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Philip J. Nathanson Arizona State Bar #013624THE NATHANSON LAW FIRM8326 E. Hartford Dr. Suite 101Scottsdale, AZ 85255(480) 419-2578
(480) [email protected]
Attorney for Plaintiffs
IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF ARIZONA
NET VEST FINANCIAL, LLC, andand JOHN CARTOLANO,
Plaintiffs,
vs.
AMERIPRISE FINANCIALSERVICES, INC.,
Defendant.
No.
COMPLAINT FOR TEMPORARYRESTRAINING ORDER,PRELIMINARY INJUNCTION,DAMAGES AND OTHER RELIEF.
Plaintiffs, NET VEST FINANCIAL, LLC and JOHN CARTOLANO, for
their Complaint against Defendant, AMERIPRISE FINANCIAL SERVICES, INC.,
allege as follows:
Parties, Jurisdiction and Venue
1. Plaintiff, NET VEST FINANCIAL, LLC, is an Arizona limited
liability company organized and formed under the law of Arizona, with its home
office and principal place of business located in Scottsdale, Arizona.
2. Plaintiff, JOHN CARTOLANO, is an independent financial advisor.
Plaintiff is a citizen of Arizona.
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3. Defendant, AMERIPRISE FINANCIAL SERVICES, INC., is a
Delaware corporation with its home office and principal place of business
located in Minneapolis, Minnesota (hereinafter sometimes referred to as
Ameriprise or Ameriprise Financial).
4. The jurisdiction of this court is invoked pursuant to the diversity
jurisdiction provisions of 28 U.S.C. 1332. Venue is proper in this District.
General Allegations
5. Plaintiff CARTOLANO had a long-standing business relationship
with LPL Financial as his broker/dealer. Plaintiff NETVEST FINANCIAL, LLC,
was the entity that performed the marketing and managed the operations and
independent relationship with LPL Financial. Plaintiff CARTOLANO was with
LPL for 18! years. Plaintiff NET VEST FINANCIAL, LLC, was formed and
operating since 1996, and with NETVEST FINANCIAL, LLC, Plaintiffs marketed
securities offered through LPL Financial. For the past 17 years, CARTOLANO
has owned and operated NetVest Financial, which provides comprehensive
estate and trust planning services, as well as financial planning involving
securities and insurance products to clients to meet their financial goals. Integral
to the operations of NetVest Financial, CARTOLANO hosts approximately 4-8
seminars per month entitled Trusts and Beyond where he discusses estate
planning, establishes trusts (both revocable and irrevocable) and provides related
asset titling services to clients. Additionally, as a part of those seminars,
CARTOLANO represents himself as a financial advisor who also sells securities
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and various insurance products. As Defendant knew, it is (and has always been)
critical to CARTOLANOs business that he have the ability to co-brand and co-
market NetVest Financial LLC and his broker-dealer relationship in a
comprehensive manner to provide asset and estate management. CARTOLANO
and his team manage client assets of approximately $180 million and generate
revenues of approximately $2 million per year. Prior to being fraudulently
induced to join Ameriprise, Plaintiff CARTOLANO and his team experienced
revenue growth with their business model of approximately 12% per year.
6. Prior to being fraudulently induced to invest in and join the
Ameriprise franchise, CARTOLANO was an independent registered agent of
LPL, where he was allowed to operate NetVest Financial. Having grown the
business from the ground up, CARTOLANO employs a staff of 11 individuals,
which include sales, administrative and operations personnel. While at LPL,
CARTOLANO was able to cultivate approximately $2.8 million in new client
assets per month. Approximately 40% of those assets were invested in variable
annuities and the remaining 60% were allocated into fee-based accounts.
Accordingly, each month, CARTOLANO was able to grow his business and
generate approximately $165,000 in sales commission as a direct result of his
Trusts and Beyond seminars.
7. In and about July 2012, Ameriprise Financial approached Plaintiff
CARTOLANO and offered him an opportunity to get capital and to provide
Plaintiff CARTOLANO with the same services that he had had at LPL, but with
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further attention paid to Plaintiff in terms of providing capital and succession
planning at the firm. In order to induce Plaintiff CARTOLANO to enter into an
agreement, Ameriprise Financial specifically offered to provide the same services
that Plaintiff CARTOLANO had at LPL, and assured said Plaintiff that he would
be able to operate under the Ameriprise Financial relationship in the same
fashion that he operated for 18 ! years with LPL. These promises and
assurances were a condition precedent to Plaintiff CARTOLANO entering into
any relationship with Ameriprise Financial. Based upon those promises and
assurances, Plaintiff CARTOLANO was willing to enter into the $1.1 million
seven-year forgivable note arrangement that Ameriprise Financial proposed.
