Award FINRA Dispute Resolution

in the Matter of the Arbitration Between:

Claimants Fred Hager Pat Hager

vs.

Respondents David Lemer Associates, Inc. David Lemer Martin Lemer Alan P. Chodosh John Gerard Dempsey, Jr. Steven L. Sormani Anthony Faustini

Case Number: 13-01595

Hearing Site: Columbia, South Carolina

Nature of the Dispute: Customers vs. Member and Associated Persons

This case was decided by an all-public panel.

REPRESENTATION OF PARTIES

For Claimants Fred Hager and Pat Hager: Peter J. Mougey, Esq.. Levin, Papantonio, Thomas, Mitchell, Rafferty & Proctor, P.A., Pensacola, Florida.

For Respondents David Lemer Associates, Inc., David Lemer, Martin Lerner, Alan P. Chodosh, John Gerard Dempsey, Jr., Steven L. Sormani and Anthony Faustini: Trae D. Meyr, Esq. and Michael Shannon, Esq., Thompson Hine LLP, New York, New Yori .

CASE INFORMATION

Statement of Claim filed on or about: May 24, 2013. Fred Hager signed the Submission Agreement: May 24, 2013. Pat Hager signed the Submission Agreement: May 24, 2013.

Statement of Answer filed by Respondents on or about: September 3,2013, Alan P. Chodosh signed the Submission Agreement: September 20, 2013. Steven L. Sonnani signed the Submission Agreement: September 20, 2013. Martin Lemer signed the Submission Agreement: September 23, 2013. John Gerard Dempsey, Jr. signed the Submission Agreement: September 23, 2013. Anthony Faustini signed the Submission Agreement: September 23, 2013. David Lerner Associates, Inc. did not sign the Submission Agreement. David Lerner did not sign the Submission Agreement.

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Petition for an Award Recommending Expungement filed by Respondents Martin Lemer, Alan P. Chodosh, John Gerard Dempsey, Jr. and Anthony Faustini on or about: December 12. 2014.

CASE SUMMARY

Claimants asserted the following causes of action: breach of fiduciary duty; violation of NASD and FINRA Rules 2310 and 2010 regarding suitability and just and equitable principles of trade; breach of contract; negligence; misleading statements and misleading omissions of material infonnation in violation of NASD Rule 2210(d)(1); negligent supervision; violation of Blue Sky laws; and control person liability. The causes of action relate to Claimants' investments in Apple Real Estate Investment Trusts.

Unless specifically admitted in their Answer. Respondents denied the allegations made in the Statement of Ciaim and asserted various affinnative defenses.

RELIEF REQUESTED

In the Statement of Claim, Claimants requested: compensatory damages In the amount of $519,932.00; interest at the statutory rate; rescission; attorneys' fees; reasonable costs associated with bringing this claim; and such other and further relief as deemed appropriate by the Panel.

In their Statement of Answer, Respondents requested: dismissal of the Statement of Claim in its entirety with prejudice; denial of any recovery by Claimants; expungement of this claim from the Central Registration Depository ("CRD") records of Respondents Martin Lemer, Alan P. Chodosh, John Gerard Dempsey, Jr., Steven L. Sonnani and Anthony Faustini; assessment of all fomm fees and costs against Claimants; and any such other relief deemed just and appropriate by the Panel.

OTHER ISSUES CONSIDERED AND DECIDED

The Arbitrators acknowledge that they have each read the pleadings and other materials filed by the parties.

Respondents David Lemer Associates, Inc. and David Lemer did not file with FINRA Dispute Resolution properiy executed Submission Agreements but are required to submit to ariiitration pursuant to the Code of Arbitration Procedure (the "Code"), and, having answered the claim, are bound by the detennination of the Panel on all issues submitted.

On or about November 14, 2013, Claimants filed a dismissal of all claims asserted against Respondent Steven L. Sormani without prejudice. Therefore the Panel made no detenninations with respect to any of the claims asserted against Respondent Steven L. Sormani in the Statement of Claim.

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On or about August 20. 2014, the parties notified FINRA that they settled this matter with respect to all of the remaining Respondents and requested that the file remain open in order for Respondents to pursue expungement.

On or about December 12, 2014, Claimants filed a Notice of Dismissal With Prejudice of this proceeding in its entirety. Therefore the Panel made no determinations witii respect to any of the claims asserted in the Statement of Claim.

On or about December 12,2014, Respondents Martin Lemer, Alan P. Chodosh, John Gerard Dempsey, Jr. and Anthony Faustini filed a Petition for an Award Recommending Expungement, to which Claimants did not respond. Inasmuch as Respondent Steven L. Sonnani did not reassert his request fbr expungement in the Petition filed, the Panel deemed Respondent Steven L. Sonnani's request contained within the Statement of Answer to be moot.

On or about March 4,2015, Respondents Martin Lemer, Alan P. Chodosh. John Gerard Dempsey, Jr. and Anthony Faustini filed a Supplement to Exhibit A of their Petition for Expungement.

