SUGGEST TO, ALTHOUGH YOU CANNOT FORCE, MR. GROETSCH TO DROP HIS ARBITRATION AND FOLD HIM INTO ONE OF THE CLASS ACTION SUITS (IF POSSIBLE). EXPLAIN YOUR REASONING.
Mr Groetsch has an issue with his stockbroker from Securities America. Despite Mr Groetsch’s diagnosis ofAlzheimer’s disease and his family’s formal request for Securities America to not do any business with him,Securities America broker Ron Carazo sold Groetsch a Medical Capital Holdings bond worth $500,000. Groetsch’shealth issues aside, the sale was made despite internal memos at Securities America questioning the legitimacy ofMedical Capital. These concerns were disseminated to brokers across the company, yet Securities America continuedto sell these bonds for years. Medical Capital was eventually exposed as a fraud, and now Groetsch is trying to recoup his losses. Does this seem straightforward? It’s not.Groetsch is pursuing an arbitration claim, which is oftenthe preferred route for investors. Arbitration can be shorter, cheaper, less complex, and profitable. But Groetsch’s conflict is compounded by the fact that numerous other defrauded clients are seeking remedies via litigation in theform of class action lawsuits. For example, authorities in Montana and Massachusetts have brought separate classaction suits against Securities America, claiming that the firm described the investments as conservative, even thoughan internal committee raised red flags about the risks. This scenario pits arbitration versus litigation. Many people may not see a problem here—all claims will eventually be settled and the plaintiffs paid. Although logical, this may not happen. A judge has put the brakes on Groetsch’s arbitration, due to concerns that the awards he may be granted willdeplete the funds available for pending class action lawsuits. More specifically, the fear is that enough funds will not be left to pay the many, many plaintiffs in the class action suits. The class action attorneys argue that they may be able tocollect only 10 cents on the dollar of funds lost by the defrauded investors they represent.
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