Additionally, Ameriprise Financial offered and provided $600,000 in a loan,
through Ameriprise's banking department, at a 6+ percent interest rate for the
next seven years. Ameriprise Financial Services, Inc. is a national broker-dealer
and FINRA member firm that is a subsidiary of Ameriprise Financial. A large
percentage of Ameriprises registered representatives are independent contractor
franchisees like Mr. Cartolano who are not employees of Ameriprise, but rather
are independent financial advisors with their own unique business models (the
Ameriprise Franchise Group, or the Independent Channel). On its website,
the Ameriprise Franchise Group purports to allow experienced financial advisors
to develop their practice the way they have always envisioned with flexibility
and support. That flexibility and support were not experienced by Mr.
Cartolano, as detailed below.
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8. The promises made by Ameriprise Financial to induce Plaintiff
CARTOLANO to enter into a relationship with Ameriprise Financial were made
repeatedly, both before and after the execution of agreements between the
parties. Plaintiff CARTOLANO would not have entered into those agreements
had he not been assured that everything would continue, in terms of the
operations of his business, as it was prior to his relationship with Ameriprise
Financial. Plaintiff CARTOLANO explicitly discussed with Ameripirse
Financial, and made it a condition of entering into a relationship with Ameriprise
Financial, that the marketing strategies that Plaintiff had in place were in fact
going to work the same way as before because Plaintiffs business was on a
growth track due to the kind of marketing Plaintiff was doing prior to the
Ameriprise Financial transaction.
9. Ameriprise agents stated that that they were impressed by
CARTOLANO 's business model and specifically stated that Ameriprise would
provide additional resources to expand and grow the business exponentially.
CARTOLANO emphasized that he would need to operate NetVest Financial
exactly the way he had at LPL and that it was necessary that he be able to co-
market and co-brand NetVest Financial and Ameriprise for purposes of
conducting his Trusts and Beyond Seminars, just as LPL had allowed him to do.
Ameriprise agents assured CARTOLANO that he could continue with his
business and marketing model whereby CARTOLANO would be allowed to
continue to co-brand and comarket NetVest Financial and Ameriprise.
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AGREEMENT, a copy of which is attached hereto as Exhibit #1 and is
incorporated herein by this reference (hereinafter referred to as the franchise
agreement).
12. Transferring Plaintiff CARTOLANOs business from LPL to
Ameriprise entailed a movement of over 350 clients maintaining more than 2,200
accounts. There were substantial costs associated with the transfer as a result of
the downtime in terms of future production. Ameriprise told Plaintiff the
transfer would take 60 to 90 days. But Ameriprise knew it would take six
months, not 90 days.
13. Thirty days prior to the contractual date of August 12, 2012, which
is the date of the franchise agreement, was required, under the circumstances, to
not take in any new business thirty days prior to August 12, 2012. When Plaintiff
CARTOLANO committed to a thirty-day date of August 12th, on or about
July 10-12, 2012, CARTOLANO took all appropriate steps to move forward with
the Ameriprise Financial transaction.
14. Ameriprise promised to send a special team to draft the necessary
business paperwork, to help Plaintiff CARTOLANO design buy/sell agreements;
help design the new structure so Plaintiff could move forward with the necessary
documents, sign the necessary contracts to effectuate the Ameriprise Financial
transaction. Ameriprise sent a team headed by Tom Titus. It was his firm called
Smart Concepts that was the lead firm. Ameriprise promised to pay Smart
Concepts for its services, and to help Plaintiff put together the necessary
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structure both legally and structurally to marry everything together to create a
healthy relationship with Ameriprise.
15. Smart Concepts, via Tom Titus, informed Plaintiff how great
Ameriprise was going to make everything for Plaintiff from that point forward.
At the end of the series of meetings, it became more and more apparent that
there was really not a group at Smart Concepts to help Plaintiff design a way of
morphing what Plaintiffs current structure was into structures or a structure or
multiple structures that would make things work with Ameriprise.
16. As this series of meetings with Smart Concepts went on, Plaintiff
notified the responsible people at Ameriprise that the amount of time that was
going by to get this done was, in fact, a downtime for Plaintiff. So they were
willing to advance us $100,000 of the $1.1 million in advance, and which they
did, to help offset the downtime because of how long it was taking.
17. Plaintiff was induced to sign the franchise agreement, Exhibit #1,
by promises and assurances from Ameriprise that it would be made to include
ancillary amendments, which were promised to include certain provisions that
would allow Plaintiff to maintain his existing customer base as well as Plaintiffs
future customer base, and that those clients would be, in fact, always be Plaintiff
CARTOLANOS clients by definition. Since that time Ameriprise has proclaimed
that those amendments and addenda to the franchise agreement would be issued
after the fact to that effect, but Ameriprise has yet to deliver such amendments
and addenda.
