award finra office of dispute resolution · and limited partnerships such as breitburn energy...

AwardFINRA Office of Dispute Resolution

In the Matter of the Arbitration Between:

Claimants Leslie A. Baronian The Birgitta Baronian Decedent’s Trust

Case Number: 17-01023

vs.

Respondents Dustin James Brown RBC Capital Markets LLC

Hearing Site: San Francisco, California

______________________________________________________________________ Nature of the Dispute: Customers vs. Member and Associated Person

This case was decided by a majority-public panel.

REPRESENTATION OF PARTIES

For Claimant Leslie A. Baronian (“Baronian”): Nancy C. Field, Esq., Law Offices of Nancy C. Field, Larkspur, California.

For Claimant The Birgitta Baronian Decedent’s Trust (“Trust”): Cary S. Lapidus, Esq., Law Offices of Cary S. Lapidus, San Francisco, California.

Hereinafter Baronian and Trust are collectively referred to as “Claimants.”

For Respondent RBC Capital Markets LLC (“RBC”) and Dustin James Brown (“Brown”): Michael M. Gless, Esq., Keesal, Young & Logan, Long Beach, California.

For Brown with respect to all claims related to the real estate transaction: Abe Lampart, Esq., Law Offices of Abe Lampart, P.C., San Francisco, California.

Hereinafter, RBC and Brown are collectively referred to as “Respondents.”

*FINRA recorded the appearance of Claimant’s counsel at the time of filing of the Statement of Claim. The counsel’s representation of the Claimant may have ended with the parties’ settlement. Please see the Other Issues Considered and Decided section of this award for information on whether Claimants’ counsel appeared at the expungement hearing.

CASE INFORMATION

Statement of Claim filed on or about: April 21, 2017. Claimants signed the Submission Agreement: April 21, 2017.

FINRA Office of Dispute Resolution Arbitration No. 17-01023 Award of 7

Statement of Answer filed by Respondents on or about: June 13, 2017 RBC signed the Submission Agreement: May 11, 2017. Brown signed the Submission Agreement: June 5, 2017.

Brown’s Statement of Answer (Real Estate Transaction) filed on or about: June 15, 2017. Brown’s Amended Statement of Answer (Real Estate Transaction) filed on or about: June 19, 2017.

CASE SUMMARY

Claimants asserted the following causes of action: breach of fiduciary duty; negligence; breach of contract; common law fraud and deceit; elder abuse under California Welfare and Institutions Code Sections 15657.5 and 15610.30; violations of California Civil Code Section 3345; and violations of California Business & Professions Code Sections 17200, et. seq. and 17500 et. seq. The causes of action relate to the sale of real property and the alleged mismanagement of Claimants’ accounts with RBC involving, but not limited to, the following investments: (1) energy related and commodities stocks and limited partnerships such as Breitburn Energy Partners L.P., CSI Compressco LP, Cushing Royalty & Income Fund, Linnco LLC, Seadrill Limited, CVR Partners LP, the Cushing MLP Total Return Fund and Alps ETFTR Alerian MLP; (2) REITS such as Annaly Capital Management, Inc., and American Capital Agency Corp; (3) private equity and lending companies such as KCAP Financial Inc., Fifth Street Finance Corporation and Apollo Global Management LLC; and (4) aggressive fixed income products.

Unless specifically admitted in the Statement of Answer, Respondents denied the allegations made in the Statement of Claim and asserted various affirmative defenses. RBC advised that it was assuming the defense of Brown solely as to the allegations relating to the purchase or sale of securities in Claimants’ accounts at RBC. RBC further advised that the real estate sale is outside the scope of Brown’s employment with RBC and that Brown would be represented by other personal counsel on that issue.

Unless specifically admitted in Brown’s Answer (Real Estate Transaction), Brown asserted that FINRA lacked jurisdiction over the real estate dispute, denied the allegations made in the Statement of Claim, and asserted various affirmative defenses relating to the real estate transaction.

In the Amended Answer (Real Estate Transaction), Brown corrected typographical errors and added an additional specific denial.

