Award FINRA Office of Dispute Resolution · Statement of Answer filed by Respondents Citigroup,...

Award FINRA Office of Dispute Resolution

In the Matter of the Arbitration Between: Claimants Estate of Rosemary Seheult Nicolette Billings

Case Number: 16-02933

vs.

Respondents Citigroup Global Markets, Inc. Morgan Stanley Smith Barney, LLC David Lawrence Gray Gregg Stupinski

Hearing Site: Miami, Florida

______________________________________________________________________ Nature of the Dispute: Customers vs. Members and Associated Persons

This case was decided by an all-public panel.

REPRESENTATION OF PARTIES For Claimants the Estate of Rosemary Seheult and Nicolette Billings: Gregory A. Friedman, Esq., Friedman, Maguire & Carey, P.C., Chicago, Illinois. For Respondents Citigroup Global Markets, Inc. (“Citigroup”), Morgan Stanley Smith Barney, LLC (“Morgan Stanley”), David Lawrence Gray (“Gray”) and Gregg Stupinski (“Stupinski”): Adam Kauff, Esq., Kauff Laton Miller LLP, New York, New York.

CASE INFORMATION

Statement of Claim filed on or about: October 4, 2016. Nicolette Billings signed the Submission Agreement: December 10, 2017. Estate of Rosemary Seheult signed the Submission Agreement: December 10, 2017. Statement of Answer filed by Respondents Citigroup, Morgan Stanley and Gray on or about: November 30, 2016. Citigroup signed the Submission Agreement: December 1, 2016. Morgan Stanley signed the Submission Agreement: December 1, 2016. David Lawrence Gray signed the Submission Agreement: December 1, 2016. Gregg Stupinski did not sign the Submission Agreement and did not file an Answer. Motion for Leave to file Amended Statement of Claim filed by Claimants on or about: May 1, 2017. Response to Claimants’ Motion for Leave to File Amended Statement of Claim filed by Respondents on or about: May 19, 2017. Amended Statement of Claim filed by Claimants on or about: May 1, 2017.

FINRA Office of Dispute Resolution Arbitration No. 16-02933 Award of 7

Motion for Expungement filed by Respondents on or about: January 31, 2018. Response to Respondents’ Motion for Expungement filed by Claimants on or about: February 7, 2018. Reply in Further Support of Motion for Expungement filed by Respondents on or about: February 8, 2018.

CASE SUMMARY In the Statement of Claim, as amended, Claimants asserted the following causes of action: breach of fiduciary duty; negligence; negligent misrepresentation; negligent supervision; violation of Florida Statutes to protect elderly persons; and common law fraud. The causes of action relate to various mutual funds that were purchased and sold in Claimants’ account. Unless specifically admitted in the Statement of Answer, Respondents Citigroup, Morgan Stanley and Gray denied the allegations made in the Statement of Claim and asserted various affirmative defenses.

RELIEF REQUESTED In the Statement of Claim, as amended, Claimants requested: compensatory damages in an amount in excess of $300,000.00; punitive damages in an amount to be determined by the Panel; attorneys’ fees; costs; and such additional relief as the Panel deemed just and proper. In their Statement of Answer, Respondents Citigroup, Morgan Stanley and Gray requested dismissal of the Statement of Claim in its entirety and expungement of this complaint from the Central Registration Depository (“CRD”) records of Respondent Gray. At the close of the hearing, Claimants requested: between $275,000.00 and $300,000.00 in compensatory damages, plus $46,000.00 in commissions paid; treble damages; $10,000,000.00 in punitive damages; costs of the arbitration; and expert witness fees.

OTHER ISSUES CONSIDERED AND DECIDED

The Arbitrators acknowledge that they have each read the pleadings and other materials filed by the parties.

On or about May 1, 2017, Claimants filed a Motion for Leave to File Amended Statement of Claim for the purposes of clarification of the claim and to add an additional party, Respondent Stupinski. In their Response, Respondents asserted that Claimants are not legally or factually entitled to any recovery and their claims against Respondent Stupiniski are baseless. On June 8, 2018, the Panel issued an Order grating Claimants’ Motion for Leave to File Amended Statement of Claim.


Respondent Stupinski did not file with FINRA Office of Dispute Resolution a properly executed Submission Agreement or an Answer to the Statement of Claim but is required to submit to arbitration pursuant to the Code of Arbitration Procedure (“Code”) and having appeared and testified at the hearing, is bound by the determination of the Panel on all issues submitted.

At the conclusion of Claimants’ case-in-chief, Respondents moved for dismissal. The Panel denied the motion on the basis that additional testimony was needed to make their decision on the case.

On or about January 31, 2018, Respondents filed a Motion for Expungement requesting expungement of this matter from the CRD records of Respondents Gray and Stupinski pursuant to FINRA Rules 2080 and 12805. In their response, Claimants objected to the Motion and submitted that the Motion must be denied. In their reply, Respondents reiterated that the Panel should order that the customer dispute information related to Claimants’ complaint be expunged from the CRD records of Respondent Gray and Respondent Stupinski.

The Panel conducted a recorded telephonic hearing on March 16, 2018, so the parties could present oral argument and evidence on Respondents Gray and Stupinski’s request for expungement. Claimants participated in the expungement hearing and contested the request for expungement. The Panel noted that Respondents Gray and Stupinkski did not previously file a claim requesting expungement of the same disclosure in the CRD.

