Stifel is asking a court to toss out a nearly $133 million arbitration penalty, alleging that one of the arbitrators was biased by previous work on a related case.
In a petition filed on Friday, Stifel deemed the award a “shocking, runaway” amount and called on the federal court for the Southern District of Florida to vacate the $132.5 million penalty, which it was hit with in March by a Financial Industry Regulatory Authority arbitration panel over one of its broker’s recommendations of complex investment vehicles known as “structured notes.” The award went to a family of investors, David, Sarah Lyn, Adam and Leah Jannetti, who had worked with the Stifel broker Chuck Roberts.
The penalty, according to Stifel’s petition, was the largest “in FINRA history in a retail customer arbitration and was big enough to weigh heavily on Stifel’s profits in the first quarter of 2025. (The largest, for $400 million, was handed down in 2009 in an electronics company’s claim against Credit Suisse.)
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Stifel’s petition to vacate the decision comes in response to a motion asking the federal court in Florida to confirm the Jannetti family’s $132.5 million award. In seeking to have the penalty overturned, Stifel drew particular attention to the alleged biases of Stephanie Charny, one of the three FINRA arbitration panelists who handed down the landmark penalty.
An arbitrator’s past work on a panel covering similar claims
Charny, Stifel noted, had served as an arbitrator on the three-member panel that had handed down a $14.3 million arbitration award against the firm in October. That previous case also involved Roberts’ recommendations of structured notes, and the claimants were a pair of investors named Louis and Elizabeth Deluca. (Stifel says in its petition that 25 arbitration complaints have been filed over Roberts’ alleged misrecommendations.)
Charny was serving on panels in both the Jannetti and Deluca cases at the same time. A day after the award was handed down in the Deluca dispute, Charny filed paperwork in the Jannetti proceedings acknowledging her role in the previous decision involving “the same or similar subject matter.”
Yet, she then answered “no” to the follow-up question: “Have you formed an opinion, positive or negative, about any of the parties, their counsel or the subject matter of the arbitration?” That assertion, according to Stifel, “was indisputably and necessarily false.”
“Her finding in Deluca that the same Stifel personnel involved in the same conduct had acted wrongly is itself an expression of a negative view of Stifel and the very personnel, subject matter and claims she knew and acknowledged were also involved in this case,” the petition stated.
Charny refused to recuse herself from the Jannetti case, Stifel said. Stifel later asked the FINRA director of dispute resolution services to remove her but the request was turned down on procedural grounds.
Stifel said in its petition that there was some attempt to prevent the previous Deluca decision from influencing the outcome in the Jannetti proceedings. The chairman of the Jannetti arbitration panel, the firm noted, agreed to keep details from the Deluca case from being presented after finding they could “jeopardize the ruling in this case.”
“Of course, that exclusion was utter fiction because Ms. Charny presided over the prior case,” according to Stifel. “Under these clear circumstances, Ms. Charny’s partiality was evident and her participation as an arbitrator in this matter deprived Stifel of a fair hearing and requires that the resulting award be vacated.”
Charny could not be reached for comment. Jeffery Erez, who represented both the Delucas and Jannettis in their complaints against Stifel, did not return a request for comment.
Stifel could have raised concerns about partiality earlier
Federal law allows decisions by arbitration panels to be overturned by courts only in a very narrow set of circumstances. One of the grounds for having an award vacated is compelling evidence that an arbitrator acted with “evident partiality or corruption” in handing down a decision.
Douglas Schulz, a securities expert and the president of Invest Securities Consulting, said the problem for Stifel is one of timing. Stifel had known since the start of the second arbitration case that Charny was serving on the panels in both the Deluca and Jannetti proceedings.
But it was only after Charny ruled against Stifel in the Deluca case that the firm decided she had no business in the Jannetti dispute.
“When they found out that she had a similar Stifel case, if they had a problem with that, it was their job to do something about it immediately,” Schulz said.
Schulz, who has served on arbitration panels and as a witness in many FINRA cases in the past, said there are only so many experts to draw on in disputes in the securities industry.
“If I were thrown off every case automatically because I’d already had a case against the same broker-dealer against, we’d run out of experts and witnesses overnight,” he said. “We can’t go excluding people from panels or as experts merely for the fact they have previously had a negative ruling.”
Jenice Malecki of the New York-based firm Malecki Law said Stifel would have had a chance to have Charny removed from the arbitration panels in the Jannetti and Deluca cases at the start of both proceedings.
“But they empanelled her twice,” she said. “Just because she then ruled against doesn’t mean that she was biased.”
Punitive damages also questioned
Stifel also questioned the large percentage of the $132.5 million award in the Jannetti case that was made up of so-called punitive damages. Punitive damages, or “punies” as they’re sometimes called, are intended to punish conduct that’s deemed grossly malicious or negligent and to deter defendants and others from committing the same violations again.
Of the total Jannetti award, roughly 60% — or $79.5 million — consisted of punitive damages. Stifel argued in its filing that the arbitration panel exceeded its authority in granting punitive damages and the actual amount it awarded was “grossly excessive.” The petition noted that the Jannettis had initially claimed an out-of-pocket loss of only $16.3 million.
The punitive award, according to Stifel, “comes on top of a statutory award of ‘compensatory’ damages, which, at $26.5 million, was already $10 million more than petitioners’ out-of-pocket loss. This massive, runaway punitive award bears no correlation to the matters in dispute in this case and is unsustainable under any notion of proportionality or fairness.”
The award in the Deluca dispute also consisted in large part of punitive damages. In that case, punies made up just over 60% — about $9 million — of the $14.3 million total. Stifel’s petition focused on Charny’s role in awarding punitive damages in both proceedings.
Stifel noted that there has been one other FINRA arbitration award handed down against it for Chuck Roberts’ alleged misdeeds. That one, for $2.4 million, contained no punitive damages. And Charny was not on the panel that awarded it.
“Thus if proof of actual impact were required to demonstrate that partiality was evident, not merely theoretical, that added element also exists here,” Stifel wrote.
Stifel isn’t the only large wealth manager turning to the courts in the hopes of turning over a large arbitration award consisting mostly of punitive damages. UBS filed a lawsuit in March to have a $95.3 award vacated, including $69.2 million in punies, over one of its advisor’s recommendations of short investments in Tesla stock.
‘Every argument under the sun’ to fight massive arbitration awards
Schulz said he can understand why firms would make longshot attempts at having arbitration decisions overturned. With Stifel and the Jannetti case, he said, “They are going to make every argument under the sun because it’s one of the largest awards ever.”
Stifel separately questioned the $26.5 million in attorney’s fees awarded to the Jannettis. The amount was approved even though the petitioners “offered no evidence — zero, nada, zilch — concerning the amount of fees they actually incurred, the amount of time expended by their attorneys, or even the terms of their fee agreement …,” Stifel wrote.
The broker-dealer contended in footnotes in its petition that David Jannetti is a sophisticated investor and businessman with a net worth of $70 million and a college degree in finance. It says he was informed in writing 44 times of the risks he was running with his investments in structured notes.
Malecki said Stifel may be going to court in the hopes of pushing the Jannettis into settling for a lesser amount.
“That’s another possible angle in this filing,” she said. “But I just don’t see it happening.”