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18. Smart Concepts and Ameriprise, all of the way up to August 12th,
had plenty of time to do the really necessary research and to provide the
necessary personnel to do a complete and comprehensive analysis as to how why
Plaintiff operated the way it did. Instead Ameriprise and Smart Concepts
focused most of their time on Plaintiffs revenues. But they never once did a
comprehensive investigation of the breakdown of Plaintiffs business, the
business expenses, and why Plaintiff operated the way it did structurally, legally,
financially, et cetera. Ameriprise and Smart Concepts wanted to impose on
Plaintiff contracts that jeopardized Plaintiffs revenue stream because the chosen
representatives of Ameriprise Financial did not take the time to completely
analyze and structure the transaction around the manner in which that revenue
stream was generated. Ameriprise had not familiarized Mr. Titus with
CARTOLANO's business model. Initially, CARTOLANO was told that Smart
Concepts would structure a deal whereby CARTOLANO's senior registered
representatives would assign their clients over to CARTOLANO in order to
comport with the Ameriprise Franchise model and, pursuant to new agreements,
CARTOLANO personally would share in only a very small percentage of the
revenues generated from those accounts. Thereafter, for the first time, Mr. Titus
informed CARTOLANOthat Ameriprise would not allow CARTOLANOto use
the entity NetVest Financial, LLC. Instead, Mr. Titus informed him that he would
have to function under a "team name" called NVO Financial (which was not a
legal structure) in order to comply with the rules of the Ameriprise franchise.
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Furthermore, Mr. Titus told CARTOLANO that he was instructed by
"higher-ups" at Ameriprise not to discuss this issue any further with
CARTOLANO. Accordingly, Ameriprise did not view or treat NetVest as an
integral part of the franchise and effectively wanted the entity out of the
relationship, despite Ameriprises prior representations and promises.
19. Worst of all, with regard to the Trusts and Beyond seminars,
Ameriprise management initially represented that CARTOLANO could co-
market and co-brand the names NetVest Financial alongside Ameriprise.
However, several months into his tenure with the firm, Ameriprise's Compliance
Department told CARTOLANO that he could not co-market the Ameriprise
brand, and that he would be required to remove the Ameriprise name from all
brochures and seminar materials. That decision, which was contrary to all prior
representations,emasculated CARTOLANO's entire business model, because he
no longer could hold himself out as an Ameriprise financial advisor at his
Trusts and Beyond seminars.
20. Plaintiff CARTOLANO was the registered principal branch
manager of his own branch when he was with LPL. But when Plaintiff joined
Ameriprise as a franchisee, Ameriprise enforced an outside Office of Supervisory
Jurisdiction, OSJ, which is a registered principal that existed outside of Plaintiffs
branch. Ameriprise nevertheless assured Plaintiff that there would be proper
compliance and proper systems in place. Ameriprise assured Plaintiff that the
liability issues and the compliance issues that are enforced by FINRA would be
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handled professionally by Ameriprise. But Ameriprise knew that it had no
intent of fulfilling that promise because it knew that it did not have the personnel
and expertise and make assurances regarding liability and compliance issues.
21. Plaintiff later learned, long after signing the franchise agreement,
about Ameriprises lack of expertise in supervising a branch office. Their lack of
supervision was and is fraught with the probability of creating liability, and their
systems are just not capable of really uncovering or discovering any kinds of
problems that exist in a branch office. Ameriprise knew this, yet represented to
Plaintiff just the opposite as the truth.
22. A representative of Ameriprises trust deparment came out and
met with Plaintiff. The Ameriprise trust department wasn't very advanced.
Plaintiff needed to know what language Plaintiff needed to have and
requirements we needed to have in customer documents since Plaintiff is in the
revocable trust preparation business -- which they knew we were. That is part of
Plaintiffs marketing structure -- that Plaintiff needed to have documentation
from the trust department so Plaintiff could name, if Plaintiff needed to, that
trust company as a potential successor trustee for Plaintiffs clients' documents.
Plaintiff clarification on fees that apply to the franchise owner and individual
advisors. Plaintiff needed to have suggestions on how not to interrupt systematic
ACH instructions on our client accounts that are currently set up -- that were
currently set up in the LPL accounts during this transitional process. Anything
that related to being operational, from the transfer of securities and monies in
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accounts to ACH transactions, in or out journal transactions, in or out, at the
level in which we were operating.
23. But when Plaintiff arrived at Ameriprise, Plaintiff was assigned
untrained and unskilled personnel from Ameriprise to allegedly assist Plaintiff.
These were inexperienced people that basically had less experience than
Plaintiffs receptionist. Plaintiff fought day after day, hour after hour, with these
Ameriprise employees. Plaintiffs staff had to beg and do whatever they could to
get information from these inexperienced staff members at Ameriprise.
Plaintiffs employees participated in more than 850 telephone calls with these
Ameriprise employees. And when brought to the attention of the senior VP at
Ameriprise, no one at Ameriprise took those telephone calls seriously.
24. In an attempt on an ongoing basis to fulfill Plaintiffs fiduciary
responsibility to his business, and Ameriprise, Plaintiff CARTOLANO
repeatedly tried to demonstrate to Ameriprise that damage had been occurring
during this entire process, and that it is still occurring to this day. Plaintiff
provided Ameriprise with a document entitled "Three- Month Review --
Ameriprise." It started off with training, and Plantiff went on to explain that if
Plaintiff had the proper training regarding the Ameriprise processes, the
technology, and the systems to begin with, approximately 200 hours of Plaintiffs
time could have been spared. There was very little hands-on support beyond the
superficial overview of Advisor Compass and Thompson One, which are the two
technology platforms.
