Schottenstein Settlement Nixed by Judge as High-Dollar Family Fight Rolls On

by Jake Martin – Read the article on AdvisorHub.com

Beverley B. Schottenstein in Bal Harbour, Florida won a Finra arbitration award last year for $19 million against her grandsons, Evan and Avi Schottenstein, and their former employer, J.P. Morgan Securities.

The dispute between retail matriarch Beverley Schottenstein and her grandsons, former J.P. Morgan Securities brokers Evan and Avi Schottenstein, last week entered a new chapter that revived the threat of higher liabilities for the two brothers fighting with their grandmother.

Judge Beth Bloom, who has presided over the multimillion-dollar intrafamily battle in U.S. District Court for the Southern District of Florida, denied the younger Schottensteins’ motion to enforce a settlement they claimed to have reached last year with their nonagenarian grandmother that would have significantly reduced their liability in the $19 million arbitration award at issue. Bloom based her February 22 order on the recommendation of a magistrate judge.

The Bal Harbour, Florida grandmother last February had won the Financial Industry Regulatory Authority’s largest arbitration award since 2018 when three panelists decided against the two ex-brokers and J.P. Morgan over alleged unauthorized trading in Beverley Schottenstein’s account and elder abuse. Her attempt to confirm the award in court was met by resistance from the brothers, who filed a motion to vacate the award and whose lawyers thereafter tried to negotiate a settlement with their grandmother’s legal team.

In June, the Schottenstein brothers, who had been found liable for $9.8 million of the Finra award total, claimed in court filings that their grandmother had reneged on terms to resolve the dispute, and they sought to enforce what they described as a $4 million oral settlementof the issues that she wrongfully dragged back to court.

The brothers claimed that the parties on March 18, 2021, and again on May 6, 2021, had reached settlement agreements “on all material terms” but that their grandmother in both instances “went back on her word and attempted to walk away from the binding settlement agreement to which she assented.” (The case in March had been administratively closed without prejudice pending the finalization of the filed settlement agreement, but Beverley in June filed to reopen the case on the grounds that no written settlement had been finalized.)

The report and recommendations, filed January 14 by U.S. Magistrate Judge Alicia M. Otazo-Reyes, found that the parties had not reached an “enforceable, oral settlement agreement” on either of the dates alleged. The parties, she wrote, had “not yet agreed on all essential terms of settlement and had nothing more than an agreement to agree” as of March and were still lacking a binding agreement as of May.

Beverley Schottenstein’s lead lawyer Scott Ilgenfritz of Johnson, Pope, Bokor, Ruppel & Burns in Tampa, Florida, directed all questions to Lonnie L. Simpson of Shutts & Bowen, also in Tampa, who did not respond to a request for comment.

The brothers’ lawyer, Peter S. Fruin with the Birmingham, Alabama law firm Maynard Cooper & Gale, also did not respond to a request for comment.

The dispute at this point is solely a family affair as J.P. Morgan Securities (now operating as J.P. Morgan Advisors) has paid “all of its financial obligations” to Beverley Schottenstein under the Finra award, which had held the firm responsible for more than $9 million, according to court filings. Beverley Schottenstein’s claims against J.P. Morgan Securities were dismissed with prejudice and the firm on February 24 was terminated as a respondent to the case.

Evan, who in April was barred from the industry over the underlying allegations in the dispute, had been ordered by arbitrators to pay $9 million in compensatory damages and $172,631 in costs while Avi, who is not currently registered with a Finra member firm, was on the hook for $602,251 in compensatory damages.

The Schottenstein brothers on January 28 had filed their objections to the magistrate’s report, arguing that Magistrate Judge Otazo-Reyes erred in not finding that certain members of Beverley Schottenstein’s legal team had authority to formally negotiate on her behalf and bind the client to agreements. The judge also did not incorporate case law recognizing Florida’s “strong policy favoring settlements,” they claimed.

They also filed a motion for mediation and to stay all deadlines, contending in part that Evan Schottenstein does not have the financial resources to pay the full Finra award and would have to declare bankruptcy if the case didn’t settle through mediation. The motion was opposed by Beverley Schottenstein’s lawyers, who argued that mediation “will serve no legitimate purpose other than to delay the case and force Petitioner to expend additional resources,” according to filings.

Judge Bloom was “not persuaded” by the brothers’ contention that mediation would be required for Evan Schottenstein to avoid bankruptcy, she wrote in her order accepting the report.

“Petitioner is the master of her case, and she has decided to oppose mediation despite being aware of the risks of an Order confirming the arbitration award,” Judge Bloom wrote. “The Court sees no reason to force Petitioner to take an alternative course of action based on Respondents’ representation of Petitioner’s best interest.”

The judge also noted that the elder Schottenstein could still settle the case outside of mediation “and avoid Evan Schottenstein’s bankruptcy if she chooses to do so, and court-annexed mediation is not required for further settlement negotiations.”

Evan and Avi Schottenstein worked at J.P. Morgan Securities from 2014 to the summer of 2019, when Evan was terminated over “[c]oncerns relating to trading activity for the account of a family member, and the accuracy of the records regarding the same,” according to his BrokerCheck record. Avi also left the firm at that time, according to the database. The brothers had both worked out of J.P. Morgan Securities’ Park Avenue office in New York City.