Award FiNRA Dispute Resolution

Award FiNRA Dispute Resolution In the Matter of the Arbitration Between: Claimants Case Number: 08-02874 Matt Lichtenberg David Living Trust Will F...
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Award FiNRA Dispute Resolution

In the Matter of the Arbitration Between: Claimants

Case Number: 08-02874

Matt Lichtenberg David Living Trust Will Ferreii Viveca Paulin Respondent

Hearing Site: Los Angeles, California

J.P. Morgan Securities LLC. f/k/a J.P. Morgan Securities, Inc., f/k/a Bear, Stearns & Co. Inc. Counter-Claimant J.P. Morgan Securities LLC, f/k/a J.P. Morgan Securities, Inc., f/k/a Bear, Stearns & Co. Inc. Counter-Respondents Matt Lichtenberg David Living Trust Will Ferreii Viveca Paulin Nature of Dispute: Customers vs. Member Member vs. Customers REPRESENTATION OF PARTIES Claimants/Counter-Respondents, Matt Lichtenberg ("Lichtenberg"), David Living Trust (the "David Trust"), Will Ferreii ("Ferreii") and Viveca Paulin ("Paulin"), hereinafter collectively referred to as "Claimants": H Thomas Fehn, Esq. and Orly Davidi, Esq., Fields, Fehn & ShenA^in, Los Angeles, Califomia. Respondent/Counter-Claimant, J.P. Morgan Securities LLC, f/k/a J.P. Morgan Securities, Inc.. f/k/a Bear, Stearns & Co. Inc., hereinafter referred to as "Respondent": Paul J. Schumacher, Esq. and Scott E. Rahn, Esq., Greenberg Traurig, LLP, Santa Monica, California.

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CASE INFORMATION Statement of Claim filed on or about: August 11. 2008 First Amended Statement of Claim filed on or about: January 23, 2009 Second Amended Statement of Claim filed on or about: June 9, 2009 Claimant Lichtenberg signed the Submission Agreement: August 11, 2008 Trustee Larry David signed the Submission Agreement on behalf of Claimant David Trust: January 22, 2009 Claimant Ferreii signed the Submission Agreement: January 22, 2009 Claimant Paulin signed the Submission Agreement: January 22, 2009 Statement of Answer, Motion to Dismiss, and Counterclaim filed by Respondent on or about: January 5. 2009 Amended Statement of Answer. Motion to Dismiss, and Counterclaim filed by Respondent on or about: February 17,2009 Respondent signed the Submission Agreement: January 5, 2009 Answer to Counterclaim filed by Lichtenberg on or about: January 22. 2009 Answer to Counterclaim filed by Ferreii and the David Trust on or about: January 29, 2009. CASE SUMMARY In the Statement of Claim dated August 11, 2008, Claimant Lichtenberg asserted that Respondent engaged in the unauthorized and unsuitable purchases of unspecified preferred securities in the accounts of two unnamed real parties in interest. Unless specifically admitted in its Answer, Motion to Dismiss, and Counterclaim, dated January 5. 2009, Respondent denied the allegations made in the Statement of Claim and asserted various afflrmative defenses. In its Counterclaim dated January 5, 2009, Respondent asserted a claim for indemnification against Claimant Lichtenberg. In his Answer to the Counterclaim dated January 22,2009, Claimant Lichtenberg denied the allegations made in the Counterclaim.

