More than six years after two financial advisors’ multimillion-dollar M&A deal, the subsequent legal wrangling is finally approaching its conclusion.
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Last month, Jayne W. Di Vincenzo of the Chester, Virginia-based office of Curo Private Wealth won the state Supreme Court’s rejection of a bid by Devin J. Garofalo of Midlothian-based Colonial River Wealth Management to vacate her FINRA arbitration award of more than $2 million. Garofalo had argued that one of the arbitrators showed “evident partiality” toward her.
Such protracted legal disputes show why finding the right M&A partner or new firm destination on the recruiting trail involves so much more than securing the biggest check, according to Jason Diamond, the president of advisor recruiting firm Diamond Consultants. Deal structures that give either side an exit prior to full consummation can also help avoid disputes.
“Don’t think about it through the lens of what firm pays the highest multiple or the biggest deal,” Diamond said. “It’s either give yourself off-ramps or be super thoughtful about who you partner with, even if it’s not the highest bidder, because it very well might not be.”
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Things (and deals) fall apart
Di Vincenzo has now prevailed over her former business partner in FINRA arbitration, as well as state and federal court cases. The legal saga, which has cost several hundreds of thousands of dollars in attorney fees, started with Di Vincenzo’s arbitration filing seven months after Garofalo and Colonial River acquired her advisory practice, then known as Lions Bridge Financial Advisors, for $3.6 million in February 2020.
“We are disappointed by the Supreme Court of Virginia’s decision, which we believe deprives litigants of a meaningful opportunity to choose fair and impartial arbitrators and undermines confidence in the arbitral process,” Garofalo’s lawyer, Monica Taylor Monday of Gentry Locke, said in an email.
“FINRA’s robust disclosure rules — which are the foundation of FINRA arbitration — are designed to ensure that the arbitrators have disclosed all information bearing on their ability to impartially decide the case so the parties can make an informed decision when choosing arbitrators,” Taylor Monday continued. “But Mr. Garofalo never had the opportunity to consider the arbitrator’s undisclosed business connection with the very company at the heart of the dispute, Lions Bridge Financial Advisors, or that the arbitrator had introduced and promoted Ms. Di Vincenzo as a five-star wealth advisor — facts that the arbitrator later admitted could create an appearance of bias. Mr. Garofalo should have had a chance for an impartial panel rule on the merits of the case.”
Di Vincenzo referred a request for an on-the-record interview about the case to her lawyer, who declined it.
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Many forums and filings
The Feb. 26 decision in Virginia’s Supreme Court affirmed an appeals court’s December 2024 ruling against Garofalo’s request to toss the FINRA panel’s March 2022 award of $2.07 million in compensatory damages, unpaid commissions, attorney fees and expert witness costs plus interest and remanded the case back to the lower court for further proceedings involving additional legal expenses.
Di Vincenzo’s arbitration claim had accused Garofalo of breach of contract and the covenant of good faith and fair dealing, disparagement and defamation, fraud and misrepresentation and tortious interference with business. He denied those allegations and filed a counterclaim accusing Di Vincenzo of tortious interference, defamation, fraud, misrepresentation and breach of contract while seeking injunctive and declaratory relief.
In November 2022, Colonial River filed a separate lawsuit in the Richmond federal court accusing Di Vincenzo and her onetime brokerage, Cambridge Investment Research, of tortious interference and conspiracy and alleging Di Vincenzo had breached their contract. However, the judge in that case ruled in favor of motions by Cambridge and Di Vincenzo to dismiss it in July 2023, and, in January 2024, that federal district judge ordered Colonial River to pay Di Vincenzo attorney fees of more than $227,000.
In the unanimous state Supreme Court decision last month, the judges ruled that Garofalo had failed to demonstrate that a reasonable person would believe that “the arbitrator’s conduct signifies obvious bias” against him, Justice Thomas Mann wrote in the opinion. Arbitrator Michael Glasser, a Norfolk-based attorney, served on the board of a bank with trust and marketing arms that had a referral relationship with Lions Bridge over a 15-month span in 2014 and 2015. In prior proceedings, Glasser has admitted that he failed to disclose that connection during the FINRA arbitrator selection process, saying he had forgotten about meeting her and wouldn’t have taken the case otherwise, the document stated. But, in the justices’ opinion, he didn’t do anything as an arbitrator that suggested he tilted the case in Di Vinvenzo’s favor.
“Glasser repeatedly stated that he was unaware of Di Vincenzo or her company before the arbitration and recognized his imperfect disclosures,” Mann wrote. “Put simply, Glasser’s imperfect disclosures and inability at the time of the arbitration to recall past interactions would not lead a reasonable person to conclude that he harbored obvious bias in favor of Di Vincenzo. The fleeting, formal introductions at board meetings and the attenuated connection to a defunct business partnership fall well short of the material nondisclosures that would suggest evident partiality.”
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Case closed?
Garofalo and his attorney do not plan to petition for a rehearing of their appeal of the earlier decisions confirming Di Vincenzo’s arbitration award and rejecting their request to vacate it, Taylor Monday said in an email.
In earlier communications, Garofalo asserted that Financial Planning’s other stories about the case had “completely omitted” the “significant amount of facts and documents” provided by his previous attorney about how Di Vincenzo had allegedly violated the terms of their earnout agreement in the M&A deal.
Garofalo’s “focus continues to be advocating for fairness and equality in our industry while providing a platinum-level experience to our clients at Colonial River Wealth Management,” he said. He expressed his strong disagreement with the arbitration and court rulings.
“Like so many litigants involved in the FINRA arbitration process, I experienced the inequities associated with arbitrator failures to disclose relevant background information,” Garofalo said. “This inequity negatively impacted all other cases that you refer to. I believe the court decisions were not correct, because the courts focused on prejudice in the decision, whereas the real issue is the perceived prejudice and lack of impartiality that occurs when an arbitrator like Mr. Glasser failed to disclose that he knew my adversary, had introduced her at presentations, at corporate meetings on which he sat as a board member and even admitted that had he recalled that he knew her, that he would have recused himself from the case. I intend to bring the inequities of the arbitration system to the attention of legislative members who have expressed concern over FINRA.”