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25. Plaintiff received a call from Gary Gassmann, an Ameriprise
executive, wherein he proceeded to tell Plaintiff that he was sending his IT tech
support team to redo Plaintiffs computer system. One year earlier Plaintiff had
installed a state of the art computer network system in Plaintiffs facility which
addressed the computer stations at each desk, security cameras, AV equipment,
telephony integration, etc. This cost us approximately 150k, was well displayed
in an air conditioned and climate controlled room and was Windows based, etc.
Because their systems were VPN/DOS based, they would have interfered with
Plaintiffs computer system. Plaintiff accordingly said that
"under no circumstances" would they be allowed to touch our systems. So
Ameriprise came up with an alleged temporary arrangement by sending Plaintiff
15 laptops. Those laptops currently sit at every station to access their AMPF
systems. Ameriprise disclosed 7 months thereafter that it did have a Windows
based system available at the time.
26. If Plaintiff wanted to sell a bond in a client portfolio, Ameriprise
had not instructed Plaintiffs employees how to effectuate such a sale, 90 days
into the relationship. As a broker, one needs to know instantly how to execute a
stock or a bond trade. After many conversations with the front-end inept service
individuals that didn't even know what an equity desk or bond desk was, it
made it extremely difficult to do trades. Plaintiff was also used to having tools
that compare client portfolios. So when asked to provide us with those kinds of
tools at Ameriprise, Josh Cohen and others told Plaintiff that they were not
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available. However, Plaintiff later discovered that was not true, and that such
tools were available.
27. Plaintiff was led to believe by Ameriprise that Plaintiff would be
improving proposals and deliverables for Plaintiffs prospective clients to help
Plaintiff gather new business in the world of financial plans and investment
proposals, platform proposals. However, at that point, Plaintiff had seen none of
those tools. Thanks to Ameriprise, Plaintiff took a giant step in the wrong
direction with regard to Plaintiffs ability to deliver portfolio analysis, investment
proposals, recommendations, and solutions to Plaintiffs prospective clients. That
severely hindered and hinders Plaintiffs ability to do business.
28. As to commissions and money tracking regarding revenues coming
into Plaintiffs branch, Plaintiff did not at the 90-day time frame obtain the
information from Ameriprise to understand the commission systems and
tracking. Ameriprises systems themselves were archaic, confusing, and
cumbersome. It took nearly ten months to get Ameriprise to provide to Plaintiff
their web-based commission system that had been there the entire time, that was
much more proficient, easier to read, and that had the ability to track client data,
client commissions, et cetera, on a one-screen basis, because it was web-based.
Plaintiff actually was not allowed to even use that until well into the 10th month
of operations. Plaintiff was then forced to use their VPN-based system for
commission tracking, which is worse than a DOS-based system. With that
Plaintiff could not track the revenue coming into the firm, who got paid for what,
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what was paid for what came in, what wasn't paid for yet. Plaintiff could not
manage his financial practice without that kind of data. Plaintiff was forced to
use a payroll system that was and is inept. When Plaintiff was told several
different scenarios were going on as to the working of the commission system,
such as the overrides and the rep. adjustments, it caused several accounting
strategies to be started and then abandoned, therefore wasting additional time
and effort when productivity could have been spent elsewhere.
29. Ameriprise did not provide assistance and help in response to
Plaintiffs questions and needs. Where Plaintiff found that there had been
multiple ACAT and non-ACAT rejections -- this is a system that -- ACAT stands
for automatic account transfer systems, some accounts can be moved via the
ACAT system; other accounts, because of the type of securities within the
account itself, cannot be ACAT transferred. It falls into the non-ACAT category.
But when either one of those systems rejected a transfer of an account, there was
no communication by the home office. Yet this is the most important process in
the move. When Plaintiff requested a transfer of an account from a firm, and it
got rejected, Plaintiff did not know what to tell the client, when to tell the client,
how to resolve the problem with the client, because no one from the Ameriprise
home office even bothered to let Plaintiff know. This was and is inefficiency at
its highest order. When an account was not anything that needed further
requirements, it wasn't until Plaintiffs employees looked into the account to find
the status that Plaintiff discovered it was rejected. Ameriprise never told
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Plaintiff to expect this lack of service and ineptitude.
30. Journaling at Ameriprise, which is moving securities or money
from one account to the other, was poorly designed, and it didn't recognize
relationships via the Social Security number or tax ID number. If a registration
was off by one letter or by an ampersand instead of "and," the system at
Ameriprise not recognize what is being said, forcing Plaintiffs employees to
spend 15 to 20 minutes on the phone just to get a periodic journal created, or
journals created for Plaintiffs clients.
31. Ameriprise executives at the highest level represented to Plaintiff,
on numerous occasions, that Plaintiff would still be an independent franchise
capable of marketing Plaintiffs brand, which brand was NetVest Financial LLC.
