Pastore & Dailey successfully dismissed claims filed in Delaware bankruptcy court by one of the nation’s largest mineral mining companies. Pastore & Dailey represents an investment bank seeking a fee associated with $650 million in construction financing for the project. The mining company was attempting to avoid paying this fee by asserting that claims had been discharged in bankruptcy.
Tag: Joseph Pastore
Defeated Motion to Stay
On behalf of its sophisticated financial services client, Pastore & Dailey LLC recently defeated a Motion to Stay a New York Supreme Court action pending resolution of an ongoing arbitration. In denying the defendants’ motion for a stay, the court agreed with P&D’s arguments that the corporate defendants’ conduct in choosing not to participate in the arbitration, thus creating a complete separation of identity between the defendants in the court case and the respondents in the arbitration, could not be used as an excuse to stop the court proceedings until the arbitration was resolved.
Defeated Emergency Appeal to NYS Appellate Division
Pastore & Dailey recently defeated an emergency appeal to NYS Appellate Division (1st Dept.) by a client’s competitor in the financial services industry (including a FINRA member firm) on the trial court’s denial of its motion to stay our client’s lawsuit in NYS Supreme Court (New York County) against the competitor and its principals while a related FINRA arbitration was in process. (Our client is suing the competitor and its principals for tortiously interfering with our client’s contracts with its ex-employees, among other things.)
Enforcing Texas Judgement in New York for International Clients
The attorneys at Pastore & Dailey recently claimed a victory with respect to opposing a joint motion to dismiss and motion for summary judgment in New York Supreme Court (Kings County). In that matter, Pastore & Dailey’s clients successfully secured a judgment for the client (a limited liability company whose members reside in Israel) in excess of $4MM in a Texas state court against a now defunct company. Our attorneys successfully domesticated that judgment in the New York Supreme Court and commenced an action against a party who owes money to the judgment debtor (the defunct company). After the commencement of the action, our attorneys successfully negotiated that a large sum of money be held in escrow by the defendant while the New York action was pending. Said funds came out of the sale of commercial property in New York City, which funds our clients claim to be entitled to as the judgment creditor. The defendant simultaneously moved to dismiss and for summary judgment claiming that Article 52 of the New York CPLR was the exclusive method to collect on a prior judgment and because the sale of the property did not create a cause of action for unjust enrichment and the creation of a constructive trust. While Article 52 is the primary means to collect on a judgment, our attorneys successfully argued that Article 52 is not the exclusive means upon which to collection on a judgment and furthermore successfully argued that the sale of the property created a colorable cause of action for unjust enrichment as the enhancement of value of the property was created, in part, by the investment of the judgment debtor. Therefore, the judgment creditor (our client) will be able to pursue its claims against the defendant for money that is owed to the judgment debtor.
Summary Judgement Win
Successfully represented a software development company in the motion for summary judgment phase of litigation pending in the Southern District of New York, in which the court determined that the Firm’s client could seek in excess to $15 million in damages at trial on its primary claim against a Fortune 500 company.
Should All Financial Advisors Bear the Obligations of Fiduciary Duty?
As of today, in the retirement and savings plan matters, money managers are not required to register as fiduciaries. The Department of Labor (“DOL”) is about to clarify the situation by wiping out the difference that exists between financial advisors and broker dealers in regard to their responsibilities in retirement advices.
A fervent debate is currently on regarding whether the fiduciary duty should be applicable to broker dealers. Under section 3(21)(A)(ii) of the Employee Retirement Income Security Act (“ERISA”), a fiduciary advisor is a person who “renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan … .” In other words, the fiduciary advisor has to act solely in another party’s interests. The main corollary of this principle, for the fiduciary, is to avoid any conflicts of interest between itself and its clients.
Recently, the United States Supreme Court clarified the scope of the fiduciary duty under ERISA – Tibble v. Edison International, No. 13-550 (U.S. 2015). The Supreme Court expressed that a fiduciary “has a continuing duty to monitor trust investments and remove imprudent ones. This continuing duty exists separate and apart from the fiduciary’s duty to exercise prudence in selecting investments at the outset.”
Some financial services providers do not seem concerned about the possibility of a higher standard – i.e., they already support these basic safeguards in their work policy. Others who are under the pressure of their executives demanding large profit-return, seem to “forget” some of these principles and claim that they will not be able to serve their clients or stay in business if such a rule came into effect.
Who Takes the Lead?
Although initially the Securities and Exchange Commission (“SEC”) regulated broker dealers and investment advisors, it has delegated a large part of its prerogatives related to the broker dealers to the Financial Industry Regulatory Authority (“FINRA”). Nevertheless, when investment advice and securities transactions are related to savings and retirement plans the DOL also has a say in the matter.
Industry groups have widely expressed their concerns with the idea of a fiduciary standard commitment for broker dealers. The fact that the DOL is conducting the project understandably makes the financial services industry skeptical as the connection between them and the DOL is much less privileged than with the SEC or FINRA.
Financial services providers would welcome a consistent and coordinated interpretation of this new standard by the DOL and SEC; divergence between regulators would not serve anyone and would confuse both providers and clients. Trustees believe the industry and investors would be better served if the SEC took the lead and the DOL incorporated the standard guidelines in its interpretation of ERISA.
The Crisis Aftermath
Investment advisors – who provide investment advices – undertake to strictly respect the fiduciary duty. The objectives and interests of their clients must be their priorities when they suggest securities acquisitions. Any conflict of interest must be avoided or at least fixed in the Clients favor.
