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Award

FiNRA Dispute Resolution

In the Matter of the Arbitration Between:

Claimants Case Number: 08-02874

Matt Lichtenberg
David Living Trust
Will Ferreii
Viveca Paulin

Respondent Hearing Site: Los Angeles, California

J.P. Morgan Securities LLC.


f/k/a J.P. Morgan Securities, Inc.,
f/k/a Bear, Stearns & Co. Inc.

Counter-Claimant

J.P. Morgan Securities LLC,


f/k/a J.P. Morgan Securities, Inc.,
f/k/a Bear, Stearns & Co. Inc.

Counter-Respondents

Matt Lichtenberg
David Living Trust
Will Ferreii
Viveca Paulin

Nature of Dispute: Customers vs. Member


Member vs. Customers

REPRESENTATION OF PARTIES

Claimants/Counter-Respondents, Matt Lichtenberg ("Lichtenberg"), David Living Trust


(the "David Trust"), Will Ferreii ("Ferreii") and Viveca Paulin ("Paulin"), hereinafter
collectively referred to as "Claimants": H Thomas Fehn, Esq. and Orly Davidi, Esq.,
Fields, Fehn & ShenA^in, Los Angeles, Califomia.

Respondent/Counter-Claimant, J.P. Morgan Securities LLC, f/k/a J.P. Morgan


Securities, Inc.. f/k/a Bear, Stearns & Co. Inc., hereinafter referred to as "Respondent":
Paul J. Schumacher, Esq. and Scott E. Rahn, Esq., Greenberg Traurig, LLP, Santa
Monica, California.
FINRA Dispute Resolution
Arbitration No. 08-02874
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CASE INFORMATION

Statement of Claim filed on or about: August 11. 2008

First Amended Statement of Claim filed on or about: January 23, 2009

Second Amended Statement of Claim filed on or about: June 9, 2009

Claimant Lichtenberg signed the Submission Agreement: August 11, 2008

Trustee Larry David signed the Submission Agreement on behalf of Claimant David
Trust: January 22, 2009

Claimant Ferreii signed the Submission Agreement: January 22, 2009

Claimant Paulin signed the Submission Agreement: January 22, 2009

Statement of Answer, Motion to Dismiss, and Counterclaim filed by Respondent on or


about: January 5. 2009

Amended Statement of Answer. Motion to Dismiss, and Counterclaim filed by


Respondent on or about: February 17,2009

Respondent signed the Submission Agreement: January 5, 2009

Answer to Counterclaim filed by Lichtenberg on or about: January 22. 2009

Answer to Counterclaim filed by Ferreii and the David Trust on or about: January 29,
2009.

CASE SUMMARY

In the Statement of Claim dated August 11, 2008, Claimant Lichtenberg asserted that
Respondent engaged in the unauthorized and unsuitable purchases of unspecified
preferred securities in the accounts of two unnamed real parties in interest.

Unless specifically admitted in its Answer, Motion to Dismiss, and Counterclaim, dated
January 5. 2009, Respondent denied the allegations made in the Statement of Claim
and asserted various afflrmative defenses.

In its Counterclaim dated January 5, 2009, Respondent asserted a claim for


indemnification against Claimant Lichtenberg.

In his Answer to the Counterclaim dated January 22,2009, Claimant Lichtenberg


denied the allegations made in the Counterclaim.
FINRA Dispute Resolution
Arbitration No. 08-02874
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In their Answer to the Counterclaim dated January 29,2009, Claimants Ferreii and the
David Trust denied the allegations made in the Counterclaim.

In the First Amended Statement of Claim dated January 23, 2009 Will Ferreii, Viveca
Paulin, and the David Living Trust were added as Claimants. Claimants asserted that
Respondent engaged in unauthorized and unsuitable purchases of unspecified
preferred securities with regard to their respective accounts.

Unless specifically admitted in its Amended Answer, Motion to Dismiss and


Counterclaim dated February 17, 2009, Respondent denied the allegations made in the
First Amended Statement of Claim and asserted various affirmative defenses.

In its Amended Counterclaim dated February 17, 2009, Respondent asserted a claim
for indemnification against all Claimants.

In the Second Amended Statement of Claim dated June 9,2009, Claimants asserted
that Respondent made unauthorized purchases of unspecified preferred securities with
regard to their respective accounts.

RELIEF REQUESTED

In the Statement of Claim, Claimant Lichtenberg requested:


1. That the purchase of the securities at issue in this case be rescinded and that
Respondent pay Ciaimant Lichtenberg the full purchase price of the securities in
the amount of approximately $18,000,000.00; and
2. Interest at money maricet rates from the date of the investments.
In exchange. Claimant Lichtenberg would reconvey the securities to Respondent.

In the Statement of Answer, Respondent requested:


1. Dismissal of Claimant Lichtenberg's Statement of Claim in its entirety and with
prejudice;
2. Costs; and
3. Such other relief as provided by law.

