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Significant Cases

| Introduction | Securities Arbitrations | Trials and Appeals | Enforcement and Disciplinary Actions | Reported Decisions |

Introduction

During their individual legal careers leading up to the formation of Beam & Astarita, LLC, the individual attorneys at the firm have represented thousands of individuals and entities in a wide variety of matters. Although we are a litigation firm, ultimately representing our clients in courtrooms across the country, much of our work is done outside of the courtroom, in an advisory role.

However, it is our trial work which often results in important, or interesting decisions, which have gained national attention, in the press and in the legal community. While the matters contained in this document are only a small portion of the litigation matters which we have handled, they do demonstrate the scope and variety of those matters.

Arbitrations

Mark J. Astarita, Esq. has represented parties in hundreds of arbitrations before the National Association of Securities Dealers, the New York Stock Exchange, and the American Arbitration Association, at hearings held in most major cities across the country.

Summaries of a few of the more significant matters, follow:

  • In the last nine years alone, from 2000 to today, Mr. Astarita has represented parties in over 100 arbitrations, involving claims of fraud, churning and unsuitability, as well as brokers and firms in employment disputes. Successful settlements were obtained in most of the cases, with the remainder going to hearing in Illinois, Florida, Louisiana, North Carolina, Virginia, Massachusetts, Illinois, New York, Pennsylvania, Georgia, Minnesota and Nebraska.
  • Mr. Astarita has represented dozens of brokers in cases against their former brokerage firms arising from breach of contract, harassment, and in defense of the firms' claims for repayment of forgivable promissory notes. Employee forgivable loan cases are notoriously difficult to defend, as the promissory note is often considered to be an absolute obligation that must be repaid. However, Mr. Astarita was able to successfully prosecute counterclaims on behalf of the brokers, resulting in significant awards in favor of the broker on the counterclaims, which served to substantially reduce the amount owed on the promissory notes. In August 2009, Mr. Astarita obtained an award of attorneys fees for a broker who he was defending in a promissory note enforcement case, an extremely unusual, but well deserved, award. In September 2008, Mr. Astarita obtained an award for 100% of an investment adviser's unpaid compensation, as well as attorneys fees incurred in prosecuting the claim.
  • In March 2007 Mr. Astarita was able to obtain a favorable settlement for a retail broker who was denied compensation for the introduction of an institutional client to his firm. Despite his efforts to secure the client, the firm refused to pay him. An arbitration claim was filed, discovery taken and the broker compensated without the need for a hearing.
  • In July 2006 Mr. Astarita defended a major wire house in a customer case where the customer, a software engineer and designer, claimed that a technology based portfolio was unsuitable for his needs. Incredibly, during cross examination the customer claimed that he did not open his confirmation slips, or his account statements, during the years that his account was opened, and relied solely on discussions that he had with the broker, which were less than once a year. After cross examination, the matter settled on terms that were favorable to the firm.
  • While most EFL cases settle prior to hearing, in July 2006, Mr. Astarita successfully represented two wirehouse brokers in a complex promissory note case, in Denver, which involved multiple state court actions, allegations of forgery, sexual harassment, and fraud. The brokers were awarded damages on their claims, which reduced the amount they were obligated to pay by more than 50% of the outstanding amount of the notes.
  • In early 2006 Mr. Astarita's representation of another wirehouse broker led to a repayment of less than 1/3 of the outstanding loan amount, and in 2004 after a hearing in Tampa, another wirehouse broker paid back less than 1/2 of his outstanding note obligations .
  • In August 2004 Mr. Astarita's investor clients received an award against a major brokerage firm based on claims of unsuitability, based on a recommended trading strategy of writing naked puts. Mr. Astarita was able to recover not only 100% of their out of pocket losses, but all of their costs, attorneys fees and $900,000 in punitive damages against the broker and the firm.
  • In February 2004 Mr. Astarita successfully represented a customer against a major brokerage firm for claims of unsuitability, abusive margin and churning arising from the broker's recommendations of Internet and technology stocks for the customer's portfolio which were not suitable for her investment goals.
  • During an arbitration hearing held in Minnesota during 2003, a customer claimed that his account had been mishandled five years earlier. While the complaint was not unusual, the customer did not sue his broker. During cross-examination, the customer admitted that he had no complaints about his broker, but that he still believed his account was mishandled. The arbitration panel dismissed all of his claims, and ordered the customer to pay half of the forum fees and costs.
  • In a 2003 case heard in Philadelphia, a customer of a brokerage firm claimed damages for unauthorized and unsuitable trading, and also claimed that he was unaware of the status of his account during the years 2000 and 2001. He claimed that the broker lied to him about the profits in his account, and that during those two years, he never opened his statements, or his confirmation slips, and that he never read a newspaper, nor listened to the news on the television or radio and was unaware of the dramatic decline in the markets during those two years. After 10 days of hearings, although the arbitrators entered a small award in favor of the claimant, it was a fraction of his losses and his settlement demands.
  • In a 2000 arbitration, a customer claimed, among other things, that the purchases made in his account were unsuitable for him given his income and net worth. During discovery we learned that the customer had borrowed a sum equal to his entire net worth from a bank, without telling the brokerage firm about the loans. The matter settled on the last hearing day, after the customer's cross-examination.
  • In a 1999 arbitration a husband and wife commenced an arbitration against a broker and his firm, alleging that the activity in their separate accounts were unsuitable for them. The husband had a limited power of attorney over the wife's account, and the firm and broker filed a counterclaim against the husband for any liability in the wife's account. After 10 hearing days, the arbitration panel denied all of the husband's claims against the firm and the broker, and ordered the husband to pay the firm part of the wife's damages.
  • In a 1997 New York Stock Exchange arbitration held in Boston, Mass., a customer brought proceedings against two registered representatives and their former brokerage firm, alleging that three bridge financing deals in which he participated 6 years earlier were fraudulent. The customer sought RICO damages in excess of $1,000,000, as well as punitive damages. In addition to arguing that the brokers acted appropriately, Mr. Astarita also argued that the matter was too old, and that documents which would establish the brokers' defense had long ago been lost or destroyed. After three days of hearings, the panel of arbitrators denied the customer's claim, in its entirety.  
  • In 1995 when a customer of a New York broker-dealer commenced an arbitration, and then refused the firm's offer of 100% of his claimed damages (the cost of the trip to California for the hearing was more than the amount of claimed damages), Mr. Astarita filed a counterclaim in the arbitration against the customer, for the filing of a malicious and frivolous claim. A hearing was held, and the brokerage firm was found not to be liable to the customer, and the brokerage firm was awarded damages against the customer for the filing of a specious claim. The award received considerable attention in the securities industry, and was the focus of the Legal Corner column in the September, 1995 issue of Registered Representative magazine.
  • In 1994 at a New York Stock Exchange Arbitration, Mr. Astarita successfully defended an Exchange Member Firm and its corporate officers in connection with securities fraud claims of over 6 million dollars, arising from the merger of two major retail securities firms. The hearings took over 2 years to complete and resulted in a full dismissal of all of the fraud claims.
  • In 1993 Mr. Astarita successfully represented a major institutional brokerage firm against two of its Executive Vice Presidents, in connection with claims for theft of trade secrets, including proprietary computer software, unfair competition and other business torts, in a proceeding at the NYSE.

