Litigation

By: Daniel M. Hanifin

“Selling away” is when a broker leads an investor to investments that are not offered through their brokerage house. Investing in securities outside of your brokerage account can be extremely risky, because investors will miss important investor protections that flow from the broker’s and the firm’s regulatory obligations, including the firms supervision of the brokers activities.

These investments are often presented as “alternative investments” or “outside investments.” Investors are often lured to these investments by promises of high returns with low risk. Another common theme in these cases is a representation by the broker that he/she has personally invested in the investment. Outside investments can take many forms including unsecured notes, limited partnerships, and limited liability companies.

Many of these alternative investments are in reality Ponzi schemes. Ponzi schemes are fraudulent alternative investment schemes that typically attract investors with promises of high returns and the investment initially produces some nice returns. However, these returns are money of subsequent investors. Ponzi schemes continue to pay investors with money received from subsequent investors, but eventually collapse when the well of new investors runs dry.

FINRA, the Financial Industry Regulatory Authority, takes these types of claims seriously. In April 2010, an arbitration panel in Kansas, awarded an investor more than $500,000 in damages flowing from her investment in two outside companies that her broker recommended.

If you think you have been a victim of one of these fraudulent investment schemes please contact Daniel Hanifin at (610) 692-1371.

By: Nancy J. Glidden

With the approach of Spring and Summer comes a more active residential real estate market. The process of buying or selling a home may have become just a little more complicated due to the recent decision handed down by the Pennsylvania Superior Court in Trowbridge v. McCaigue.

Buyers, sellers, and real estate agents need to be aware that, under certain circumstances, what is intended to be only an “offer to purchase” can instead be a legally binding and enforceable “contract for sale.” According to the majority of the Court in Trowbridge, this occurs when an “offer to purchase” real estate contains all essential terms. However, one of the judges, Justice Shogan, felt the majority ignored the plain language of the document as well as the intention of the parties. He indicated that what was clearly identified as a “purchase offer” was an “agreement to agree,” and it was not on its face intended or otherwise to be an express and binding contract.

To avoid the result that was obtained in Trowbridge, one lesson seems to be that when making an offer to purchase real estate, clearly specify that any essential terms referenced in the offer are intended to be the subject of further negotiations.

For more information, contact Nancy Glidden.

By: James C. Dalton

More often than not, the answer to the question posed above is “No”. The general rule in American courts provides that each party to a lawsuit is responsible for paying their own attorneys fees, unless one of the following exceptions applies:

A statute or rule of court authorizes the recovery of fees (for example, consumer protection and anti-discrimination laws provide for the recovery of “reasonable fees” under certain circumstances), or

A clear agreement between the parties in a document provides that the prevailing party may recover fees (for example, a contract, lease or other document that refers specifically to attorneys fees. Note, however, that general language regarding “costs” is not enough).

While the American rule can be criticized for favoring the party with “deeper pockets” and forcing some litigants to compromise otherwise valid claims in order to avoid the cost and delay of litigation, it remains the law and is a factor in every case. The potential cost of litigation, and availability of exceptions to the American rule allowing recovery of counsel fees, should be discussed with an experienced litigation attorney before a claim is filed.

Please contact James C. Dalton for further information.

By: Stephen P. Lagoy

The Financial Industry Regulatory Authority (FINRA), which administers the arbitration program to which brokerage customers must bring their complaints, is considering using arbitration panels comprising all “non-industry” members.  Presently, panels must include at least one industry member among the three-person panel.  The remaining member(s) are “public” (i.e. from outside the brokerage industry).  FINRA is now running a pilot program that allows parties to choose an all-public panel.  This move may be in response to public criticism of FINRA’s arbitration program as being too lenient on brokerage misconduct. For more on the FINRA program and how securities arbitration works, see Forexyard News.

If you would like to know more about arbitration and how it may be used effectively as an alternative to court litigation, please call Stephen Lagoy.