The All-Public FINRA Securities Arbitration Panel – is it any better?

In February 2011, FINRA started allowing claimants to choose an all-public panel in securities arbitrations. I thought it was window-dressing. I did not think that the presence or absence of a non-public arbitrator would make a difference. In 2011, FINRA analyzed 30 cases that went to hearing after the arbitrator selection rule was instituted. Public customers were awarded a “win” 54% of the time with an all-public panel as opposed to 18% in a regular panel. Claimants’ lawyers started beating their chest about how this proved the system was previously rigged against public customers. I was unconvinced. In part this was due to the small sample.

In 2012, the percentage of “wins” in all-public panels had decreased by five percentage points, but the win percentage for mixed panels had increased from 18% to 33%. This was the first full year of analysis. I was still unimpressed. I still felt that cases that go to trial are the difficult ones anyway, so the run-of-the-mill case never sees the light of day. However, the sample was much larger, a total of 210 cases, so I simply had to rely on my gut to say that all-public panels were a sham to make people feel better.

The statistics for 2013 were just released here. Through the end of July 2013, 73 cases were decided by all-public panels and 68 by mixed panels. in the all-public cases, 42% were “wins” for Claimants, although there is no analysis of the size of the award. On the mixed side, 41% were “wins” for customers. Now this is a smaller data set, and it is only a partial year. But if this keeps up, how long will it be before someone from the Claimants’ bar starts complaining that arbitration in general is unfair?

I won’t be surprised to see the statistics remain fairly consistent through the end of the year. Then what do we do?

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

FINRA warns about marijuana stock scams.

This should come as no surprise. A topic is in the news and scammers figure out a way to make a profit, sometimes faster than the actual industry that is the subject of the scam. In this case, FINRA is concerned about scammers touting marijuana stocks, as in investments not inventory. Or maybe inventory, who knows?

In the Investor Alert, FINRA warns about the importance of spotting a potential scam and being circumspect when approached.

Perhaps the humor is only noticed by me, but FINRA warned of one company that was being touted as a wonderful investment. “Yet the company’s balance sheet showed only losses, and the company stated elsewhere that it was only beginning to formulate a business plan.” FINRA says in the Alert. Am I the only one who is not surprised that a marijuana grower has not gotten around to formulating a business plan? Maybe once the grower satisfies its insatiable appetite for Doritos, they’ll get around to it.

Please, people, if it is too good to be true, just walk away or hang up. Unless you’re me and you get cold-called. Then get the name of the broker and the firm, then hang up. Then write a blog post about the broker. But I digress.

That’s the sober view of one Lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

Not great news for Merrill Lynch brokers.

The rumor has been around for a while. Brokers were whispering that Bank of America doesn’t want to own the Merrill Lynch salesforce any more. That the cultures are too different.

Well don’t get your hopes up, people. Bank of America has announced that it is doing away with the parent company, Merrill Lynch & Co., which the bank owns, and will make the broker-dealer, Merrill Lynch Pierce Fenner & Smith, Inc., a direct subsidiary of the bank. OnWallStreet magazine reports that the bank is doing this, in part, to ease reporting.

The bank says it will be business as usual (which, in my view, means that the beatings will continue until morale improves) for the customers and clients. Let’s see, what was business as usual? Oh yeah, cheating (had another word there, thought better of it) brokers out of their FCAAP accounts, that was business as usual. Forcing those brokers to file lawsuits and arbitrations to get the money. That was business as usual. Letting the bank make wrong-headed firing decisions. That was business as usual.

Congratulations, Merrill Lynch brokers, the bank is now one level closer in controlling your life. Aren’t you happy?

That’s the bearish view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

The latest cold caller, “Mark Sinclair”

So, once again, a cold caller braved the telephone tree to call me. He said his name was “Mark Sinclair.” He told me he was calling from “Myers Associates.” I asked him how to spell the company’s name. He said it was Myers. I can’t find a “Myers Associates” in FINRA’s database.