But Ameriprise actually intended to restrict Plaintiffs brand, without disclosing
that fact to Plaintiff, and instead representing just the opposite to Plaintiff to
induce Plaintiff to become a franchisee of Ameriprise.
32. At the time those representations were made, Ameriprise did not
intend to live up to those representations to Plaintiff that Plaintiff would still be
an independent franchise capable of marketing Plaintiffs brand, which brand
was NetVest Financial LLC. The intent of Ameriprise was and is evidenced by
the insistence of Ameriprise that Plaintiff remove the NetVest Financial LLC
from the logo; that the logo be removed from Plaintiffs building; and also that
the bull and bear image from the logo be removed. Ameriprise further insisted
on the removal of Plaintiffs current website after one year. These were and are
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major issues that were expressed to be unacceptable from the start. Amerprise
rejected Plaintiff portraying himself and NetVest Financial LLC as independent,
which Plaintiff was promised. Plaintiff was not even allowed by Ameriprise to
use the word independent anymore. Accordingly, as more fully alleged herein,
Ameriprise, through its various agents, fraudulently induced Mr. Cartolano to
leave his former broker-dealer of 18 years, LPL Financial, LLC (LPL) and join
Ameriprise by falsely promising Mr. Cartolano that his independent practice,
NetVest Financial, LLC would be able to operate at Ameriprise exactly the way it
had at LPL, and that Ameriprise was willing to invest in Mr. Cartolano so that he
could expand NetVest Financials operations, thereby increasing its revenues,
both for Mr. Cartolano and for Ameriprise. Instead, the promises and
representations made by Ameriprise were not true and have caused
CARTOLANO to suffer significant damages. Ameriprises misconduct is clearly
evidenced by the fact that CARTOLANO was forced to resign just over one year
into his tenure with Ameriprise and to move his entire practice and staff of 11
individuals back to LPL in order to mitigate his damages.
33. It thus became apparent, after the relationship was formed and had
moved into operations, that Ameriprise was insisting that Plaintiff operate his
business Ameriprises way. It became apparent after the relationship was
formed that these were the systems and structures that Ameriprise knew, from
day one, that Ameriprise would use, and that Ameriprise therefore had no
intention of adapting their organization to allow for what it was Plaintiff was
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doing to generate the revenues Plaintiff was generating. Ameriprise clearly
lacked the intent to implement and approve what Plaintiffs structure was, and to
permit the Plaintiffs current structure that had been in place for a very long
period of time.
34. It was all about an agenda that became more evident as time went
on. Ameriprise, over time, made it apparent that they wanted to dismantle
Plaintiffs existing structure, and to insert structure(s) that were more suitable to
AMPF's way of doing things and their means of controlling Plaintiffs manner of
doing business. No effort was made by AMPF to understand the complexity of
Plaintiffs existing LLC structure, registered trade name, years of doing business,
nor the kinds of business that Plaintiff was doing. Ameriprise was pushing hard
to have Plaintiff end up using an entity or, in their terms, a marketing name,
NetVEST Financial that wasn't in fact a legal entity at all. Ameriprise refused,
contrary to prior representations, to permit Plaintiff to use NetVest Financial
LLC as an operating and marketing arm of the enterprise.
35. Whether it was stationery, or pictures on Plaintiffs website, it all
became relevant as to the control mechanisms that Plaintiff was not told about
that were put into force starting at about the 90th day moving forward. The cost
of transition as of that date had been approximately $400,000. Plaintiff also
wanted to know what the platinum partnership was, what it did. Ameriprise
never said.
36. Plaintiff repeatedly informed Ameriprise of Plaintiffs concerns that
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surrounded the representations and promises that were made to Plaintiff to
induce Plaintiff to enter into the franchise agreement, and its related agreements,
especially from the Tom Titus group and other Ameriprise personnel, to the
effect that the continuation of NetVest Financial, LLC, as a very successful
independent financial advisory firm, would occur. And eight months into the
franchisor-frachisee relationship, Ameriprise had literally destroyed Plaintiffs
business, which Plaintiff informed Ameriprise about in writing. And this was
one of many attempts by Plaintiff to explain to Ameriprise that something
needed to be done.
37. There were many nonqualified accounts that weren't transferred
even after 120 days; 60 accounts of outside mutual funds that were transferred
after 120 days of delay; 30 retirement accounts, which held REITS, which were
not transferred after 90 days. And the fact that there was a 42 percent error ratio
in how the ACAT process had been processed by Ameriprise's back office. A
42% error ratio is a very high number in any business. And there have been
numerous ACAT/non-ACAT rejections with no communication, as alleged
above.
38. Plaintiff reiterated to Ameriprise that Plaintiff needed the
definitions and contractual agreements designed and made for NetVest
Financial, LLC, and written agreements for Plaintiff to keep Plaintiffs existing
client book of business. This was yet another request for attention to be paid to
Plaintiff regarding issues that Plaintiff felt were very critical. Plaintiff reiterated
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that it wanted the written agreement previously discussed and promised for full
approval of NetVest, LLC's, "Trusts and Beyond" seminar series, which is
Plaintiffs OBA. Plaintiff did not receive any answer from Ameriprise.
