Sarah Lilly (2L), Arda Barlas (2L), and Katie Black (2L) argued a FINRA arbitration case in the Fall 2019 semester
When Thomas and Joanne Colgan lost their retirement savings in a fraudulent investment scheme, they thought they had run out of options. The advisor they trusted with their money promised to pay them back but never did. After several years wtihout progress, the Colgans learned about the University of Miami School of Law Investor Rights Clinic from a neighbor who the IRC already represented concerning the same fraudulent scheme.
The IRC offered the Colgans representation and filed their claim in early 2019 with the Financial Industry Regulatory Authority Office of Dispute Resolution. FINRA is the self-regulatory organization that oversees U.S. brokerage firms and administers the arbitration of almost all individual claims for investment losses against those firms. In 2018, FINRA introduced a new type of arbitration proceeding for small claims in which investors like the Colgans can participate in an arbitration hearing by telephone with opening statements, witness testimony, and closing arguments all in one day.
Miami Law students Arda Barlas, Katie Black, and Sarah Lilly began their internships at the IRC in August 2019. By September, they were drafting motions, reviewing thousands of documents produced in discovery, and counseling Mr. and Mrs. Colgan. In October, Black and Lilly argued motions against experienced defense counsel before a FINRA arbitrator.
One of the motions filed by the Respondent, Interactive Brokers, LLC, sought dismissal of the Coglans’ claims, alleging that the claims were filed too late. If successful, the motion would prevent Mr. and Mrs. Colgan from presenting their case to the arbitrator. Black drafted and argued the Claimants’ successful opposition to that motion, clearing the way for a final hearing on the merits of the case.
“Working on and arguing the opposition motion is, to date, the hardest thing I’ve done in law school,” said Black, who spent dozens of hours drafting the motion and preparing for oral argument. “Winning the motion was also the proudest moment I’ve had.”
Black explained that “it just felt great to win for the Colgans. Even if we didn’t win in the end, by getting past the motion to dismiss and going to a full hearing, they were given the full-fledged opportunity to tell their story.”
After prevailing on the motion to dismiss, all three students began drafting a pre-hearing brief for the arbitrator and preparing exhibits for use at the final hearing. In preparing for the hearing, the students came to realize the importance of counseling their clients to testify as witnesses. “The Colgans relied on us way more than my previous clients,” said Barlas, who practiced law in Turkey before enrolling in Miami Law’s Joint J.D./LLM. Program in International Arbitration, representing corporate clients in the field of international arbitration. “We had to understand that this was happening to them for the first time ever.”
During a conversation with the Colgans, it became apparent to the students that their clients felt uncertainty and discomfort at the prospect of testifying before an arbitrator. “I believe that was the moment they realized very clearly that they were part of the process,” Barlas said.Mr. Barlas began counseling the Colgans by describing the basic details: how the room would look for the hearing, who would be there, and the roles of each person, including their role as fact witnesses. After the clients became comfortable with the process, Ms. Black continued to prepare the clients by reviewing the facts with them over the course of several meetings, by telephone and in person. “You’re answering to a client who has a real stake in it,” she said. “There’s absolutely no way you can get through this without identifying with your client, identifying with their struggles and believing in their case.”
Facing an uphill battle to prevail in the case, the students worked days, nights, and weekends to be as prepared as possible for the final hearing. “So many things are already stacked against our clients in every way,” Lilly said. “They’re against these brokers that do this all the time at a very high level. [The brokers are] incredibly practiced at doing this over and over and over, and they have the resources to throw at this, unlike the clinic and unlike most legal services providers.”
Nonetheless, the students remained optimistic and confident throughout the process. “I think in some ways you don’t have an option not to be,” said Lilly. “If you didn’t believe that there was a chance that you find some justice for people in whatever way that might look, we wouldn’t do it, right?
“At the end of the day, that is sometimes all you can do – and in a system that is very often stacked against our clients – is make sure that you give them the best shot at some positive outcome… And if nothing else, I feel very confident that we did that.”
In November, the three students prepared and presented Mr. and Mrs. Colgan’s case before an arbitrator in one of the first arbitration hearings using FINRA’s new single-day, telephonic proceeding for small claims. During the hearing, Black gave the opening statement and presented the Colgans’ testimony through direct examination. Barlas conducted direct examinations of two expert witnesses, and Lilly delivered the closing argument.
In the end, however, the arbitrator denied all claims and awarded the Colgans none of their lost retirement savings. “It was a gut punch when we got the verdict,” Black said. “I understand the outcome… I don’t agree with it.”
After absorbing the impact of the decision, the students reflected on the experience of working in the Clinic and representing the Colgans. “It’s not the journey, it’s the destination,” Barlas said. “I’m not happy with the destination [where] we ended, but I was happy with the journey at least.”
“It was a much different experience than sitting in a law school class, and I think, better in some ways,” Black said. “I don’t think I could walk out of law school the same person having not had this experience.”
Lilly, who had a public interest background before coming to law school, wanted to make an impact on people right away, and in her first year, did not find those opportunities easy to come by. That changed when she enrolled in the Clinic.
“It all very quickly went from theoretical to real for me,” she said. “And I think that was key in me understanding, reconnecting maybe to why I came to law school.”
It was the Colgans, though, who suffered the direct consequence of the disappointing outcome. Nonetheless, they expressed gratitude to the Clinic and praised the work of the students. They commented on Black’s opening, “done so professionally and full of confidence,” said that Barlas’ “knowledge of finances astounded [them]”, and called Lilly’s closing “dynamite… right on and forceful.”
“These students are truly a shining light in the field of law,” the Colgans wrote in a letter thanking the Clinic.
“We had an impact on them in a way that even though it wasn’t measurable, it was obviously very valuable to them,” Lilly said. “There are so many people out there that just would never have that opportunity and their story – of being defrauded and cheated by the people that they trusted with their money – would stay in their homes and no one would ever hear about it and nothing would ever change.”
“I’m glad that we helped them,” Black added. “I’m glad that we helped them tell their story.”