Tripi v. Prudential Securities, Inc.

Beginning in August 1998, Rick Tripi (plaintiff) maintained a retirement account at Prudential Securities, Inc. (Prudential) (defendant). The funds in Tripi’s account were managed by Prudential broker Glenn Malloff, who had previously been censured and suspended by the New York Stock Exchange. Tripi intended his account funds to be used for retirement but was fine with aggressive investments. In January 1999, Tripi’s account reached a high of approximately $980,000, but by November 1999, it had fallen to less than $110,000. According to Tripi, he verbally instructed Malloff in January 1999 to liquidate stock into cash. Malloff denied receiving the instruction. On Prudential’s behalf, Malloff engaged in a high number of trades, each generating commissions, such that Tripi’s account was twice selected for a compliance review by Prudential. Although Tripi received written confirmations for each trade and monthly statements from Prudential, Tripi stated that he did not scrutinize the documents because he was more concerned about the “bottom line.” In October 2000, Tripi initiated arbitration against Prudential, alleging that his account had been improperly managed in the form of unauthorized and excessive trading in contravention of the account’s goal as a retirement fund and for the sole purpose of increasing Prudential’s commissions. Prudential defended itself by arguing that Tripi ratified Prudential’s conduct or failed to mitigate damages. The arbitration panel awarded Tripi $25,000 in compensatory damages, effectively holding Tripi at 97 percent fault and Prudential at 3 percent fault for Tripi’s investment losses. The panel declined to provide its rationale for the award. In court, Tripi moved to vacate the award, while Prudential moved to confirm it.