David vs. Goliath: How a Small Law Firm Toppled a Giant in FINRA Arbitration

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David vs. Goliath: How a Small Law Firm Toppled a Giant in FINRA Arbitration

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Sometimes little guys slay big guys. Take, for example, Conti Fenn & Lawrence LLC, a small litigation boutique in Baltimore. With the right mix of audacity and clever resourcefulness, it proved that it could stand toe to toe with a much bigger defense firm—and win.

The Back Story

It all began when Conti Fenn & Lawrence (CF&L) was called upon to represent Bethesda-based Kajeet, Inc., an award-winning wireless service provider that empowers kids with technology and gives parents tools to keep them safe. In 2008, Kajeet suffered a substantial liquidity crisis when auction-rate securities it had purchased from UBS AG were essentially allowed to fail by the bank, leaving the start-up company starved of its cash. The crisis forced the executives to conduct layoffs and put Kajeet in serious financial distress.

Convinced that it had grounds for legal action against UBS, Kajeet engaged CF&L to handle the litigation. “This was clearly a ‘save-the-company’ case for our client, not simply to recover the lost value of the securities themselves, but also the consequential damages to their business stemming from that direct loss,” said Gregory Lawrence, a partner at CF&L and the lead attorney in the case. “The stakes were extremely high for us to find a way to help them recover some of those damages.”

Building the Case

Lawrence’s trial team faced one major logistical challenge: with his client experiencing financial stress and having limited available resources to try the case, he would have to accomplish more with less and do battle with a large New York law firm that had access to deeper resources. This was a classic case of David vs. Goliath.

“As a former civil prosecutor for the SEC in D.C., I was familiar with a product from LexisNexis® called CaseMap®, which we used a lot to help us with case management and analysis,” said Lawrence. “I knew that I would need a technology aid like that in order to manage this large matter with limited available resources.”

As Lawrence prepared his case, CaseMap allowed him and his co-counsel to see relationships between people, facts and issues in a coherent way, which improved his case strategy and presentation.

A Stunning Decision

The Kajeet lawsuit was subject to a formal arbitration process overseen by the Financial Industry Regulatory Authority (FINRA), the largest independent regulator for all securities firms doing business in the United States.

“During the arbitration, we weaved together the Kajeet story, from its start-up days through its major milestones reached at meteoric speed, and then its sudden and all-but-fatal cash crisis,” said Lawrence. “This story was unique because the cash crisis coincided with a critical round of funding for the company, as well as the beginning of the 2008 financial crisis. The resulting financial destruction was thus magnified, and the challenge was to persuasively prove that the carnage was all due to the frozen cash.”

The FINRA panel sided with Lawrence and, in a decision that stunned the U.S. financial services industry, ordered UBS to pay $80.8 million in damages to Kajeet—a figure that was substantially more than what the company had originally invested in auction-rate securities and one of the largest FINRA arbitration judgments ever secured by a U.S. plaintiff.

David slew Goliath.

The Final Verdict

“CaseMap provided me with some of the vital technology support we had to have in order to successfully try this case,” said Lawrence. “The fact is that the deck was stacked against us with respect to the resources available to both sides, and we had a very tight budget that required us to try this case in an efficient manner. CaseMap allowed me to manage this matter with approximately 50 percent less staffing resources than I would have otherwise needed.”

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