On or about March 9.2015. Respondent Antiiony Faustini withdrew his petition for an award of expungement without prejudice and advised that he would not be participating in the expungement hearing scheduled for March 10, 2015.

The Panel conducted a recorded telephonic hearing on March 10,2015. so the parties could present oral argument and evidence on Respondents Martin Lemer. Alan P. Chodosh and John Gerard Dempsey, Jr.'s requests for expungement. Claimants did not oppose the expungement requests and opted not to appear for the telephonic hearing.

The parties have agreed that the Award in this matter may be executed in counterpart copies or that a handwritten, signed Awanj may be entered.

AWARD

After considering the pleadings, the testimony and evidence presented at the recorded telephonic hearing, and the post-hearing submissions (if any), the Panel has decided in full and final resolution of the issues submitted for determination as follows:

1. The Panel recommends the expungement of all references to the above-captioned ariiitration from Respondents Martin Lerner (CRD #871038), Alan P. Chodosh (CRD #2918542) and John Gerard Dempsey. Jr.'s (CRD #869304) registration records maintained by the CRD, with the understanding that pursuant to Notice to Members 04-16, Respondents Martin Lemer, Alan P. Chodosh and John Gerard Dempsey. Jr. must obtain confirmation from a court of competent jurisdiction before the CRD will execute the expungement directive.

Unless specifically waived in writing by FINRA. parties seeking judicial confinnation of an arbitration award containing expungement relief must name FINRA as an additional party and serve F IN i^ with all appropriate documents.

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Pursuant to Rule 12805 of the Code, tiie Panel has made the following Rule 2080 affinnative finding of fact with respect to Respondents Martin Lemer, Alan P. Chodosh and John Gerard Dempsey, Jr.:

The claim, allegation, or infonnation is false.

The Panel has made the above Rule 2080 finding based on the following reasons:

The three petitioners, Martin Lemer, Alan P. Chodosh and John Gerard Dempsey, Jr., do not know the Claimants and have never communicated with them in any manner. Additionally, none of the petitioners supervised the financial adviser. Moreover, Claimants actually made money on their investments, rather than suffering losses.

In making the above findings, the Panel considered the detailed and uncontroverted swom testimony of Martin Lemer. Alan P. Chodosh and John Gerard Dempsey, Jr., an independent analysis of Claimants' accounts showing that they made money in their investments, the BrokerCheck records of Respondents Martin Lemer, Alan P. Chodosh and John Gerard Dempsey, Jr. (who were officers of the finn, not acting brokers in this Instance), and the settlement agreement. Including the amounts paid to any party (representing the nuisance value of the claim) and any other relevant terms and conditions of the settlement. The Panel notes that Respondents Martin Lemer, Alan P. Chodosh and John Gerard Dempsey, Jr., were not parties to the settlement agreement and did not contribute in any way to the settlement amount. Additionally, no party conditioned settlement upon an agreement not to oppose an expungement request.

2. Notwithstanding the foregoing. Arbitrator Sandlin has qualified her concurrence with the decision, as follows:

1 write this concuning agreement to the recommendation for expungement for Respondents Martin Lemer, Alan P. Chodosh, and John Gerard Dempsey. Jr. I reluctantly agree to the expungement, as a public arbitrator on the Panel. I agree, in principal, because the three Respondents eventually did 'the right thing', and returned the investment principal of their investors. Had they not accomplished this, I would hold out for a very different outcome to this hearing.

Winston Churchill stated, "Americans can be counted on to the do the right thing, after they have tried everything else." He was a great orator, with a bit of truth to his logic.

These issues could have been better prevented if the President, Chief Financial Officer, and Senior Vice President/Director of Sales for David Lemer Associates, Inc., had added a few extra questions to the Suitability Profile:

1) Did the investors have any investments with negative outcomes in their past securities dealings?

2) What percentage of the investors* income was being placed in the same REIT

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investments? (and how much is too much? Is 40% of their portfolio too much for one investment? I would posit that it is);

3) If the investors had to reach their principal investment quickly (i.e. in a personal emergency), could they afford to wait the entire seven-year waiting period to receive back their principal investment?

I would also posit that while salesmanship and puffery go hand in hand, in order to make a sale, someone at the top levels needs to make sure that there are sufficient lines of credit available to stop a 'run on the bank', should one occur in a bear mari<et. In this case, it took close to two years (2011 to 2013) to satisfy investors and that is too long.

One argument was made that these REITs were 'a safe bet', in that the investments were in 'solid' hotel chains (i.e. Mam'ott and Hilton), and that the investors should have been able to trust in their investments. I am sure that the investors in Sears. Circuit City, and with Bemie Madoff were also feeling that their investments were 'solid'. Nothing is 'solid', nor beyond reproach, any longer. Investors not only have a right to question any investment, they shouid be questioning closely all investments.

While investors may feel that they personally have a strong investment history when they have been investing for 15 years, this is not a long investment history; not long enough in the years of bull markets for them to really understand what a bear maricet can do to their life savings. They may feel that they 'have anived' and have a strong market knowledge, but they still rely on their investment companies and the officers of those companies, who have many more years of investing experience, to guide them through their mari<et excursions.

