By George Miller of Shustak Reynolds & Partners, P.C. posted on Friday, June 8, 2012.

The firm announces that it obtained a $622,000.00 FINRA arbitration award against Fidelity Brokerage Services LLC (“Fidelity”) on behalf of an 86 year old investor who had opened a joint account at a San Diego Fidelity office. The amount awarded the firm’s client is approximately $100,000.00 more than the total compensatory damages requested and includes an award of $272,000.00 in legal fees and costs.

According to Erwin Shustak, the firm’s managing partner, the elderly investors opened an account at a San Diego Fidelity branch and wanted to transfer into that account the contents of their existing account which consisted of stocks, cash and margin debt. The elderly couple told the Fidelity advisor who met them at the Fidelity office and opened the account that they did not have wills; both were in their 80’s and they wanted to ensure the account assets would transfer one to the other without probate in the event of either’s death. The claim alleged that the Fidelity representative who opened the account knew the substantial assets being transferred into Fidelity were coming from an account the couple had at TD Ameritrade which was specifically titled as a “Joint Tenancy”, meaning the assets would pass to the survivor, by operation of law, without the need for any probate.

The Fidelity representative who met the couple and opened up the account, however, mistakenly opened the Fidelity account as “Joint Tenants in Common”. The evidence proved the Fidelity form was improperly written-as there is no legal form of ownership known as “Joint Tenants In Common”-and the Fidelity representative was not knowledgeable about the types of co-ownership available. When the wife died a few months later, Fidelity refused to correct their error; “froze” half of the account; denied the husband access to deposit or withdraw funds into or out of the account to meet margin calls and proceeded to sell off substantial amounts of quality stocks to pay its own margin calls.

The Shustak firm was able to prove the Fidelity form was poorly drafted and, in fact, the form subsequently was modified to make it easier to understand and distinguish between the types of co-ownership. The firm also proved Fidelity personnel were negligent in opening the account and mishandling the problem once the wife died.

The $622,000.00 award includes $350,000.00 in compensatory damages and $272,000.00 in legal fees and costs. The Panel concluded there was no contractual or statutory basis on which to award attorneys’ fees but nonetheless “determined that it had the authority to award attorneys’ fees in this case” because both parties requested them. Claimant requested attorney’s fees in his Statement of Claim. While Fidelity did not request attorneys’ fees in its Answer, at the close of hearings Fidelity’s counsel presented detailed fee statements and orally requested that Fidelity be awarded its attorneys’ fees. An excellent example of application of the rule embodied in law and in the FINRA Arbitrator’s Manual-when both sides to a securities arbitration request legal fees and costs, the Panel has the authority to award costs and fees to the prevailing party.

Partner Thomas Frost, associate Mary Scott-Hattendorf (who had her first child during the hearings) and senior paralegal Dominic Giovanniello handled the case for Shustak Reynolds & Partners.

Our firm handles a wide range of securities and FINRA related issues and has substantial expertise and experience in the securities and brokerage business. If you believe you have been damaged as a result of broker-dealer negligence please contact our firm’s managing partner, Erwin Shustak, at 619.696.9500 or [email protected].

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