39. Plaintiff calculated the damages suffered by NetVest Financial LLC,
as in excess of $869,000.
40. Contrary to Ameriprises prior representations, assurances and
promises, Ameriprise completely ignored Plaintiffs issues, problems and
concerns, further evidening Ameriprises fraudulent and unreasonable conduct.
41. As a direct and proximate result of the foregoing, the cost of
transferring to Ameriprise and the financial consequences from the false
promises and misrepresentations made to Plaintiff farexceed the amount of any
loans or promissory notes extended to Plaintiff by Ameriprise. The cost of
transferring to Ameriprise and the fallout from the false promises and
misrepresentations have damaged CARTOLANO's business and far exceed the
amount of the promissory notes extended to him by Ameriprise. The costs
related to the transferof customers both to and away from Ameriprise have cost
CARTOLANO and his practice over $900,000.00. Additionally, the NetVest
Financial fiasco has affected CARTOLANO's ability to attract new clients
through his Trusts and Beyond seminars, and has caused (and continues to
cause) damages in excess of $2,600,000.00 in lost revenue and reputational
damage. As alleged herein, the limited products which were available to
Plaintiffs existing clients, as well as the sub-par support, services and technology
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at Ameriprise, also translated into additional loss of revenue as Plaintiff and his
staff were forced to spend additional time and resources compensating for
Ameriprises inadequacies and unreasonable conduct, as opposed to generating
revenue. Plaintiff has continued to sustain damages, and will continue to sustain
damages into the future, in connection with lost growth as a result of
Ameriprises conduct. In total, Mr. Cartolano estimates his damages to be in
excess of $4,000,000, as of this point in time. There were also
commissions/receivables through 8/30/2013 of approximately $170,000. There
was an additional bonus due of 125,000 on 11/20/2013, together with other
payments and damages that are due and owing to Plaintiff.
42. Ameriprise visited Plaintiffs office on 8/13/2013, which visit was
supposed to last until 8/15/2013, but did not. Ameriprise sent Plaintiff an
agenda about 30 days prior to the meeting, which showed that Ameriprise
wanted to review risk mitigation. At that meeting it became apparent that the
only mitigation of risk Ameriprise was concerned with was risk that related to
Ameriprise, and not anyone else. That was not reasonable or good faith conduct.
43. As a result, Plaintiff CARTOLANO must terminate his relationship
with Ameriprise, in line with paragraph 17(A) of the franchise agreement, and
the applicable law.
44. The franchise agreement contains various arbitration provisions as
to Plaintiff CARTOLANO. Plaintiff NET VEST FINANCIAL, LLC is not a party
to that franchise agreement, and is not a party to any arbitration agreement. As
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to Plaintiff CARTOLANO, the franchise agreement, in paragraph 27(E), provides
in relevant part that:
either Independent Advisor or Ameriprise Financial may applyto a court of law for immediate injunctive relief, or other temporary
or emergency relief, as allowed by FINRA rules
Consistent with that contractual provision, FINRA Rule 13804, provides in
relevant part that:
(a) Temporary Injunctive Orders
(1) In industry or clearing disputes required to besubmitted to arbitration under the Code, parties may seek a
temporary injunctive order from a court of competent jurisdiction.Parties to a pending arbitration may seek a temporary injunctiveorder from a court of competent jurisdiction even if another partyhas already filed a claim arising from the same dispute inarbitration pursuant to this paragraph, provided that an arbitrationhearing on a request for permanent injunctive relief pursuant toparagraph (b) of this rule has not yet begun.
(2) A party seeking a temporary injunctive order from acourt with respect to an industry or clearing dispute required to besubmitted to arbitration under the Code must, at the same time, file
with the Director a statement of claim requesting permanentinjunctive and all other relief with respect to the same dispute inthe manner specified under the Code.
45. In line with the foregoing FINRA Rule 13804, Plaintiff
CARTOLANO is filing a FINRA statement of claim on the same date as the filing
of this Complaint. No arbitration hearing has begun or is about to begin. This
Court therefore has the jurisdiction and power to enter temporary or preliminary
injunction orders as to Plaintiff CARTOLANO.
46. Plaintiff NET VEST FINANCIAL, LLC seeks injunctive relief and
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damages from this Court, since it is not required to arbitrate any aspect of its
claims. Defendant took the position with Plaintiff CARTOLANO that NET VEST
FINANCIAL, LLC was not and should not be part of his business with
Ameriprise.
47. Defendant has in the past refused to transfer all customer accounts
when a customer submits a written transfer request. Defendant should be
required to transfer all customer accounts upon written demand of the customer.
48. As a direct and proximate result of one or more of the aforesaid
improper acts of defendant, Plaintiffs contractual and property rights in and to
the Plaintiffs business will be injured and destroyed. If not enjoined from
pursuing its illegal and unreasonable conduct, Defendant will damage or destroy
Plaintiffs extensive business efforts to create and operate its business, as well as
Plaintiffs valuable investment in and to its business.
