Broker-Dealer Litigation - Greenberg Traurig LLP

2. Eligibility/Limitations
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Yuan v. Getco, LLC, 2011 U.S. Dist. LEXIS 89991 (N.D. Ill. August 12, 2011).
A former employee brought the action against defendant under the Illinois Wage
Payment and Collection Act for failure to pay several million dollars of bonuses and
commissions owed from plaintiff’s position as a securities trader. In granting defendants’
motion to compel arbitration, the court rejected plaintiff’s argument that because FINRA Rule
13206 precludes claims over six years old, those portions of his wage-payment claim that are
over six years should be considered by the court. The court determined that the issue of whether
a claim is timely is specifically reserved for the arbitrator.
Mid-Ohio Sec. Corp. v. Estate of Burns, 790 F. Supp. 2d 1263 (D. Nev. 2011).
Lawrence Burns opened a traditional IRA account with the Firm that designated his wife
as the primary beneficiary and instructed that the funds be invested with Cumberland Enterprise
Holding, LLC. Three years later Burns discovered that Cumberland was a fraud and the
investment was worthless. Burns passed away on July 7, 2007. In September 2009, Burns’ wife
filed a Statement of Claim with FINRA alleging negligence and breach of contract. The Firm
filed an Answer and motion to dismiss asserting that the claims were ineligible because the
claims were brought more than six years after the date the securities were purchased. The panel
denied with motion to dismiss and subsequently awarded Burns’ wife $280.683.50 in
compensatory damages. The Firm moved the court to vacate the award because the arbitrators’
decision was in manifest disregard for the law, specifically FINRA Rule 12206. The court found
that the arbitrators did not manifestly disregard the law because the United States Supreme
Court’s holding in Howsam v. Dean Witter, 537 U.S. 79, 85 (2002), solidified that the FINRA
eligibility time limit was not a question of arbitrability for the court, but rather a procedural
matter for the arbitrators akin to a statute of limitations. Thus, the arbitrators were free to
interpret the rule and apply the discovery rule or other tolling provisions. Therefore, the panel’s
use of a tolling principle delaying the trigger event of FINRA Rule 12206 until Burns’ discovery
in 2005 could not be considered a manifest disregard for the law and the Firm’s motion to vacate
was denied.
Reynolds v. Parklane Inv., Inc., 2011 Mich. App. LEXIS 1610 (Sept. 20, 2011).
Plaintiffs hired defendants to manage six accounts with an online broker, but allegedly
charged higher fees than agreed upon without written authorization. Defendants asserted that
they were entitled to a set off due to amounts due from another related account and filed a thirdparty
complaint on the owner of the deficient account, E. Wagner, LLC (the “LLC”). The parties
ultimately agreed to arbitration and the arbitration award included damages for claims made by
the LLC. Defendants challenged the award on the ground that the LLC was not a named plaintiff
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