As opposed to advisors, broker dealers – who only execute securities transactions – have so far not been required to follow the fiduciary duty principle. However, as they suggest the purchase of securities, they are held to submit suitable products to their clients in regard to their financial situation and investment objectives. However, FINRA “suitability” standard does not mean that the products sold must be the best in respect to the purchaser profile.
During the latest financial crisis, many people learned the hard way that, even though those brokers were managing their savings, they were not fiduciaries and, consequently, were not held by the fiduciary duty. Thereafter, Congress adopted the Dodd-Frank Wall Street and Consumer Protection Act, with the intent to have the SEC examine the need of a new uniform federal fiduciary rule both for brokers and advisors. The SEC did so, and in 2011 released that a uniform standard would be appropriate.
At the same time, the DOL – which enforces among others the ERISA – implemented its own set of regulations in this matter with the intent to put some safeguards in place regarding retirement and savings accounts. In its new regulations, it focuses mainly on the conflict of interest facet of the fiduciary duty in respect to retirement accounts.
Two Week Extension
In 2010, the DOL wished to expand the definition of Fiduciary Duty under the ERISA but, eventually, overwhelmed by the industry pressure, had to withdraw it. In February 2015, President Obama asked the DOL to move ahead on its fiduciary rule.
Although Senators from both sides asked the DOL to extend the comment period, arguing that the matter is too complex to be commented in 75 days, the latter extended the period only for two weeks. Rule makers bode that a longer extension of this period could be prejudicial for their project.
http://newoak.com/wp-content/uploads/Defining-Fiduciary-POV-F3.pdf
https://www.asppa.org/News/Browse-Topics/Details/ArticleID/4515
Investment Banking: How to Protect the Success Fee
The terms of the investment banking engagement letter are critical to the protection of the issuer in any deal. Often overlooked, however, is that the investment banker’s fee is often protected or lost by those same terms – particularly in small deals for micro-cap or under capitalized companies. Generally, an investment bank charges two different fees: the retainer fee, which has to be paid as soon as the banker starts his assignment, and the success fee, which has to be paid when the deal is closed.
Although the investment banker could waive this retainer fee in case of a surefire deal, it is usually a lump sum and oftentimes it is paid on a monthly basis. It can also be paid out at the beginning and might eventually be credited against the success fee.
The success fee, however, is most commonly a percentage of the final deal. Depending on the bank philosophy, the fee can be declining – e.g. the Lehman system – or the opposite, progressive, which can better incentivize the banker not to hurry in the transaction and motivate him to close a deal that exceeds the initial goals.
The time to pay the success fee is also a key point to be determined by the parties. It is evident that the bank wants to be paid at deal close and it should not be a problem with a cash sale. It can be much more complicated when the deal involve other payment options such as capital adjustments or deferred payments.
Often with smaller companies, there is a primary secured lender that has significant control over the issuer. When an investment banker is successful, and raises debt or equity, (or some combination thereof) the bank and banker are entitled to this fee. With a secured lender that controls the issuer in some form, or has the ability to foreclose on the assets, the investment banker is at risk if the bank is not paid at closing – if the deal is funded and sometimes thereafter the issuer faces economic trouble, the investment banker’s success fee can be swallowed up by a bankruptcy or asset foreclosure.
Thus, we propose that where practical, and where leverage allows, the investment bank insists that the secured lender or those lenders with the ability to foreclose and take the issuers assets, either indemnify, or better yet, guarantee the investment banker’s fee in the event that the issuer cannot pay it due to the actions taken by the lender.
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http://www.axial.net/forum/investment-banking-fee-structures/
http://thismatter.com/money/stocks/investment-banking.htm
http://www.axial.net/forum/how-to-structure-the-investment-banking-engagement/
http://www.lexology.com/library/detail.aspx?g=84675f88-e4c0-492e-8535-954518c0c7f5
B. Riley & Co., LLC – Investor Conference
Pastore & Dailey LLC proudly sponsored the 16th Annual B. Riley Investor Conference in Los Angeles on May 12 to the 14. Along with several other national law firms, Pastore & Dailey helped B. Riley facilitate a dialogue between issuers and investors from around the country, and helped B. Riley raise money for the Sugar Ray Leonard Foundation.
California FINRA Aribitration
The attorneys at Pastore & Dailey LLC successfully represented Los Angeles based broker-dealer in the prosecution of a FINRA arbitration in California seeking the collection of a contractually earned broker dealer’s investment banking fee. The issuer represented by our client claimed that the investment banking fee was not owed, but ultimately satisfied the fee obligations by transferring equity in the company to the broker-dealer as payment.
National Law Firm Pastore & Dailey Expands to Space Coast
Pastore & Dailey’s new Melbourne office, located at 7827 N. Wickham Road in Suntree, is led by attorney Rob Manning, a Brevard County native. Manning holds an AV-Preeminent Peer Review rating from Martindale-Hubbell. “I am grateful for this opportunity to return to Brevard County, and to bring my experience and Pastore & Dailey’s resources to serve my hometown,” Manning said.
Brevard County’s growing and diversified economy made it a prime market for Pastore & Dailey’s expansion. “When Pastore & Dailey considered expansion opportunities in Florida, the Spacecoast was at the top of the list with its growing, diverse economy, ” said Pastore & Dailey’s managing partner Joseph M. Pastore, III.
Contact Rob Manning at 321.684.7144 and via email at RManning@psdlaw.net.
Pastore & Dailey LLC is a national law firm with offices in Stamford, CT, New York, NY, Glastonbury, CT, Gainesville, FL and Melbourne, FL. Visit the firm’s website at www.psdlaw.net.