In the Counterclaim, Respondent requested that Claimant Lichtenberg indemnify


Respondent for any and all liability and damages detemnined against Respondent.

In the First Amended Statement of Claim, Claimants requested:


1. That the purchase of the securities at issue in this case be rescinded and that
Respondent pay Claimants the full purchase price of the securities in the amount
of approximately $18,000,000.00; and
2. Interest at money market rates on the full amount from the date of the
investments.
In exchange. Claimants would reconvey the securities to Respondent.
FINRA Dispute Resolution
Arbitration No. 08-02874
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In the Amended Statement of Answer, Respondent requested:


1. Dismissal of Claimants' Amended Statement of Claim in its entirety and with
prejudice;
2. Costs; and
3. Such other relief as provided by law.

In the Amended Counterclaim, Respondent requested that Claimant Lichtenberg


indemnify Respondent for any and all liability and damages detemriined against
Respondent. Respondent also brought a counterclaim against Claimants Fen^eli,
Paulin. and the David Trust for indemnification.

In the Second Amended Statement of Claim. Claimants requested:


1. That the purchase of the securities at issue in this case be rescinded and that
Respondent pay Claimants the full purchase price of the securities in the amount
of approximately $18,000,000.00; and
2. Interest at money market rates from the date of the investments.
In exchange. Claimants would reconvey the securities to Respondent.

At the close of the hearing. Claimants requested rescission of the transactions in both
the David Trust Account and the Ferrell/Paulin Account totaling $18,200,000.00 of
preferred securities. Claimants in turn would pay Respondent $2,700,000.00.

At the close of the hearing, Respondent made an additional request for attorneys' fees
of $650,000.00, discovery sanctions, costs, and a dismissal of all claims with prejudice.

OTHER ISSUES CONSIDERED AND DECIDED

The Arisitrators acknowledge that they have each read the pleadings and other
materials filed by the parties.

At the beginning of the recorded evidentiary hearing held on November 1, 2010,


Respondent made a motion to dismiss the Claimants' Claim. The Panel denied the
motion. Respondent also made a motion for monetary sanctions against Claimants.
The Panel denied the mofion.

Claimants Ferreii. Paulin, and the David Trust did not appear in person at the
evidentiary hearing, but appeared through their agent. Claimant Lichtenberg.

The parties have agreed that the Award in this matter may be executed in counterpart
copies or that a handwritten, signed Award may be entered.
FINRA Dispute Resolution
Arbitration No. 08-02874
Award Page 5 of 8

AWARD

After considering the pleadings, the testimony and evidence presented at the hearing,
the Panel has decided in full and final resolution of the issues submitted for
detemnination as follows:

1. Claimants' claims are denied in their entirety and dismissed with prejudice.

2. Regarding Respondent's Counterclaim, Claimants are jointly and severally liable for
and shall pay Respondent $600,000.00 in costs and attorneys' fees pursuant to the
following:
a. Trading Authorizations executed by Ferreii and Paulin, and Power of Attorney
executed on behalf of the David Trust;
b. Cal. Civil Code § 2772;
c. Roozv. Kimmel (App. 1 Dist. 1997) 64 Cai.Rptr.2d 177, 55 Cal.App.4th 573;
d. Todd Shipvards Coro. v. Cunard Line Ltd.. 943 F.2d 1056 (9th Cir. 1990);
e. Mastrobuono v. Shearson Lehman Hutton. Inc.. 514 U.S. 52, 61 (1995);
f. Advanced Micro Devices v. Intel Coro.. 9 Cal. 4th 362. 384 (1994);
g. FINRA Code of Arbitration Procedure Rule 10330(e);
h. Johnson, et al. v. CISC Oppenheimer Corp. et al.. Pacific Stock Exchange
Case No. 98-S017;
i. Vildosola. et al v. UBS Financial Services Inc.. Citigroup Global Martlets Inc.
and Juan Ignacio Cabanas Vildosola. FiNRA Case No. 06-05306 (July 30,
2008);
j. Marshall & Co.. Inc. v. Duke. 114 F.3d 188 (11th Cir. 1997); and
k. Weber V. UBS Financial Sen^ices. Inc.. et al.. NASD Case No. 03-05403
(2005).

3. Claimants are jointly and severally liable for and shall pay Respondent $22,500.00
for discovery abuse and failure to comply with the forum's discovery rules and
procedures. After three motions to compel discovery by Respondent and three
orders from the Panel, Claimants were still supplying ordered documents on the
afternoon of the second day of the evidentiary hearing.

4. All other claims regarding Respondent's Counterclaim are denied.

5. Any and ail relief not specifically addressed herein is denied.

FEES

Pursuant to the Code, the following fees are assessed:


FINRA Dispute Resolution
Arbitration No. 08-02874
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Filing Fees
FINIRA Dispute Resolution assessed a filing fee* for each claim:
Initial Claim filing fee =$ 1,800.00
Counterclaim filing fee =$ 3.700.00

*The filing fee is made up of a non-refundable and a refundable portion.

