Arbitrators awarded a former partner at an adviser marketing firm more than $1 million and found fault in the way the other partners fired him, but both sides claimed victory in the case.
In a
Nov. 27 decision, an American Arbitration Association panel in Florida awarded Robert Sofia $1.013 million for breach of contract and fiduciary duty for the way that he was dismissed from Platinum Advisor Strategies and
Platinum Strategies, which provide marketing and communications support for independent financial advisers.
The total included $625,000 for Mr. Sofia's share of the firms as well as fees and expenses for attorneys and arbitrators. The amount of the damages was reduced by $10,000 because Mr. Sofia transferred that amount from a business account to his personal bank account unilaterally.
Mr. Sofia was a partner who also ran the daily operations for Platinum from 2009 until 2016, when he sought to leave to establish his own company. Mr. Sofia could not reach an agreement with Thomas Fross, Platinum president, and his brother Robert Fross, chief executive, regarding his payout.
In an April 19, 2016, email, the Frosses told Mr. Sofia that they were firing him and revoking his membership interest in Platinum after a vote of the majority members. The arbitrators ruled that the Frosses improperly terminated Mr. Sofia.
Mr. Sofia sought $2.7 million for his 27% stake in the company but was awarded about a third of that amount by the arbitrators.
"I'm grateful that the arbitrators thoroughly examined the evidence and came to a fair and balanced conclusion," Mr. Sofia wrote in an email. "It's disappointing that they didn't award me the full value of my shares, but having my position validated is more important than any monetary award."
SILVER LINING?
Thomas Fross found a silver lining.
"We were able to buy out a minority partner for a fraction of the value of his shares," Mr. Fross said. "We couldn't be more pleased."
But Mr. Fross is upset by the arbitrators' conclusion that he and his brother didn't treat Mr. Sofia appropriately.
"[O]ne could easily conclude that, at least at the sending of the [April 2016] email, the Frosses believed they could revoke Sofia's membership interests without a meeting of the members and without compensating him for the value of his membership interests," the arbitrators wrote. "Or, it is possible the Frosses fully understood that what they were doing was improper under the operating agreement but sought to terminated [sic] Sofia's interest anyway. Either way, it is clear they intended to do so."
Mr. Fross insisted that he and his brother were not trying to boot Mr. Sofia without compensation.
"We categorically deny that," Mr. Fross said. "We deny 100% that we tried to take his shares away. The operating agreement would not have allowed that."
Under that agreement, Mr. Fross said that he and has brother had 12 months to determine Mr. Sofia's payout. But Mr. Sofia pursued arbitration before they could reach their conclusion.
SOURCE OF SUCCESS?
Mr. Sofia takes much of the credit for Platinum's success.
"With minimal involvement from the Fosses, I built Platinum into a multi-million dollar enterprise supporting thousands of advisers," Mr. Sofia said. "Their actions represented an egregious and financially damaging betrayal that stripped me of my livelihood and forced me to start over at ground zero."
Mr. Sofia bounced back pretty quickly, launching
Snappy Kraken, a technology company that provides marketing and business automation for advisers, in September 2016.
The Frosses said that they were generous to Mr. Sofia, giving him a large stake in the company, and wanted to reach a buyout agreement directly with him.
"Our only regret is that after numerous attempts to settle with Mr. Sofia and keep it from going to arbitration, he was unwilling to do so," Robert Fross said. "We wish him the best. We're excited about the future prospects of Platinum."
Mr. Sofia has a different account of the negotiations.
"I reached out to the Frosses on many occasions in an effort to resolve our dispute privately but they refused to engage in a constructive dialogue," Mr. Sofia said. "In time, it became evident that they had no intention of paying me the value of the shares they revoked and that arbitration was the only way for me to collect what I was owed."
