Arbitrators order losing investors to pay more than $2M in attorneys’ fees, costs

'That is about as cataclysmic an outcome as a claimant can have in a Finra arbitration,' says an attorney not involved in the case.

Lucy Chua and John Byrnes didn’t just lose their Finra arbitration claim against several financial firms and advisors for allegedly fraudulent sales of private corporate bonds — they’re on the hook for more than $2 million in attorneys’ fees and costs incurred by the winning side.

Chua and Byrnes are trustees of both the Yife Tien Irrevocable Dynasty Trust and Rocky Vista University, which purchased the bonds. Chua and Byrnes filed an arbitration claim in June 2018 alleging that the firms and brokers misrepresented and concealed “numerous existing ongoing non-public financial and operating problems of the bond’s issuer,” according to a Thursday arbitration award. The transaction involved taxable revenue bonds offered through a private placement.

Chua and Byrnes sought $5 million in compensatory damages and punitive damages of $15 million.

Not only did a panel of three Financial Industry Regulatory Authority Inc. arbitrators deny the claims, they also ordered the investors to pay the firms — INTL FCStone Financial Inc., Stifel Nicolaus & Co. Inc. and RBC Capital Markets — and the brokers — Jandra Stephen Lubovich, Jon Cary Cooper and Aaron Chaim Lupuloff — $1.8 million in attorneys’ fees and $294,024 in costs.

The claimants cited fraud, breach of fiduciary duty, failure to supervise, conversion and civil theft, among other causes of action. The arbitrators cited the Florida Civil Theft Statute in ruling that the respondents were entitled to recover their attorneys’ fees and costs. The case was adjudicated in Miami.

The outcome shocked a longtime Finra arbitration lawyer who was not involved in the case.

“That’s the largest attorney fee against a claimant I’ve ever seen in my 23 years [arguing Finra arbitration cases],” said Andrew Stoltmann, a Chicago securities attorney. “That is about as cataclysmic an outcome as a claimant can have in a Finra arbitration.”

Lawyers on each side of the case did not respond to requests for comment.

The arbitrators also granted expungement requests from Lubovich, Cooper and Lupuloff, and, in another unusual aspect of the award, provided detailed explanations for the expungements.

Lubovich is currently registered at a Stifel office in Minneapolis, according to his BrokerCheck profile. BrokerCheck shows that Cooper and Lupuloff are no longer registered as brokers. All three worked at Sterne Agee when the bond sales occurred in 2014.

Prehearing sessions in the case began in July 2019. The final hearing occurred two months ago.