Morgan Stanley’s settlement with a late client’s estate for hundreds of thousands of dollars led to the dismissal of a FINRA arbitration claim seeking several millions of dollars in damages.
Three arbitrators granted Morgan Stanley’s motion to dismiss a case filed by Lisa Drew, the successor trustee of the Tullio and Maria DeFilippis Joint Revocable Trust, based on the wirehouse’s settlement of any claims by the family involving an unidentified former registered representative for $425,000, according to the Dec. 2 award document. Drew, the deceased couple’s daughter, had requested more than $3.6 million in damages under laws against exploitation of vulnerable adults, negligence, fraudulent misrepresentation and other claims.
Fraud cases take years to sort out even after the perpetrators are caught, with victims often left with unpaid losses. Drew and her family allege the firm cost them millions of dollars in losses stemming from its lack of supervision of the former rep, who isn’t named in the public summary of the decision. The case before the Boca Raton, Florida-based panel revolved around an email sent by Drew’s former attorney last year accepting the confidential settlement of pre-suit mediation, the award document shows. Drew argued that the email “is not enforceable,” but the arbitrators ruled unanimously that the “electronic signature acknowledging agreement of the material settlement terms is sufficient” to toss the estate’s case, according to the document.
“The material terms set forth in the mediator’s email dated Dec. 22, 2020, provided for a settlement and release of all claims, payment of $425,000, standard confidentiality provision, Morgan Stanley to pay the mediator’s fee, which were accepted by Claimant and the Trust via electronic signature by Claimant through her counsel,” the award stated. “Thus, the Panel finds there was sufficient evidence to establish a settlement of this matter between the parties.”
The ruling didn’t identify the “former associated person” of Morgan Stanley whose “confessed conversion and mismanagement of assets” led to the case.
An attorney who represented Drew didn’t respond to requests for comment, while representatives for Morgan Stanley declined to comment.
Like brokers pitching themselves against competitors down the road, attorneys may hear about a case and offer their own services as carrying the potential for higher damages, although the missing information makes it impossible to know the nature of the arbitration claim.
“Based on the text of the award, the arbitrators found that there had been a settlement reached by the parties during mediation,” said Michael Edmiston, an attorney with the Law Offices of Jonathan W. Evans & Associates and the current president of the Public Investors Advocate Bar Association. The arbitrators ruled “that a settlement agreement existed and was enforceable at the original $425,000 amount,” Edmiston added.
Tullio DeFilippis died at 88 years old in June 2017, preceded in death by his wife Maria, according to an online obituary. Drew’s statement of claim earlier this year accused Morgan Stanley of breach of contract and fiduciary duty, negligent supervision and misrepresentation, among the other claims. The litigation requested compensatory damages of $1.2 million and multiplying “treble damages” of another $2.4 million, as well as attorney fees and other costs.
This summer, the arbitrators denied Drew’s motion to remove from the evidence a draft statement of claim that her former lawyer sent to Morgan Stanley “in connection with a pre-suit demand and mediation,” along with an exchange between her and a new attorney about Morgan Stanley’s opinion that the settlement barred the new case, according to the award document. Last month, the arbitrators heard arguments on the wirehouse’s motion to dismiss and issued an order in Morgan Stanley’s favor throwing out the case on Nov. 19.
The award dismissed Drew’s claims with prejudice, though the panel said that the parties to the settlements “shall comply with its terms in full,” including Morgan Stanley’s obligation to pay the set amount and the requirement that the late clients’ daughter give the firm “a full release of all claims in accordance with those material terms,” according to the award. The arbitrators didn’t leave Drew on the hook for all of the expenses of the case, though.
“This Panel further finds that each party acted in good faith in pursuit of these issues, and as such, each party shall bear their own fees and costs in this matter,” the arbitrators added.