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In their Answer to the Counterclaim dated January 29,2009, Claimants Ferreii and the David Trust denied the allegations made in the Counterclaim. In the First Amended Statement of Claim dated January 23, 2009 Will Ferreii, Viveca Paulin, and the David Living Trust were added as Claimants. Claimants asserted that Respondent engaged in unauthorized and unsuitable purchases of unspecified preferred securities with regard to their respective accounts. Unless specifically admitted in its Amended Answer, Motion to Dismiss and Counterclaim dated February 17, 2009, Respondent denied the allegations made in the First Amended Statement of Claim and asserted various affirmative defenses. In its Amended Counterclaim dated February 17, 2009, Respondent asserted a claim for indemnification against all Claimants. In the Second Amended Statement of Claim dated June 9,2009, Claimants asserted that Respondent made unauthorized purchases of unspecified preferred securities with regard to their respective accounts. RELIEF REQUESTED In the Statement of Claim, Claimant Lichtenberg requested: 1. That the purchase of the securities at issue in this case be rescinded and that Respondent pay Ciaimant Lichtenberg the full purchase price of the securities in the amount of approximately $18,000,000.00; and 2. Interest at money maricet rates from the date of the investments. In exchange. Claimant Lichtenberg would reconvey the securities to Respondent. In the Statement of Answer, Respondent requested: 1. Dismissal of Claimant Lichtenberg's Statement of Claim in its entirety and with prejudice; 2. Costs; and 3. Such other relief as provided by law. In the Counterclaim, Respondent requested that Claimant Lichtenberg indemnify Respondent for any and all liability and damages detemnined against Respondent. In the First Amended Statement of Claim, Claimants requested: 1. That the purchase of the securities at issue in this case be rescinded and that Respondent pay Claimants the full purchase price of the securities in the amount of approximately $18,000,000.00; and 2. Interest at money market rates on the full amount from the date of the investments. In exchange. Claimants would reconvey the securities to Respondent.

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In the Amended Statement of Answer, Respondent requested: 1. Dismissal of Claimants' Amended Statement of Claim in its entirety and with prejudice; 2. Costs; and 3. Such other relief as provided by law. In the Amended Counterclaim, Respondent requested that Claimant Lichtenberg indemnify Respondent for any and all liability and damages detemriined against Respondent. Respondent also brought a counterclaim against Claimants Fen^eli, Paulin. and the David Trust for indemnification. In the Second Amended Statement of Claim. Claimants requested: 1. That the purchase of the securities at issue in this case be rescinded and that Respondent pay Claimants the full purchase price of the securities in the amount of approximately $18,000,000.00; and 2. Interest at money market rates from the date of the investments. In exchange. Claimants would reconvey the securities to Respondent. At the close of the hearing. Claimants requested rescission of the transactions in both the David Trust Account and the Ferrell/Paulin Account totaling $18,200,000.00 of preferred securities. Claimants in turn would pay Respondent $2,700,000.00. At the close of the hearing, Respondent made an additional request for attorneys' fees of $650,000.00, discovery sanctions, costs, and a dismissal of all claims with prejudice. OTHER ISSUES CONSIDERED AND DECIDED The Arisitrators acknowledge that they have each read the pleadings and other materials filed by the parties. At the beginning of the recorded evidentiary hearing held on November 1, 2010, Respondent made a motion to dismiss the Claimants' Claim. The Panel denied the motion. Respondent also made a motion for monetary sanctions against Claimants. The Panel denied the mofion. Claimants Ferreii. Paulin, and the David Trust did not appear in person at the evidentiary hearing, but appeared through their agent. Claimant Lichtenberg. The parties have agreed that the Award in this matter may be executed in counterpart copies or that a handwritten, signed Award may be entered.