  • When a registered representative for a major wirehouse's Florida office was fired, he believed that his branch manager was soliciting complaints from the RR's customers, in order to delay the RR's registration at a new firm, and thereby enable the firm to retain the RR's customers. Mr. Astarita filed an arbitration claim against the manager and the wirehouse and investigated the claim, which resulted in a settlement shortly before the hearings were to commence.

  • During the crash of 1987, a customer ordered the full liquidation of his account, and then sued the broker and the brokerage firm for the resulting loss of $1.2 million dollars. When the firm and broker refused to pay the customer, the customer threatened to make sure that the broker never worked again. The customer filed an arbitration before the NYSE, and wrote letters to regulatory agencies about the broker, making statements that were not true. As a result, the broker was fired, and could not find new employment.

At the arbitration, Mr. Astarita filed a counterclaim against the customer for defamation, business torts, and filing a malicious complaint. After 10 days of hearings, the customer's 1.2 million dollar claim was denied, in total, and the broker was awarded $190,000 from the customer, to compensate the broker for the actions of the customer. The case received national press and was the first time a broker had successfully claimed against his customer for a false or malicious complaint.

Significant Litigation Matters

  • Securities Industry Technology Corp. and Quick & Reilly, Inc. v. Fox, et al Index 110511/93, Supreme, New York - Represented Senior Corporate Executive in defense of claims by major corporation for breach of contract and fraud, and prosecuted the Executive's claims against the Corporation for fraud, breach of contract, invasion of privacy and conversion, including allegations of theft and conversion of computer software and integrated computer systems underlying major online brokerage trading system. Three week jury trial, to successful verdict.
  • Fahnstock & Co., v. Waltman, 935 F.2d 512 (2d Cir. 1991). Appeal to United States District Court, and the United States Court of Appeals, of a New York Stock Exchange Arbitration award in favor of a registered representative for the malicious filing of a Form U-5 and punitive damages.
  • Landau v. Vallen, 723 F. Supp. 218 (SDNY 1989);731 F. Supp. 116 (SDNY 1990), reversed, 895 F.2d 888; (2d Cir. 1990). Major international securities litigation involving fraud by a New York Stock Exchange Member firm and others. Part of this matter involved a case of first impression in the Second Circuit Court of Appeals, reversing the District Court and holding that a crime victim may attach a criminal defendant's bail bond. That decision, which represented a major change in the law was reported in the Wall Street Journal and other newspapers. Reported decisions in this matter also include issues of clearing firm liability for correspondent's actions