In recommending expungement, the Panel relied upon the following documentary or other evidence: BrokerCheck® Reports for Respondents Gray and Stupinkski; documentary evidence accepted into evidence at the final hearing; documents referred to at the expungement hearing and the credible testimony presented at the final hearing and recorded telephonic expungement hearing.

The parties present at the evidentiary hearing and expungement hearing have agreed that the Award in this matter may be executed in counterpart copies or that a handwritten, signed Award may be entered.

AWARD After considering the pleadings, the testimony and evidence presented at the in-person evidentiary hearing and the recorded telephonic expungement hearing, and the post-hearing submissions, the Panel has decided in full and final resolution of the issues submitted for determination as follows: 1. Claimants’ claims are denied in their entirety.

2. Other than forum fees which are specified below, the parties shall each bear

their own costs and expenses incurred in this matter.


3. Any and all claims for relief not specifically addressed herein, including Claimants’ requests for punitive damages, treble damages and attorneys’ fees, are denied.

4. The Panel recommends the expungement of all references to the above-captioned

arbitration from registration records maintained by the CRD, for Respondents David Lawrence Gray (CRD # 2502267) and Gregg Stupinski (CRD #2068917), with the understanding that, pursuant to Notice to Members 04-16, Respondents Gray and Stupinski must obtain confirmation from a court of competent jurisdiction before the CRD will execute the expungement directive. Unless specifically waived in writing by FINRA, parties seeking judicial confirmation of an arbitration award containing expungement relief must name FINRA as an additional party and serve FINRA with all appropriate documents. Pursuant to Rule 12805 of the Code, the Panel has made the following Rule 2080 affirmative finding of fact: The claim, allegation, or information is false. The Panel has made the above Rule 2080 finding based on the following reasons: The Panel considered Claimants’ and Respondents’ documentary evidence accepted into evidence at the final hearing, and referenced to by counsel during the recorded telephonic expungement hearing; the credible, sworn testimony of witnesses and experts presented at the final hearing; and the credible testimony presented during the expungement hearing. The Panel also reviewed the BrokerCheck® Reports for Respondent Gray and Respondent Stupinski and noted that there was no settlement between the parties prior to the expungement hearing. The Panel accepted the testimony presented at the expungement hearing as to lack of additional events from both movants and the explanation of prior events by Respondent Stupinski as credible. Much of the expungement hearing was dedicated by the parties to rearguing arguments made at the final hearing. The Panel considered that, overall, the account had a profit and that the market conditions during certain times the account was in place were in significant unanticipated flux justifying change in some or all of the positions held. The Panel believed that a portion of Claimants’ argument was flawed and/or not supported by the credible evidence. After several days of in-person final hearings, including full consideration by the Panel of all admitted documentary evidence; full consideration of all testimony deemed credible by the Panel; review of the BrokerCheck® Reports; and after the testimony at the expungement hearing, the Panel determined that Claimants’ claims, allegations or information are false as to both movants, Respondent Gray and Respondent Stupinski, justifying expungement from their CRD records of any reference to all the claims presented this arbitration. Pursuant to Rule 12805 of the Code, and after hearing oral arguments and considering pleadings submitted by the parties, the Panel has made the following Rule 2080 finding of fact: (c) the claim, allegation or information is false.


FEES Pursuant to the Code, the following fees are assessed: Filing Fees FINRA Office of Dispute Resolution assessed a filing fee* for each claim:

Initial Claim Filing Fee =$ 2,250.00 *The filing fee is made up of a non-refundable and a refundable portion. Member Fees Member fees are assessed to each member firm that is a party in these proceedings or to the member firm(s) that employed the associated person(s) at the time of the event(s) giving rise to the dispute. Accordingly, as a parties, Respondents Citigroup and Morgan Stanley are each assessed the following: Respondent Citigroup

Member Surcharge =$ 3,600.00 Member Process Fee =$ 6,800.00

Respondent Morgan Stanley

Member Surcharge =$ 3,600.00 Member Process Fee =$ 6,800.00

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 arbitrator(s), including a pre-hearing conference with the arbitrator(s) that lasts four (4) hours or less. Fees associated with these proceedings are: One (1) pre-hearing session with a single arbitrator @ $450.00/session =$ 450.00 Pre-hearing conference: September 18, 2017 1 session One (1) pre-hearing session with the Panel @ $1,125.00/session =$ 1,500.00 Pre-hearing conference: March 1, 2017 1 session Fourteen (14) hearing sessions @ $1,125.00/session =$15,750.00 Hearing Dates: December 5, 2017 2 sessions December 6, 2017 2 sessions December 7, 2017 2 sessions

December 8, 2017 2 sessions January 16, 2018 2 sessions January 17, 2018 2 sessions January 18, 2018 2 sessions One (1) hearing session on expungement request @ $1,125.00/session =$ 1,125.00 Hearing Date: March 16, 2018 1 session ______________________________________________________________________


Total Hearing Session Fees =$18,825.00 The Panel has assessed $8,850.00 of the hearing session fees jointly and severally to Claimants. The Panel has assessed $9,225.00 of the hearing session fees jointly and severally to Respondents, which includes the entire hearing session fee on expungement. The Panel has assessed $750.00 of the hearing session fees jointly and severally to Respondents Citigroup, Morgan Stanley and Gray. All balances are payable to FINRA Office of Dispute Resolution and are due upon receipt.

March 29, 2018

Award FINRA Office of Dispute Resolution · Statement of Answer filed by Respondents Citigroup,...

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