49. Absent the issuance of an injunction by this Court prohibiting the
defendant from interfering with Plaintiffs conducting their business away from
Ameriprise, and from damaging the assets and business of Plaintiff, Plaintiff's
investment in its field will be dissipated or extinguished, causing Plaintiff to
suffer irreparable harm and damage.
50. Without injunctive relief, Plaintiff will suffer irreparable harm
because its business and investments will be destroyed by the conduct of the
Defendant, should that conduct be permitted to continue. Defendant will be
unable to compensate the plaintiff for the ensuing irreparable harm if not
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name, trademark, service mark or other commercial symbols;
(b) Cartolano and Defendant had a community of interest in the
marketing of the services by agreement; and
(c) Cartolano, as the franchisee paid, directly or indirectly, a
franchise fee under M.S.A. 80C.01(9). Said franchise fee constituted the 10% of
the gross revenue received by Ameriprise, together with the fees and other
charges that the Plaintiff franchisee was and is required to pay under the
franchise agreement, and has agreed to pay, for the right to enter into business
and to continue the business under the franchise agreement, including, but not
limited to, the payment either in lump sum or by installments of any fee or
charges based upon a percentage of gross or net sales whether or not referred to
as royalty fees, any payment for goods or services, or any training fees or
training school fees or charges.
56. Defendant engaged in unfair and inequitable practices under
M.S.A. 80C.14 and M.S.A. 80C.13, and the rules promulgated thereunder, by
the Minnesota Commissioner of Commerce, Minn. R. 2860.4400(G) which rules
prohibited Defendant from imposing on the Plaintiff franchisee by contract
or rule, whether written or oral, any standard of conduct that is unreasonable.
Defendants violations of that statute, and the administrative rule promulgated
thereunder, based upon the allegations herein, included, but are not limited to:
(a) Representing and promising Plaintiff that it could operate itsbusiness as it had done prior to becoming a franchisee ofAmeriprise, when in fact Amerprise had no intention ofpermitting Plaintiff to do so;
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(b) Requesting Plaintiff to make representations to regulatorybodies that were untrue;
(c) Subjecting Plaintiff and his business to slipshod andsubstandard work procedures and systems;
(d) Assuring Plaintiff that all the problems would be alleviated,and then doing nothing about those problems.
57. Defendant additionally engaged in unfair and inequitable practices
under M.S.A. 80C.14, and the rules promulgated thereunder, by the Minnesota
Commissioner of Commerce, Minn. R. 2860.4400(J), in that:
(a) Defendant required Plaintiff Cartolano to waive a jury trialin the franchise agreement;
(b) Defendant required Plaintiff Cartolano to waive the right torecover damages, under the foregoing statute, rule andunder M.S.A. 80C.17(1) and M.S.A. 80C.17(3).
58. Defendant violated M.S.A. 80C.14, and Plaintiff Cartolano has the
right to pursue this action under M.S.A. 80C.17.
WHEREFORE, Plaintiffs, NET VEST FINANCIAL, LLC and JOHN
CARTOLANO, pray for the relief set forth below against the Defendant,
AMERIPRISE FINANCIAL SERVICES, INC., its officers, agents and employees,
and therefore requests the following relief from this Court in this Count I of the
Complaint:
A. That this Court issue a temporary restraining order pursuant to
F.R.Civ.P. 65, or, as the case may be, a preliminary injunction pursuant
F.R.Civ.P. 65, by its clerk and under its seal, enjoining the Defendant,
AMERIPRISE FINANCIAL SERVICES, INC., its officers, agents and employees,
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attorneys, agents, servants and all other persons acting under its direction and
control:
(i) From interfering with Plaintiffs termination of Defendant, andfrom interfering with Plaintiffs future operation of the Plaintiffs
business separate and apart from Ameriprise;
(ii) From attempting to enforce any alleged monetary obligation ofrepayment from Plaintiff to Ameriprise until the entire controversyis resolved in this Court and in any FINRA arbitration, including,but not limited to, any promissory note or repayment obligationalleged to be owed to Ameriprise, until the entire controversy isresolved in this Court and in any FINRA arbitration, and thedamages owed to Plaintiff are adjudicated;
(iii) From taking any action which would prevent the change of broker-dealer and/or registered agent from Ameriprise (or any of itssubsidiaries, affiliates or agents) to LPL Financial, LLC (or any of itssubsidiaries, affiliates or agents);
(iv) From taking any action which would prevent the change of broker-dealer and/or registered agent from Ameriprise (or any of itssubsidiaries, affiliates or agents) to LPL Financial, LLC (or any of itssubsidiaries, affiliates or agents) on any customer insurance policy,annuity contract or other investment or insurance productcurrently held outside of Ameriprise;
(v) To pay all commissions/receivables and bonuses that are due andowing;
(vi) To pay all fee based revenue that is due and owing;
(vii) To transfer all clients to Plaintiff, whether the clients are inPlaintiffs name, Jayson Walkers name, James P. Norris name andany joint business of the above or team associated with saidpersons;
(viii) To transfer all client accounts upon the written direction of theclient, without imposing any additional transfer requirements;
(ix) To prohibit Defendant from contacting Plaintiffs clients;
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(x) To permit the NetVest name, phone and website to be used byPlaintiff so that Plaintiff may continue to present Trusts andBeyond;
(xi) To transfer all customer accounts and securities to LPL Financial,LLC, serviced by Cartolano and any of his team members;
(xii) To transfer Cartolano's personal and retirement accounts andsecurities to LPL Financial, LLC;
(xiii) To require Ameriprise to honor all written requests by customersserviced by Cartolano to liquidate any securities positions inproprietary Ameriprise products and to transfer those funds to LPLFinancial, LLC;
(xiv) That Ameriprise be prohibited from taking any action which would
interfere with the transfer of customer accounts and securities toLPL Financial, LLC; and
(xv) That Ameriprise be prohibited from interfering in any way with theoperation of NetVest Financial, LLC.
