A motion filed in federal court by Stifel Financial seeks to vacate an arbitration award against the firm, based on a claim that one of the arbitrators was biased, AdvisorHub reports.
Stifel is challenging a decision in March by a panel of three Financial Industry Regulatory Authority arbitrators. They awarded Stifel clients David Jannetti of Miami and his three children $132.5 million in damages and legal fees in a dispute over the structured note strategy of broker Chuck A. Roberts.
The Jannettis alleged that they were misled into believing that Stifel was using low-risk structured notes in their investments. They accused the Missouri-based firm of breach of fiduciary duty, negligence, negligent supervision, fraud, breach of contract, and violation of the Florida Securities and Investor Protection Act. In ruling against Stifel, the FINRA arbitrators said that Stifel “had actual knowledge of the wrongfulness of the conduct and the high probability that injury or damage to [the Jannettis] would result and, despite that knowledge, intentionally pursued that course of conduct, resulting in damage.”
The panel said Stifel failed “to exercise heightened supervision, including retraining as required” for Roberts, adding that the firm’s “egregious conduct” caused an overconcentration of structured notes and limited industries in the Jannettis’ accounts.
In its motion challenging the arbitrators’ decision, Stifel contends that one of the FINRA arbitrators, Stephanie Charny, was biased and refused to recuse herself from the case even though Stifel requested that she do so. The firm alleged that a previous FINRA arbitration ruling involving similar claims against Stifel and Roberts demonstrated Charny’s prejudice. In that case, $14.3 million was awarded to Louis and Elizabeth Deluca and their business, UBS Inc. They alleged that Stifel Financial failed to supervise the structured note strategy of Roberts, who recommended investments that resulted in losses.
The new filing by Stifel, in federal court in South Florida, asserts that the arbitrator’s “evident partiality and misbehavior prejudiced Stifel and deprived it of a fundamentally fair hearing.” The firm said the FINRA award was “a shocking, runaway award in a FINRA arbitration that was infected with fundamental prejudice by a panel member who had already pre-determined that Stifel had acted improperly and lied about her ability to be impartial when she refused to step aside.”
Stifel said the award’s compensatory damages were “excessive”, the punitive damages were “grossly excessive,” and the granting of attorney fees had “no basis.” The arbitration award far exceeded the $5 million in damages the claimants requested.
A Stifel spokesperson and a lawyer for the Jannetti family, Jeff Erez in Miami, declined to comment. A FINRA spokesperson said Charny was unavailable to comment due to confidentiality requirements for arbitrators.
The attorneys at Lewitas Hyman have handled hundreds of arbitrations before FINRA, the Chicago Board Options Exchange, the Chicago Board of Trade, JAMS, the American Arbitration Association and other self-regulatory organizations nationwide. We have also appeared in courts throughout the United States in various securities-related matters. For more information about our arbitration and litigation services, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.