RELIEF REQUESTED

In the Statement of Claim, Claimants requested: 1. Compensatory damages in an amount according to proof, but in excess of

$1,000,000.00; 2. Damages relating to the sale of the real property, included but not limited to

rescission of the sale of the real property, restitution and disgorgement of profits made by Respondents;


3. Lost opportunity damages under the Well Managed Account Theory; 4. Pre-judgement interest; 5. Reasonable attorneys’ fees 6. Treble damages; 7. Costs of the arbitration; 8. Damages for emotional distress and mental suffering; 9. Punitive damages; and 10. Such other relief as the Panel deems appropriate.

In the Statement of Answer, Respondents requested: 1. Claimants take nothing by the Statement of Claim relating to the securities

accounts; 2. Costs of suit incurred herein; and 3. Such other and further relief as may be proper.

In the Statement of Answer (Real Estate Transaction) and Amended Statement of Answer (Real Estate Transaction), Brown requested:

1. Dismissal of Claimants’ Statement of Claim in its entirety with prejudice; 2. Attorneys’ fees and costs incurred in defending this claim including all attorneys’

fees; 3. Expungement with appropriate affirmative findings such that all references to this

Statement of Claim and proceedings shall be removed from Brown’s Central Registration Depository (“CRD”); and

4. Such other relief that the Panel deems just and appropriate.

OTHER ISSUES CONSIDERED AND DECIDED

The Arbitrators acknowledge that they have each read the pleadings and other materials filed by the parties.

On September 19, 2017, Claimants filed a Voluntary Dismissal with Prejudice of Real Estate Claims.

On January 12, 2018, Claimants advised FINRA Office of Dispute Resolution that a settlement had been reached in this matter and dismissed the case with prejudice.

On February 21, 2018, Brown filed a Petition for Expungement. On March 8, 2018, RBC filed a Notice of Non-Opposition to Brown’s Petition for Expungement. Claimants did not file a response to the petition.

The Panel conducted a recorded in-person hearing on May 4, 2018 so the parties could present oral argument and evidence on Brown’s request for expungement.

RBC did not participate in the expungement hearing and did not contest the request for expungement. Claimants did not participate in the expungement hearing.

The Panel reviewed the BrokerCheck® Report for Brown.

The settlement agreements for both the FINRA arbitration and the related civil case were provided to the Panel. The Panel reviewed both, considered the amounts of


payments made to any party, and considered the other relevant terms and conditions of settlement. The Panel concluded that both settlement agreements were likely reached solely to avoid the expense, inconvenience, distractions, and inherent uncertainties associated with the arbitration and with litigation generally. RBC paid Claimants to end the litigation as described above. The Panel also noted that Brown did not contribute any money to settle either case. Respondents did not admit any liabilities in either case. The Panel noted that the settlement was not conditioned on Claimants not opposing the request for expungement. There was no mention or allusion to expungement in either settlement document. In the related civil action, Claimants dismissed the claim with prejudice without receiving any compensation.

The Panel noted that Brown did not previously file a claim requesting expungement of the same disclosure in the CRD.

In recommending expungement the Panel relied upon the following documentary or other evidence: Testimony of Brown; Statement of Claim; and Brown’s Petition for Expungement and attached exhibits.

The parties present at the hearing have agreed that the Award in this matter may be executed in counterpart copies or that a handwritten, signed Award may be entered.

AWARD

After considering the pleadings, the testimony and evidence presented at the hearing, post-hearing submissions the Panel has decided in full and final resolution of the issues submitted for determination as follows:

1. The Panel recommends the expungement of all references to the above-captioned arbitration from registration records maintained by the CRD, for Respondent Dustin James Brown (CRD# 4819448), with the understanding that, pursuant to Notice to Members 04-16, Respondent Dustin James Brown must obtain confirmation from a court of competent jurisdiction before the CRD will execute the expungement directive.

Unless specifically waived in writing by FINRA, parties seeking judicial confirmation of an arbitration award containing expungement relief must name FINRA as an additional party and serve FINRA with all appropriate documents.

Pursuant to Rule 12805 of the Code of Arbitration Procedure (“Code”), the Panel has made the following Rule 2080 affirmative findings of fact: the claim, allegation, or information is factually impossible or clearly erroneous; and the claim, allegation, or information is false.