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AWARD After considering the pleadings, the testimony and evidence presented at the hearing, the Panel has decided in full and final resolution of the issues submitted for detemnination as follows: 1. Claimants' claims are denied in their entirety and dismissed with prejudice. 2. Regarding Respondent's Counterclaim, Claimants are jointly and severally liable for and shall pay Respondent $600,000.00 in costs and attorneys' fees pursuant to the following: a. Trading Authorizations executed by Ferreii and Paulin, and Power of Attorney executed on behalf of the David Trust; b. Cal. Civil Code ยง 2772; c. Roozv. Kimmel (App. 1 Dist. 1997) 64 Cai.Rptr.2d 177, 55 Cal.App.4th 573; d. Todd Shipvards Coro. v. Cunard Line Ltd.. 943 F.2d 1056 (9th Cir. 1990); e. Mastrobuono v. Shearson Lehman Hutton. Inc.. 514 U.S. 52, 61 (1995); f. Advanced Micro Devices v. Intel Coro.. 9 Cal. 4th 362. 384 (1994); g. FINRA Code of Arbitration Procedure Rule 10330(e); h. Johnson, et al. v. CISC Oppenheimer Corp. et al.. Pacific Stock Exchange Case No. 98-S017; i. Vildosola. et al v. UBS Financial Services Inc.. Citigroup Global Martlets Inc. and Juan Ignacio Cabanas Vildosola. FiNRA Case No. 06-05306 (July 30, 2008); j. Marshall & Co.. Inc. v. Duke. 114 F.3d 188 (11th Cir. 1997); and k. Weber V. UBS Financial Sen^ices. Inc.. et al.. NASD Case No. 03-05403 (2005). 3. Claimants are jointly and severally liable for and shall pay Respondent $22,500.00 for discovery abuse and failure to comply with the forum's discovery rules and procedures. After three motions to compel discovery by Respondent and three orders from the Panel, Claimants were still supplying ordered documents on the afternoon of the second day of the evidentiary hearing. 4. All other claims regarding Respondent's Counterclaim are denied. 5. Any and ail relief not specifically addressed herein is denied. FEES Pursuant to the Code, the following fees are assessed:

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Filing Fees FINIRA Dispute Resolution assessed a filing fee* for each claim: Initial Claim filing fee Counterclaim filing fee

=$ 1,800.00 =$ 3.700.00

*The filing fee is made up of a non-refundable and a refundable portion. Member Fees Member fees are assessed to each member finm that is a party in these proceedings or to the member finn(s) that employed the associated person(s) at the time of the events giving rise to the dispute. Accordingly, as a party J.P. Morgan Securities LLC, f/k/a J.P. Morgan Securities. Inc.. f/k/a Bear. Stearns & Co. Inc.. is assessed the following: Member surcharge = $ 3,750.00 Pre-hearing process fee = $ 750.00 Hearing process fee = $ 5,500.00 Adiournment Fees Adjournments granted during these proceedings for which fees were assessed: January 11-15,2010, adjournment by Claimants = $ 1,200.00 The Panel assessed $1,200.00 of the adjoumment fees jointly and severally to Claimants. Discoverv-Related Motion Fees Fees apply for each decision rendered on a discovery-related motion. One (1) Decision on discovery-related motions on the papers with one (1) arisitrator @ $200.00 Claimant submitted one discovery-related motion Total Discovery-Related Motion Fees

=$

200.00

=$

200.00

The Panel has assessed $200.00 of the discoveryrrelated motion fees jointly and severally to Claimants. Contested Motion for Issuance of a Subpoena Fees Fees apply for each decision on a contested motion for the issuance of a subpoena. One (1) Decision on a contested motion for the issuance of a subpoena Three (3) arisitrators @ $600.00

= $ 600.00

Totai Contested Motion for Issuance of Subpoenas Fees

= $ 600.00

The Panel has assessed $600.00 of the contested motion for issuance of subpoenas fees jointly and severally to Claimants.

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Hearing Session Fees and Assessments The Panel has assessed hearing session fees for each session conducted. A session is any meeting between the parties and the ari3itrator(s), including a pre-hearing conference with the ari}itrator(s) that lasts four (4) hours or less. Fees associated with these proceedings are: Six (6) Pre-hearing sessions with the Panel @ $1,200.00/session May 1.2009 Pre-hearing conferences: 1 session May 26, 2009 1 session July 10. 2009 1 session May 26, 2010 1 session September 2, 2010 1 session October 26. 2010 1 session

= $ 7.200.00

Six (6) Hearing sessions Hearing Dates:

= $ 7,200.00

Total Hearing Session Fees

$1,200.00/session November 1. 2010 November 2,2010 November 3,2010

2 sessions 2 sessions 2 sessions = $14,400.00

The Panel has assessed $12,000.00 of the hearing session fees jointly and severally to Claimants. The Panel has waived $2,400.00 of the hearing session fees for the May 1. 2009 and July 10,2009 pre-hearing conferences. All balances are payable to FINRA Dispute Resoiution and are due upon receipt.

FINRA Dispute Resolution Arbitration No. 08-02874

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