I can find a Meyers Associates LLP in FINRA’s database. But there is no Mark Sinclair listed as registered in their New York office. There is no person with the name Sinclair in their office. And that appears to be their only office. So I’m not sure where he called from and he blocked his caller ID (first sign of trouble).

So here’s what Mark Sinclair, if that is his real name, told me. He told me that I spoke to someone else from his firm (highly doubtful, if not completely untrue) and that person made a recommendation to me (completely untrue). Mark was calling to follow up with me. How thoughtful is that? A guy I don’t know called me from a firm I’ve never heard of to follow up on a non-existent stock pick. I’m “honored.”

I, of course, asked “Mark” if he had looked me up on the Internet. Of course, he hadn’t. I asked him if he knew what I did for a living. He told me he didn’t. Then I told him. Then I hung up.

Do people fall for this stuff? I guess they must or these guys wouldn’t keep calling. I wish they would stop.

That’s the annoyed and bemused view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

Wells Fargo prevails in a promissory note case, or did they?

Remember the case I was ranting about? The one where Wells Fargo’s lawyers billed for ridiculous tasks and ridiculous amounts of time. They can be found here and here. Well, the award came out. My client was ordered to pay Wells Fargo everything they asked for in principal and interest on the promissory notes. The total was about $169,000. But that’s not the entire story.

My client was awarded $5,000 in discovery sanctions. Wells Fargo did not produce documents in a timely manner. In fact, one file was not produced until late morning on the second, and final, day of the hearing. So now their net is down to about $164,000.

Wells Fargo, as a member of FINRA, had to pay “Member Fees” of $5,200. Now their net is down to about $158,800. They had to pay $200 for a decision on one discovery-related motion. Now the balance is about $158,600.

The panel assessed $3,465 of hearing session fees against Wells Fargo. Now the balance is about $155,135.

The attorneys’ fees, before we had motion practice on the reasonableness of the fees, were just over $154,000. Since we’re rounding, we won’t be precise. But that now brings the net down to about $1,135.

Oh, and my client received an expungement of a defamatory U-5 filing the subject of which is what caused him to leave Wells Fargo in the first place.

So, after nearly two years of demanding payment and litigating, Wells Fargo ended up without a significant producer and ahead about $1,135. I forgot to add in the travel costs for 3 Wells Fargo employees who were witnesses. We’ll call it a wash for them, at best. So they lost a producer and, at best, ended up with no net recovery on the promissory notes.

If Wells Fargo had simply believed my client in the first place, not pursued the promissory note and not pursued the other part of the case (which the firm lost), they would have ended up ahead. Oops.

Not every case goes like this. This was a unique set of facts. But this is one of those times where being on the losing end still feels like a win.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

Welcome to the party, Ken Abbas (real name Kumail Abbas) from C.K. Cooper & Co., Inc.

Dear Ken Abbas – As promised, I am mentioning your name in my blog. Unlike you, I like to tell people the truth. You see, you told me that we spoke in October of last year. We never spoke and you know it. Of course, in October of last year, you were working for a different company.

I asked you if you had looked me up on the internet and you said you hadn’t. I looked you up on and found that you have worked for a variety of unknown and barely known brokerage firms. Prior to that, it seems the only qualification you had for being a broker was working at Enterprise Rent-a-car, Taco Bell and Target after graduating from high school in 2004. Yes, Ken (which is not your real name, that is Kumail), I checked you out. And I’m not sure I would want to rent a car or buy a Big Beef Burrito from you, let alone take a securities recommendation.

You see, dear readers, the cold callers have gotten my name. I don’t know how. But they call me and think that I’m an idiot. I always ask “Do I know you?” and they always tell me about some stock recommendation that they made to me in the past, which is a blatant lie. So, with a relationship based on a lie, why would I do business with them. I can only imagine what they do to older people who are easily confused and not armed with the same information as me, including a healthy dose of skepticism.

