Stephen M. Budai and Virginia L. Bellows, et al v. Brookstreet Securities Corporation, Craig L. Freedman, et al.
Published: Feb. 18, 2006 | Result Date: Dec. 22, 2005 | Filing Date: Jan. 1, 1900 |Case number: 0408798 – $0
Facts
The claimants are Stephen Budai and Virginia Bellows and the respondents are Brookstreet Securities Corporation, Craig Freedman, Freedman Financial Group LLC and Logan Capital Management.
The claimants alleged the following causes of action: suitability, breach of duty of fair dealing, breach of contract, breach of fiduciary duty, failure to follow directions, lost opportunity, negligence, respondeat superior and securities fraud. The causes of action are connected to the claimants' claim that respondent Freedman made unsuitable investment choices in various unspecified technology stocks for the claimants' IRAs. This resulted in the claimants being subject to losses of nearly 60% of their initial investment. The claimants claimed that respondent Freedman did not honor their stated financial strategy. This entailed protection of principal. Further, respondent Freedman did not implement stop-loss orders on their investments even though the claimants issued instructions to do so. The claimants also claimed that respondents Brookstreet and Logan Capital did not help the claimants in any manner in regard to their investment losses and at no time contacted them about a new investment strategy that would have slowed down losses, or to confirm that respondent Freedman was following the claimants' directions and striving for appropriate objectives.
Respondents Brookstreet, Craig Freedman and Freedman Financial denied the claims set forth in the Statement of Claim. They asserted affirmative defenses which included the following: the claimants failed to state a claim upon which relieft may be granted; the claimants were negligent supervising financial affiars and the operation of the brokerage accounts at issue; the claimants did not use the required due diligence when supervising financial affairs and the operation of their brokerage accounts at issue; the claimants have suffered no recoverable damages in relation what is claimed in the Statement of Claim; to the extent that the claimants have sustained damages, such damages are due to market conditions, not to the respondents' acts or omissions; the claimants explicitly ordered, approved, accepted, authorized, participated in and ratified the acts and transactions they complain about; the claimants through their own actions are thus estopped from recovery under the doctrines of ratification, waiver and estoppel; lastly, at all relevant times, respondent Brookstreet had an adequate and reasonable system of supervision and control of its employees; further, at all times, it acted in good faith, properly supervised its employees and never brought about any acts that would form a cause of action.
Damages
The claimants requested an award totaling $1,800,000 for compensatory damages, and in addition, costs, attorney fees, interest and any other relief the panel saw to be fair. Respondents Brookstreet, Craig Freedman and Freedman Financial requested that the claims be denied. Further they requested that they be awarded costs and attorney fees. The respondents also requested the panel order that all records in connection with the case be expunged from Respondent Craig Freedman's registration records. Such records are maintained by the Central Registration Depository ("CRD").
Result
Following consideration of the pleadings, the testimony and the evidence presented at the hearing, the undersigned arbitrators have decided in full and final resolution of the issues submitted for determination as follows: 1. The claimants' claims, each and all, are denied and dismissed with prejudice in their entirety; 2. To the extent not specifically awarded or otherwise provided for above, all other claims and requests for relief by any party hereto, including expungement, are denied with prejudice; and 3. Other than the Forum Fees noted, the parties shall each bear all other costs and expenses incurred by them in connection with this proceeding, including but not limited to attorney fees.
Other Information
Respondent Logan Capital is not a member of NASD. It did not voluntarily submit to NASD arbitration. A contract to arbitrate the disputes with Logan Capital was not presented. Thus, Logan Capital is not obligated by NASD rules to arbitrate. If Logan Capital had not voluntarily submitted, NASD would not have jurisdiction over it. It is agreed by the parties that the award here may be executed in counterpart copies. Alternatively, a handwritten, signed award may be entered. Either way, it has been agreed by the parties to receive conformed copies of the award. The originals will remain on file with NASD Dispute Resolution.
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