FINRA Panel Dismisses Ineligible Claim with Prejudice
Posted on Categories Arbitration Awards, Arbitrators, Business & Employment, FINRA Code of Arbitration, Professional ConductTags , , ,

By Harry Jacobowitz, Esq.****

In spite of the fact that arbitration claims that violate FINRA’s six-year eligibility rule must be dismissed without considering additional grounds for dismissal and without prejudice to the claimant’s or claimants’ right to pursue the claims in court, the Panel in this Award dismisses an ineligible case on another ground with prejudice.

Rimini v. J.P. Morgan Securities LLC, FINRA ID No. 21-01831 (NYC, Apr. 13, 2022), involved pro se broker Thomas Rimini’s allegations of employment discrimination, defamation, tortious interference and breach of contract against two broker-dealers, J.P. Morgan Securities, LLC (“J.P. Morgan”) and Bear Stearns Asset Management Inc. (“Bear Stearns”), which J.P. Morgan purchased in 2008.

The Eligibility Rule and Dismissals

Rule 13206 of the Industry Arbitration Code (as well as its Customer Code equivalent, Rule 12206) provides in relevant part (boldface in original): “(a) Time Limitation on Submission of Claims[] No claim shall be eligible for submission to arbitration under the Code where six years have elapsed from the occurrence or event giving rise to the claim. The panel will resolve any questions regarding the eligibility of a claim under this rule.[] (b) Dismissal under Rule[] Dismissal of a claim under this rule does not prohibit a party from pursuing the claim in court. By filing a motion to dismiss a claim under this rule, the moving party agrees that if the panel dismisses a claim under this rule, the non-moving party may withdraw any remaining related claims without prejudice and may pursue all of the claims in court…. (7) If the party moves to dismiss on multiple grounds including eligibility, the panel must decide eligibility first.[] if the panel grants the motion to dismiss the case on eligibility grounds on all claims, it shall not rule on any other grounds for the motion to dismiss.”

The Panel’s Ruling

Because the claimant alleged a statutory discrimination claim, an all-public Panel was appointed and, because Bear Stearns was no longer a FINRA member, the Panel did not decide the claims against it. J.P. Morgan filed a pre-hearing motion to dismiss on at least two grounds, eligibility and res judicata (the latter pursuant to Rule 13504(a)(6)(C)). The Award states:

“On March 29, 2022, the Panel granted the Motion to Dismiss on the grounds that the claim is not eligible for arbitration because it does not meet the six-year eligibility requirement. In addition, the Panel ruled that the claim at issue has previously been litigated and disposed of in Respondent J.P Morgan Securities, LLC’s favor. Since Respondent Bear Stearns no longer exists, the entire case must be dismissed and all of Petitioner's other applications are therefore denied.”

The kicker is in the conclusion: “Claimant’s claims, including statutory discrimination claims, are dismissed, with prejudice, pursuant to FINRA Rule 13504.” In short, the Panel bars the claimant from pursuing his ineligible claims in court and dismisses on a different ground, in apparent violation of Rule 13206(b).

(ed: *Obviously doesn’t seem right to us. However, it might not matter in the long run, because if the causes of action date back to 2008 or earlier, they will probably be barred by the statute of limitations, and courts recognize the doctrine of res judicata as well. **The Panel might have been confused by this part of Rule 13206(b)(7): "If the panel grants the motion to dismiss on eligibility grounds on some, but not all claims, and the party against whom the motion was granted elects to move the case to court, the panel shall not rule on any other ground for dismissal for 15 days from the date of service of the panel's decision to grant the motion to dismiss on eligibility grounds." The Award issued 15 days after the Panel granted the Motion. If so, this was a mistake, because the Panel did not say that any claims against J.P. Morgan were eligible and even if it had, it wouldn't justify dismissing the ineligible claims with prejudice. ***We could not find any broker named Thomas Rimini at either Bear Stearns or J.P. Morgan through a search of FINRA’s BrokerCheck. ****This Squib was prepared by Harry A. Jacobowitz, President of HAJ Research and Writing LLC. Mr. Jacobowitz, a member of the Pennsylvania bar, and his firm perform legal research and writing for attorneys and handle substantive searches of SAC’s Award database. He can be contacted at harryjacobowitz@optimum.net.)