Please, cold callers, do your homework. Check me out and then think twice about calling me. Better yet, don’t call me at all.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

A farewell to a truly great guy, Boyd Page

Before I was even a lawyer, I had heard of Boyd Page. Boyd had stepped into a case toward the very end and kicked our lawyer’s butt into the Gulf of Mexico. We later learned that, as to the central issue of the case, we were right and he was wrong, but neither side knew that Boyd’s client was lying through his teeth at the time.

Boyd gained a reputation that was bigger than he was. The tale was told that, early on, Boyd told his then-current employer that he wanted to do claimants’ securities work. The firm turned him down so he went on his own. The tale goes on that very early in his nascent practice he recovered a large sum for a client and the rest, as they say, is history. That history included being a founding member of PIABA but a frequent attendee of the SIFMA Compliance and Legal Conference as well.

Whenever I saw Boyd, he always had a smile on his face. He was always warm. Whenever I dealt with him, he always courteous and professional. I think it’s safe to say that he maintained good relationships with lawyers who were customer-oriented as well as defense-oriented. At one point, he represented Ernie Olde, the founder of the brokerage firm of the same name (now Ameriprise) and ruffled a few feathers. But Boyd paid them no mind.

Boyd’s firm was the launchpad for a number of other claimants’ lawyers. In my opinion, they were lucky to have worked with him.

Boyd’s presence will be missed. He was a true gentlemen. Those that remain behind have big shoes to fill.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin. Rest in peace, Boyd.

Further proof of the toothlessness of corporate billing policies.

We are continuing to analyze Wells Fargo’s counsel’s bills. Aside from identical billing entries for both identical or differing amounts, it seems that the firm may have figured out a way to recoup its investment, then waste it, on electronic discovery aids.

There are a number of paired entries where one legal assistant bills a .10 or .20 to tell another legal assistant to input documents into a Summation database. Summation, like the program our firm uses, Caselogistix, is a database that enables the law firm to categorize and search discovery documents, among other things. Then the second paralegal bills for importing the documents into the database and categorizing them.

The irony? I could see no laptop computer on the other side of the table. Summation has “briefcasing” abilities that allows the entire database, including the word index, to be saved on a laptop and used at trial. Caselogistix has the same functionality and I had my client’s entire database on my laptop. The other side, however, had a collection of banker’s boxes and no laptop in use that I could see. Whenever there was a document issue, I could see the senior associate leafing through the exhibit notebooks (one 4 incher and one 3 incher) trying to find a document to address the question. Again, no laptop.

Clients should not be paying for such inefficiency. I had Wells Fargo’s entire notebook in electronic form on my laptop. It was in a pdf file and I could word search it. I had better searching capabilities of Wells Fargo’s exhibit book than Wells Fargo did.

Wake up, corporate America. If you publish a billing policy, enforce it. I represent corporations with billing policies. I follow them. I have clients with e-billing and UTBMS codes. Most billing policies I’ve seen, other than one client that actually was part of FedEx, prohibit the routine use of overnight delivery services. But the fee affidavit I referred to was sent to me by email around 3:30 on Friday afternoon and then a hard copy was sent “Priority Overnight” for delivery Monday morning. I received it before 9:00 a.m. For what reason? Wells Fargo shouldn’t pay for this waste and neither should my client as the recipient of the fee application.

Dear reader (readers?), please instruct your staff about the judicious use of overnight delivery. If I am sent an email, what requirement is there to send a Priority Overnight FedEx, unless you have family members whose incomes depend on the success of FedEx?

I have represented very large corporations, and still do. But there are people within some corporations who seem to feel that a large law firm, with all of its inefficiencies, is the only way to get effective representation. Or the in-house decision-maker feels a large law firm provides “cover.” But when they do this, and pay the bills that contain obvious wastes of resources, how will a law firm ever become more efficient? Paying the bills of a firm that uses Summation in the office but not at trial, but instead sends a high-priced associate to manage the paper, rewards inefficiency. Most firms I represent will not allow two lawyers to attend a hearing without prior permission. Was there permission?

