Firm Wants FINRA Award Nixed After 'Inattentive' Zoom Panel

By Dean Seal
Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.

Sign up for our Asset Management newsletter

You must correct or enter the following before you can sign up:

Select more newsletters to receive for free [+] Show less [-]

Thank You!

Law360 (May 6, 2020, 9:41 PM EDT) -- Wunderlich Securities Inc. is asking a New York federal judge to vacate an $11.4 million award allegedly handed down with threadbare justification by a FINRA panel that didn't appear to be paying attention during the arbitration's final hearing held on Zoom.

The broker-dealer, which was acquired by B. Riley Financial Inc. in July 2017, claims in a petition filed Tuesday that the three arbitrators sitting on the Financial Industry Regulatory Authority's panel excluded crucial evidence, issued inconsistent rulings and otherwise appeared distracted throughout the case between Wunderlich and a former wealth management business that its parent company purchased in 2015.

Then on April 7, the panel issued an order awarding $11.4 million to Wunderlich's adversary, Dominick & Dickerman LLC, but failed to provide a ruling on whether the claims had been established by Dominick, whether Wunderlich committed fraud and whether it was liable, Wunderlich said, asking that the award be vacated.

"Simply put, the panel failed to satisfy its most fundamental and basic obligation — issuing a ruling on the claims presented to it," according to Tuesday's petition. "Here, no basis for the more than $11 million remedy imposed is identified anywhere in the award, and it should be vacated."

The underlying dispute is related to the acquisition of Dominick's assets by Wunderlich's parent company. The parties had originally entered into a stock-and-cash agreement in 2014, but renegotiated and struck new terms that left out any cash consideration before closing the deal in January 2015, at which time Dominick's assets were assigned over to Wunderlich Securities.

Weeks after Wunderlich's parent company was acquired in July 2017, Dominick and its chairman filed a dispute to FINRA arbitration, claiming Wunderlich and founder Gary Wunderlich lied about the parent company's financial condition leading up to the Dominick purchase — "despite knowing full well that, shortly before closing, [the Wunderlich parent company] dispensed with the $2.5 million cash component of their deal," Tuesday's petition notes.

The arbitration was held across three sessions in December and six more this past March, all of which were held in person except for the last one, which was held via Zoom video conference because of the COVID-19 outbreak.

According to Wunderlich, the award ultimately handed down was the result of proceedings in which the FINRA panel "failed to afford petitioners a full and fair opportunity to present their case." In at least two instances in March, the panel unfairly precluded Wunderlich from presenting material evidence on key issues, but gave the opposite treatment to its adversary, the firm claims.

"The only explanation for these conflicting rulings — both of which favored respondents — is that the panel was biased," Wunderlich said. "Respondents were permitted to put on their case and cross-examine witnesses on whichever topics they wished, but petitioners were not."

The arbitrators were also "effectively advocating" for Dominick throughout the case, Wunderlich said, and when they were not "interrupting testimony, they would appear to be inattentive and failed to follow the proceedings." This culminated with the final hearing, held virtually, in which one arbitrator continually looked at other screens, another blocked her screen for a period of time and, during closing arguments, the third simply walked away from the screen, the petition alleges.

Wunderlich was so troubled by the behavior that it asked the panel the following day to recuse itself, but the motion was unanimously denied. Then came the award on April 7, which lacked any rulings and even awarded Dominick and its chairman attorney fees, despite their failure to submit evidence of those fees, Wunderlich said.

"While FINRA does not require the panel to explain its reasoning, the panel must at least rule on each of the counts brought by each of the claimants against each of the petitioners and give some basis for the more than $11 million remedy it imposed — something which the panel failed to do," Wunderlich contends. "Even a jury would need to address each count in a complaint to discharge its duty. That was not done here."

Counsel for Wunderlich did not immediately respond to a request for comment Wednesday evening.

Wunderlich and its founder are represented by Jeffrey B. Korn of Willkie Farr & Gallagher LLP, James M. Woolsey III of Landman Corsi Ballaine & Ford PC and Donald J. Kelly and Bob E. Craddock Jr. of Wyatt Tarrant & Combs LLP.

Counsel information for Dominick and its chairman was not immediately available Wednesday.

The case is Wunderlich Securities Inc. et al v. Dominick & Dickerman LLC et al., case number 1:20-cv-03507, in the U.S. District Court for the Southern District of New York.

--Editing by Amy Rowe.

For a reprint of this article, please contact

Hello! I'm Law360's automated support bot.

How can I help you today?

For example, you can type:
  • I forgot my password
  • I took a free trial but didn't get a verification email
  • How do I sign up for a newsletter?
Ask a question!