A Houston Financial Industry Regulatory Authority (“FINRA”) arbitration panel awarded Brian O’Grady, M.D. and his family partnership nearly $4 million against River Oaks Capital Management, Inc., David Charles Miller and Brett Stephen Schulick (collectively “Respondents.”)
According to the Award, Dr. Grady alleged that the Respondents violated the Texas Securities Act, made material misrepresentations and breached their fiduciary duties in recommending that Dr. Grady and his family partnership enter into a collaterallized investment contract. Dr. Grady alleged that Respondents encouraged him to pledge his accounts receivable to a bank in return for a loan in order to protect his assets from creditors. Dr. Grady claimed that Respondents assured him the loan proceeds would be conservatively invested in low-risk investments, but instead, Respondents placed the loan proceeds in high-risk, volatile funds.
The panel of three public arbitrators awarded damages in favor of Dr. Grady but did not specify the rationale for their decision, as is typical in FINRA Awards. The Respondents, jointly and severally, were ordered to pay $2,868,868 in compensatory damages, $300,000 in punitive damages pursuant to the Texas Deceptive Trade Practices Act, $819,314 in attorney’s fees pursuant to the Texas Securities Act and pre- and post-judgment interest.