This was a $200,000 collection case. My firm has two lawyers and a paralegal. Wells Fargo is an enormous corporation. Did they think I was going to outgun them with my “vast” resources from the world HQ in Jupiter, FL? At one point they had five people working on this file. That’s two more people than I have in my firm. The staffing on this file was ridiculous as was the billing.

That’s the incredulous view of one lawyer from Jupiter, Florida. I’m Marc Dobin and I billed no one for this blog entry.

Florida Supreme Court rules – Statute of Limitations Applies to Securities Arbitration

The application of a limitations period in arbitration has always been a source of controversy. FINRA has its famous “six year rule.” But other than that, there didn’t seem to be much order when it came to applying a time limitation. Some arbitrators followed Florida or Federal law, some didn’t. It was the wild west.

Now there is order. The Florida Supreme Court has ruled that Florida law on time limitations applies to arbitration. In a unanimous ruling, the Court held that arbitration is a “civil action” for the purposes of Florida law. Therefore, the justices ruled, the Florida statutes of limitation apply.

What does this mean? First, it means that the time limitation for certain actions may be time-barred. Second, it means that the FINRA “six year rule” may not be the only deadline in play.

And remember the lawyers and regulators who wanted arbitration to be optional? Now arbitration will have the same time limitations as court.

That the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

Corporate Billing Policies – Proof They are a Joke.

Within the last 20 years, corporate billing policies have become much more prevalent. This was a result, in my opinion, of lawyers and law firms becoming pigs and billing for ridiculous things and outrageous amounts. Most law firms, chastened by this increased scrutiny, tightened up their billing practices and changed the way they do business. Most clients did so as well.

Well, I found an exception. As I mentioned, I just finished trying a case against Wells Fargo Advisors. In connection with that case, which was tried in less than two days, I submitted a bill for the work my firm did, including costs, to the arbitrators. That bill was in the low $30,000 range. That’s about right for a case of the type and size I was handling.

Opposing counsel, however, apparently did a lot more work than I did. Their bill was over $150,000! That’s not a typo folks. For a two day collection case, with defenses. At the hearing, the law firm sent a senior partner, at a higher rate than mine, and a senior associate, who’s rate was about 75% of mine. Collectively, the firm seems to have billed its client about $10.50 per minute for the hearing.

There are many outrageous entries. There’s a 36 minute entry by opposing counsel to review a two-line email that I sent to FINRA. Then a 12 minute entry to write a two-word response. There’s what appears to be duplicate billing. There’s billing for administrative tasks like changing the due date on a calendar. I saw at least one entry where the file was billed for one legal assistant to tell another what to do.

There’s billing for hours and hours of reviewing the arbitrators’ bios. There’s billing for “organizing arbitrator ranking award information.” I thought that corporate clients stopped paying for administrative tasks a long time ago. Apparently Wells Fargo is in the minority. The firm even paid for legal assistants to update pleading binders, a task that most corporate clients stopped paying for. If you’re a lawyer and you’re reading this, get Wells Fargo’s work. It seems that they either pay for stuff that most clients no longer pay for, or they don’t review their bills closely enough to see that they’re paying for things that their policy, if they have one, prohibits.

When I received this affidavit of fees on Friday, I only looked at the total. Now that we’re digging deep into the bill, we found that this firm, which claims to represent brokerage firms, charged their client to research FINRA rules on whether or not exhibit notebooks had to be exchanged. This is basic stuff. Any firm that does this work would know that there is no such requirement without spending 48 minutes to figure this out. They could have asked their client and only billed twelve minutes for that.

There are plenty more examples of entries that a corporate client should not pay but apparently did.

That’s the view of an astounded lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin and I did not bill my client for this message.