  • Ross v. Bolton, 106 F.R.D. 22 (SDNY 1985); 639 F. Supp. 323 (SDNY 1986). Major securities litigation between multiple brokerage firms relating to allegations of parking, wash sales, clearing firm liability and securities fraud. Multiple reported decisions resulted from this case, one becoming the leading case on the liability of clearing firms for the actions of its correspondents. Another addresses the relationship of the National Association of Securities Dealers as a quasi governmental agency for purposes of constitutional privileges.
  • SEC v. Materia, 745 F.2d 197 (2d Cir., 1984); 745 F.2d 197 (2d Cir. 1984). First use of the "misappropriation" theory of liability under Rule 10b-5 for Insider Trading, as well as the first case involving the application of Rule 14e-3, fraud in connection with tender offers. The case was widely reported in the press and is now part of the course work in securities laws in many law schools. The matter involved extensive testimony by securities experts on insider trading, analysis of market conditions, and a three week Federal Court trial in the Southern District of New York. The matter was also heard on appeal to the Second Circuit.

     

Enforcement Investigations and Hearings Proceedings

The firm routinely handles investigations and enforcement proceedings brought by the National Association of Securities Dealers, the New York Stock Exchange and the Securities and Exchange Commission. While the matters are too numerous to detail, they have ranged from representing targets and witnesses in some of the more notable insider trading cases of the 1980s; representation of witnesses at routine investigations into sales practices, stock manipulation, margin and trading violations, SOES violations, and markup and markdown violations.

We have represented the subjects of investigation at all stages of the investigations, as well as after the receipt of a Wells Notice, through settlement negotiations and where necessary through a hearing and the appellate process. We have also represented customers and industry personnel in a variety of administrative proceedings before the Commodity Futures Trading Commission, the National Futures Association, all of the major commodity exchanges, the Securities and Exchange Commission, the National Association of Securities Dealers and the New York and American Stock exchanges, in private and public investigations, disciplinary hearings, reparation and enforcement hearings.

In recent years we have represented parties in the following proceedings of interest:

  • Internet related investigations require a securities attorney who understands the technical aspects of the Internet. In the last year we have represented brokers in two such cases. In the most recent case, the NASD conducted an investigation into "URL Guessing" where brokers were able to locate a public company's press release at its web site, before it had been formally released on the wires. We represented one of the subjects of the investigation, and together with counsel for other parties, we argued that the information, published on a web site and available to the public, was not confidential information, and that the individuals did nothing wrong. Although the NASD had served a Wells Notice, it subsequently withdrew the notice, closing the investigation without any further action.
  • In another Internet related investigation, a registered representative maintained a web site with the approval of his firm, and the NASD (web sites are considered to be advertising by the NASD). The rep also used an Internet marketing consultant to optimize his web site for the best search engine results. The net effect of those efforts was to have the rep's site be returned in various search engines for a search on phrases such as "guaranteed investment" and "no lose investments." Of course, the rep was not offering those types of investments, and his web site did not contain any references to such investments. A regulatory review ensued, and after discussions with our firm, no formal action was taken against the representative.
  • Our representation of a broker who admitted to the conduct alleged in an NASD investigation resulted in a significant reduction in his ultimate suspension. The broker had previously been the subject of an investigation by his firm, which resulted in a suspension of the broker by the firm. After the broker resigned from the firm, an NASD investigation ensued. During the negotiations of a settlement with the NASD, we were able to obtain a credit on the suspension for part of the suspension effected by the brokerage firm, thereby reducing the NASD suspension significantly.
  • When a registered representative was accused by his firm of altering a document signed by a client, the NASD investigated and the broker hired Beam & Astarita to represent him in the investigation. After the investigation and review, no formal action was taken against the broker.
  • Represented a group of brokers in an NASD investigation into the so-called "Proceeds Rule" as part of the NASD's 5% markup guidelines. The matter involved a new interpretation of the rule by the NASD which extended the scope of a proceeds rule. The NASD alleged that purchases made in an account on the day after a sale were subject to the proceeds rule. During the investigation, the NASD indicated that it intended to serve Wells Notices on approximately a dozen brokers at the firm. After extensive negotiations, only 4 brokers received Wells Notices, and negotiations continued. Our position with the NASD was based on legal and well as factual defenses to the new interpretation. We made a Wells Submission on behalf of our clients, and continued to investigate and negotiate with the NASD. After months of investigation and negotiations, the Wells Notices were withdrawn, and no further action was taken against the brokers, with no impact on their CRD records.
  • Representation of numerous registered representatives in investigations relating to churning and suitability of recommendations in customer accounts.

 

Our firm has successfully represented business entities and individuals in a wide variety of matters
 
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