The Panel has made the above Rule 2080 findings based on the following reasons:

The allegations related to the real estate transaction when the property was listed for sale in 2017 that is outside the scope of FINRA jurisdiction amounted to “seller’s remorse” four years after the transaction. The specific allegations made


were false. In the related Marin County Civil action concerning the same transaction, the state court's ruling notes "In addition to offering no evidence to show that he was fraudulently induced or unduly influenced to sell his property, he has offered no evidence..."

The Panel notes the following examples of the falsity of the claim: Claimants alleged no written contract when there was one. Claimant Baronian alleged that during the sale he did not consult an attorney and accountant when in fact emails were produced indicating that both his attorney and accountant were involved with the transaction.

Regarding the claims of elder abuse under California law (Welfare & Institutions Code §15610.30), the only allegation that was true was that Baronian fits the class protected because of his age. There were insufficient allegations made to make a claim of elder abuse. Other evidence was provided at the hearing to prove the remaining allegations were false. Making the entire claim factually and legally false.

Allegations comprising the suitability and investment management claims are false. Evidence was presented that it was reasonable based on the stated goals of the accounts. Most of the time in question the accounts were under discretionary management by RBC and another broker.

Likewise there was no evidence presented by Claimants and in fact testimony and evidence given at the hearing demonstrated that there were no unsuitable securities; over concentration in energy, financial and REITS. Furthermore, there was no evidence of frenetic trading or investment mismanagement.

There were many other allegations in the statement of claim that no evidence was provided to support them. Testimony and evidence was provided at the hearing to demonstrate that these allegations are false.

Expungement here, would have no material adverse effect on investor protection, the integrity of the CRD system, or regulatory requirements.

2. In addition, based on the finding and explanation under Rule 2080 indicated in paragraph one of this award, the Panel recommends the expungement of the “Yes” answers to Questions 7B, 7F(1) and 7F(2) on Respondent Dustin James Brown (CRD# 4819448)’s Amended Form U5 filed by RBC Capital Markets, LLC on June 7, 2017 and maintained by the CRD. The Panel recommends that the answers be changed to “No” and the accompanying Internal Review Disclosure and Termination Disclosure reporting pages be deleted in their entirety. These recommendations shall apply to all subsequent disclosures concerning these events, including, but not limited to, the Form U5 Amendments filed by RBC Capital Markets, LLC on November 27, 2017 and December 20, 2017 and the Form U4 filed on January 24, 2018 by Stableford Capital LLC (173383).


FEES

Pursuant to the Code, the following fees are assessed:

Filing Fees FINRA Office of Dispute Resolution assessed a filing fee* for each claim:

Initial Claim Filing Fee =$ 2,000.00

*The filing fee is made up of a non-refundable and a refundable portion.

Member FeesMember fees are assessed to each member firm that is a party in these proceedings or to the member firm(s) that employed the associated person(s) at the time of the event(s) giving rise to the dispute. Accordingly, as a party, Respondent is assessed the following:

Member Surcharge =$ 3,025.00 Member Process Fee =$ 6,175.00

Hearing Session Fees and AssessmentsThe Panel has assessed hearing session fees for each session conducted. A session is any meeting between the parties and the arbitrator(s), including a pre-hearing conference with the arbitrator(s), that lasts four (4) hours or less. Fees associated with these proceedings are:

One (1) pre-hearing session with the Panel @ $1,400.00/session =$1,400.00 Pre-hearing conference: August 23, 2017 1 session

Two (2) hearing session on expungement request @ $1,400.00/session =$2,800.00 Hearing Date: May 4, 2018 2 sessions ______________________________________________________________________ Total Hearing Session Fees =$4,200.00

The Panel has assessed $700.00 of the hearing session fees jointly and severally to Claimants.The Panel has assessed $700.00 of the hearing session fees jointly and severally to Respondents. The Panel has assessed $2,800.00 of the hearing session fees to Brown.

All balances are payable to FINRA Office of Dispute Resolution and are due upon receipt.

June 13, 2018

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