As officers of a solid and stable company (as Respondents claim), they owed a high level of satisfaction to their investors, and could have done more to make sure that they did not have a two-year period (2011 to 2013), when investors had sleepless nights, and developed ulcers and anxiety, while waiting for the return of their principal investments.

Officers of this company should have overseen the development of an initial plan that had better protections built in for large percentage portfolio investments and investors who did not have a "Warren Buffett' experience level of investing.

Again, I will concur with the other two panel members in recommending expungement, but I will state that these officers are very, very fortunate men, and under any other circumstances. I would be very likely not to allow expungement, and would be reticent to do so in the future, under any circumstances, for this company or officers, shouid it ever happen again.

FEES

Pursuant to the Code, the following fees are assessed:

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Filing Fees FINRA Dispute Resolution assessed a filing fee'' for each claim:

Initial Claim Filing Fee =$ 1,575.00

*Ttie filing fee Is made up of a non-refundable and a refundable portion.

Member Fees Member fees are assessed to each member finn that is a party in these proceedings or to the member finn(s) that employed the associated person(s) at the time of tiie event(s) giving rise to the dispute. Accordingly, as a party. Respondent David Lemer Associates. Inc. is assessed the following:

Member Surcharge =$ 2,250.00 Pre-Hearing Processing Fee =$ 750.00 Hearing Processing Fee =$ 4,000.00

Hearing Session Fees and Assessments The Panel has assessed hearing session fees for each session conducted. A session is any meeting between the parties and the ariiitrator(s), including a pre-hearing conference with the ariDitrator(s) that lasts four (4) hours or less. Fees associated with these proceedings are:

One (1) Pre-hearing session with the Panel @ $1,200.00/session =$ 1.200.00 Pre-hearing conference: October 29,2013 1 session

One (1) Hearing session on expungement request @ $1.200.00/session =$ 1,200.00 Hearing Date: March 10.2015 1 session Total Hearing Session Fees =$ 2,400.00

The Panel has assessed $600.00 of the hearing session fees jointly and severally to Claimants.

The Panel has assessed $600.00 of the hearing session fees jointly and severally to Respondents David Lemer Associates, Inc., David Lemer, Martin Lemer, Alan P. Chodosh, John GeranJ Dempsey, Jr., Steven L. Sormani and Anthony Faustini.

The Panel has assessed $1,200.00 of the fees in connection with the expungement hearing conducted on March 10,2015. jointly and severally to Respondents Martin Lemer, Alan P. Chodosh and John Gerard Dempsey, Jr.

All balances are payable to FINRA Dispute Resolution and are due upon receipt.

Mar 23 15 11.05a p i

FINRA Dispute Resolution Arbitration No. 13-01595 Avyard p9qq7flf7

ARBITRATIOW PANEL

John D. Mattmgly Sarah G. Anderson Dana Taft Sandlln

PubUc Arbitrator, Presiding Chairperson Public Ariiitrator PubBc Arbitrator

I, the undersigned Arbitrator, do hereby affinn that I am the individual described herein and who executed this instrument which is my award.

Concurrtnq Arbitrators' Signatures

JA atbngly Ari3 10 ng

Signature Date Chairperson

Sarah G. Anderson Public Arbitrator

Signature Date

Dana Tait SandGn Public Arbitrator

Signature Date

Date of Service (For FINRA Dispute Resolution office use only)

03/26/2015 02:19PI 1

FINRA Dispute Resolution Art>itration No. 13-01595 AwardPsQB7of7

PAGE 02/02

John D. Mattingly Sarah G. Anderson Dana Tait Sandlin

ARBITRATION PANEL

Public Artjftrator, Presiding Chairperson Public Ariiitrator Public Arbitrator

1, tiie undersigned Art)itrator, do hereby affirm that I am the individual described herein and who executed this instrument which is my award.

Concurring Arbitrators' Slqnaturea

John D. Mattingly Public Ariiitrator, PresMIng Chairperson

Saifih G. Anderson Public Arbitrator

Signature Date

3/27//s-Signature Date

Dana Tart Sandlin Public Arbitrator *

Signature Date

Date of Service (For FINRA Dispute Resolution offlce use only)

FINRA Dispute Resolution / Itratton No. 13-01695

John D. Mattingly Sarah G. Anderson Dana Tait Sandlin

frPRlTRATIQN PANEL

Public Arbatrator, Presiding Chairperson Public ArisiitiBtor Public Arbitrator

I. the undersigned Ariiitrator. do hereby affirm that I am the individual described herein and who executed this instorument which is my award.

Concurring Arbitrators' Signatures

John D. Mattingly Public Artjitrator, Presiding Chairperson

Signature Date

Sarah G. Anderson Publio rbitrator

Dana Tait Sandii Public Ariiitrator

Signature Date

SIg

Date of Sen ice (For ?m<h Dispute Resolution office use only)

2000/ZOOO anois sd.i