine Anthony Berardi. On December 22, 2021, the Panel issued an order addressing whether, due to Berardi's passing after submission of evidence at the hearing, but before closing arguments, the Panel had jurisdiction to render a final award in this matter. The Panel unanimously concluded that there is continuing jurisdiction to proceed with closing arguments, after which the Panel shall close the evidentiary hearing and render a final award.
Award
After the Panel resumed evidentiary hearings on January 10, 2022, the arbitrators subsequently found the now-deceased Respondent Berardi liable to and ordered him to pay to Claimant $281,500 in compensatory damages plus interest.
Bill Singer's Comment
Something's missing from the FINRA Arbitration Award: Notably, why the hell did the Panel schedule January 2022 evidentiary hearings? The most obvious answer would be that Claimant and/or Respondent had informed the Panel that their tentative settlement had fallen through and the arbitration needed to proceed with further evidentiary hearings followed by closing arguments. You might infer that from the Award but, frankly, that inference is not warranted. If you go back and carefully read the Award, it offers no connection between the adjournment per the announced tentative settlement and the subsequent scheduling of the January 2022 evidentiary hearings. In fact, the only explanation that the Award presents is that "Claimant did not withdraw the claim, indicating to the Panel that no settlement was reached." The FINRA Arbitration Award asks us to fill in the blanks. That's disappointing. When FINRA publishes an Arbitration Award, we are entitled to something more than a connect-the-dots child's game.
After Claimant Struwe had informed the Panel about the tentative settlement but in the absence of his formal withdrawal of his claim, I can see how the arbitrators inferred that the arbitration was still unresolved. They're waiting for a second shoe to drop and there is none. But merely awaiting the sound of the thud of a second dropped shoe does not explain why the arbitrators scheduled three days of January 2022 evidentiary hearings. Did Claimant file a motion or submit a request for new hearing dates? That is not set out in the Award.
The Award states: "[a]dditional evidentiary hearing dates were scheduled for January 10-12, 2022." Not just closing arguments but additional evidentiary hearing dates. As it turns out, however, instead of conducting any further evidentiary hearings, the Panel "unanimously concluded that there is continuing jurisdiction to proceed with closing arguments, after which the Panel shall close the evidentiary hearing and render a final award." Unexplained in the FINRA Arbitration Award is why the Panel decided not to hear any further testimony per evidentiary hearings, and opted to finish up the hearings by going to closing argument.
Respondent Berardi died in November 2021 but the Award was published in January 2022. Why wasn't the arbitration caption changed sub nomine to Respondent Berardi's estate? Did Claimant Struwe move to stay the proceedings in order to re-title the caption? Did Claimant ask the Panel to delay the issuance of an Award pending a motion to amend the pleadings to add the Estate? All of which is the stuff of a law school exam and fertile fodder for many a debate about the applicable state of the law.
Notwithstanding the Award in his favor, Claimant Struwe will have to file a Motion to Confirm the arbitration award, and given Berardi's death, that action may need to be filed against Berardi's estate (assuming that there is one). Could be that Berardi left no assets behind. Could be he left millions. That's likely going to be an important issue. If Claimant Struwe seeks to collect on his Award, that could prompt Respondent Berardi's estate to move to vacate the Award or argue that its was improperly procured. Frankly, I can imagine a fascinating legal argument about why additional evidentiary hearing were scheduled for three days in January 2022 after the death of the Respondent but no further testimony was taken and only closing argument was entertained.