B. That said temporary restraining order may be issued immediately
(with or without previous notice to the Defendant), or said preliminary
injunction may be issued with previous notice to the Defendant; that the Plaintiff
be excused from giving bond; but if required by this Court, Plaintiff be ordered
to give bond upon such condition and with such security as the Court prescribes.
C. That upon final hearing and determination of this cause a
permanent injunction be issued enjoining the Defendant and any successor,
attorney, agent, servant or other person acting under his direction or control
from committing any of the aforesaid wrongful acts; and
D. That this Court grant accelerated discovery so that plaintiff may
ascertain, on an accelerated basis, in time periods substantially shorter than the
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time periods provided for discovery in the Federal Rules of Civil Procedure, the
nature and extent of the information in Defendants possession regarding the
forgoing allegations.
E. Declare that the Ameriprise franchise with Plaintiff is terminated.
F. Declare that the jury trial and damages provisions in the franchise
agreement are violative of the Minnesota Franchise Act and unenforceable.
G. That Plaintiff recover the damages authorized by the foregoing
statutory provisions, and that judgment be entered thereon against Defendant.
COUNT II - FRAUD
1. Plaintiffs incorporate paragraphs 1- 54 of the General Allegations as
though fully alleged herein.
55. Upon information and belief, Ameriprises agents were fully aware
at the time they made the aforementioned promises to Plaintiff regarding
operating NetVest Financial LLC, that Plaintiff would not be allowed to continue
to operate and co-brand his business in the way he had at LPL. Ameriprise had
no intention of performing its promise. Mr. Cartolano has suffered significant
damages as a direct and proximate result of Respondents misconduct.
56. As alleged herein, all of the misrepresentations by Ameriprises
agents regarding the Ameriprise franchise, as well as the manner in which
Plaintiff CARTOLANO would be allowed to conduct business at Ameriprise,
were made to Plaintiff CARTOLANO to induce him to invest in and operate an
Ameriprise franchise, and to transfer all of his customer assets to Ameriprise.
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Mr. Cartolano justifiably relied upon those misrepresentations and was severely
damaged in doing so.
WHEREFORE, Plaintiffs NET VEST FINANCIAL, LLC and
JOHN CARTOLANO, pray that the Court grant them the requested relief against
Defendant, AMERIPRISE FINANCIAL SERVICES, INC., as follows:
A. Such compensatory and punitive damages that are established bythe evidence;
B. Pre-Judgment and Post-Judgment Interest;
C. Reasonable Attorney Fees;
D. Costs and other fees.
E. Such other and further relief as this Court deems appropriate.
COUNT III INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE
1. Plaintiff NET VEST FINANCIAL, LLC incorporates paragraphs 1-
54 of the General Allegations as though fully alleged herein.
55. Plaintiff NET VEST FINANCIAL, LLCs expectancy of continuing
its relationship with CARTOLANO, as an operations and marketing company,
and the future businesses and business arrangements that it enjoyed with
CARTOLANO prior to Ameriprises interfernence, constituted valid business
expectancies.
56. Defendant knew about those relationships and expectancies, which
knowledge led them to engage in the foregoing conduct.
57. In approaching third parties and making the representations and
statements Defendant chose to make, Defendant intentionally interfered with the
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SERVICES, INC., as follows:
A. Such compensatory damages that are established by the evidence;
B. Pre-Judgment and Post-Judgment Interest;
C. Reasonable Attorney Fees;
D. Costs and other fees.
E. Such other and further relief as this Court deems appropriate.
NET VEST FINANCIAL, LLC and JOHN CARTOLANO
By: /s/ Philip J. NathansonPlaintiffs Attorney
Philip J. Nathanson Arizona State Bar #013624THE NATHANSON LAW FIRM8326 E. Hartford Dr. Suite 101Scottsdale, AZ 85255(480) 419-2578(480) 419-4136
Case 2:13-cv-01967-GMS Document 1 Filed 09/26/13 Page 32 of 32