Member Fees
Member fees are assessed to each member finm that is a party in these proceedings or
to the member finn(s) that employed the associated person(s) at the time of the events
giving rise to the dispute. Accordingly, as a party J.P. Morgan Securities LLC, f/k/a J.P.
Morgan Securities. Inc.. f/k/a Bear. Stearns & Co. Inc.. is assessed the following:
Member surcharge = $ 3,750.00
Pre-hearing process fee = $ 750.00
Hearing process fee = $ 5,500.00

Adiournment Fees
Adjournments granted during these proceedings for which fees were assessed:

January 11-15,2010, adjournment by Claimants = $ 1,200.00


The Panel assessed $1,200.00 of the adjoumment fees jointly and severally to
Claimants.

Discoverv-Related Motion Fees


Fees apply for each decision rendered on a discovery-related motion.

One (1) Decision on discovery-related motions on the papers


with one (1) arisitrator @ $200.00 =$ 200.00
Claimant submitted one discovery-related motion
Total Discovery-Related Motion Fees =$ 200.00

The Panel has assessed $200.00 of the discoveryrrelated motion fees jointly and
severally to Claimants.

Contested Motion for Issuance of a Subpoena Fees


Fees apply for each decision on a contested motion for the issuance of a subpoena.

One (1) Decision on a contested motion for the issuance of a subpoena


Three (3) arisitrators @ $600.00 = $ 600.00

Totai Contested Motion for Issuance of Subpoenas Fees = $ 600.00

The Panel has assessed $600.00 of the contested motion for issuance of subpoenas
fees jointly and severally to Claimants.
FiNRA Dispute Resoiution
Ari}itratlon No. 08-02874
Award Paoe 7 of 8

Hearing Session Fees and Assessments


The Panel has assessed hearing session fees for each session conducted. A session is
any meeting between the parties and the ari3itrator(s), including a pre-hearing
conference with the ari}itrator(s) that lasts four (4) hours or less. Fees associated with
these proceedings are:

Six (6) Pre-hearing sessions with the Panel @ $1,200.00/session = $ 7.200.00


Pre-hearing conferences: May 1.2009 1 session
May 26, 2009 1 session
July 10. 2009 1 session
May 26, 2010 1 session
September 2, 2010 1 session
October 26. 2010 1 session
Six (6) Hearing sessions $1,200.00/session = $ 7,200.00
Hearing Dates: November 1. 2010 2 sessions
November 2,2010 2 sessions
November 3,2010 2 sessions

Total Hearing Session Fees = $14,400.00


The Panel has assessed $12,000.00 of the hearing session fees jointly and severally to
Claimants.

The Panel has waived $2,400.00 of the hearing session fees for the May 1. 2009 and
July 10,2009 pre-hearing conferences.

All balances are payable to FINRA Dispute Resoiution and are due upon receipt.
FINRA Dispute Resolution
Arbitration No. 08-02874
AwanJPaqff8tf<f
ARBITRATIOM PANEL

Davkj L. Malslen Public Aribitrator. Presiding Chairperson


Elizabeth A. Copley Public Arisitrator
Linda L. Blackweli Non-Public /Arbitrator

Concurring ArbHrators' Signatures

David L. Maislen Signature Date


Public/Wtrator, Preskling Chairperson

Elizabeth A. Copley Signature Date


Public Arbitrator

Linda L. Blackweli Signature Date


Non-Public Arisitrator

Date of Senrice
//1 1^1'
( Dispute Resolution use only)
eTPbrFiNRAI
FINRA Dl8pul9 nMohjHon
AfbHrsUon No. 06412874

Dan^L Malslen Public Arbitrator, PrssMlrig Chaifpefson


Elbnbeth A. Copley Pubib Arbitrator
Unde L Blackweli Non-Public AriMtrator

Davkl L Msislen SignalyrB: DalB


PuUte AriMtritDr, Preskiing Chairperson

/SIgnetGre'Dats

Linda L. Blackweli Signature Date


Non-Public Aftltritor

Date or Service (For FINRA


INRA Dispute
Dispute Resdutkm use only)
FINRA Dispute Resolutk>n
Aibitratlbn No. 08-02874
Award Paoe 8 cf 8

ARpiTflATlOW PANEL
David L. Maisien Public Art)ltraton Presiding Chairperson
Elizat)eth A. Copley Public Ari}itratpr
Linda L. Blackweli Non-Public Art)itrator

Concurring Arbitrators' Signatures

David L. Maislen Signature Date


Public Ari)ltrator. Presiding Chairperson

Elizabeth A. Copley Signature Date


Public Art)itrator

Linda L. BfackyA/ell Signature Date


Non-Public Arbitrator

LI
Dispute
Date of Service (For FINRA DisputeRe
Resolution use only)

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