It doesn't happen very often. But on Wednesday, a Finra panel ordered a pair of investors to pay $75K for bringing 'frivolous' claims against a broker-dealer and one of its reps. The panel also admonished the duo for a 'bad-faith abuse of the Finra arbitration process.'
In an unusual case, an arbitration panel on Wednesday ordered two investors to pay Los Angeles-based brokerage firm Quincy Cass Associates Inc. and broker Jens Adolf Spitta $75,000 in legal expenses.
In its award, the panel called the investors' claims "frivolous" and "a bad-faith abuse of the Finra arbitration process."
The firm and Mr. Spitta incurred about $110,000 in costs, the panel said.
The award also ordered the claimants, Dr. Karl Heinrich Vogelbach and his son Andrew Vogelbach, to pay $6,000 of the $7,200 in forum fees.
In addition, the arbitrators ordered expungement of the case from Mr. Spitta's disciplinary record.
The panel said Karl Vogelbach was "wealthy, financially sophisticated, and aggressive in his approach to investing," and the "causes of his losses were his own independent decisions and market risks."
Regarding Andrew Vogelbach, "not a scintilla of evidence" was presented in the case to demonstrate that he had a contractual relationship with either of the respondents, the award said.
Andrew Vogelbach was not a client of Mr. Spitta's or Quincy Cass', said Sylvia Scott, a partner at Freeman Freeman & Smiley LLP, who represented the respondents.
The case is unusual in ordering investor claimants to pay legal costs. Arbitrators usually dismiss weak cases without awarding any damages.
"I think this award sends a strong message [to claimants who] bring a demonstrably frivolous lawsuit," Ms. Scott said.
"We disagree with the award and are looking at our options," said the Vogelbach's attorney, J. Christopher Wehrle, founder of Wehrle Law LLC.
