By DIANA B. HENRIQUES
Published August 4th 1991
A legal battle over a Miami broker's long career as an adult school teacher -- during which, plaintiffs claim, he recruited clients in the classroom and miseducated them about the risks of products he was selling -- is growing more curious each day.
The case, filed in March, pits six former adult school students against the Dade County School Board, Prudential Securities and James P. McCormick, a former Prudential broker. The students complain in their lawsuit that the school board was negligent in supervising the broker's classes, and that Prudential and Mr. McCormick used the classes as part of a scheme to defraud the students.
In mid-July, Judge Ronald M. Friedman of the Dade County Circuit Court dismissed the claims against Prudential and the broker. Although he permitted the plaintiffs to refile on narrower grounds, he also urged all parties involved to seek to settle their differences through mediation outside the courts.
Though both the securities firm and the broker's lawyer have hailed the judge's decision as a victory and a vindication, Prudential has quietly begun negotiating substantial out-of-court settlements with the broker's former students.
The settlement talks were confirmed by the plaintiffs and their lawyer, Lee H. Schillinger of Coral Gables, Fla. "I cannot discuss the settlements," Mr. Schillinger said. "But the parties are making a good faith effort, and I am hoping that case can be resolved."
Several of Mr. Schillinger's clients were more forthcoming, reporting that they are nearing an out-of-court agreement with Prudential that would cover most of the losses they attribute to their dealings with Mr. McCormick.
Brian Elias, the Miami attorney representing Mr. McCormick in this case, said, "I cannot comment on the settlement negotiations because they are between Prudential and the plaintiffs. Mr. McCormick has not been negotiating a settlement."
Eleanor Mascheroni, a spokesman for Prudential in New York, said, "We never comment on any kind of private discussion. You should not infer from that that there even is a discussion."
The Miami case is one of hundreds filed against Prudential as a result of its aggressive sales of various limited partnerships, the highly illiquid and risky investments which Mr. McCormick had described to his students as good "alternatives" to government-insured bank certificates of deposit.
But the dispute is distinctive for arguing that the adult school program that employed Mr. McCormick bore some responsibility for the students' losses because it had not monitored his classes or verified his credentials, and did not check his disciplinary record, which included several out-of-court settlements with disgruntled investors.
According to Walter Dozier, a Miami real estate appraiser and one of the plaintiffs, two sticking points have emerged in the negotiations -- and one is the former students' remaining claims against the Dade County School Board.
After investigating the students' complaints in late 1989, the school board concluded that the broker had violated district rules prohibiting commerce between teachers and students and barred Mr. McCormick from teaching in Dade County schools.
In June, the school system asked Judge Friedman to throw out all the plaintiffs' claims against it, but the judge refused and let the negligence complaint stand.
Mr. Dozier said that Prudential is demanding, as part of the settlement, that the plaintiffs also drop their case against the school board -- apparently to preclude the school district from filing a counterclaim against Prudential and Mr. McCormick, Mr. Dozier said. The lawyer representing the school board was out of town and could not be reached for comment.
The second, and more curious, stumbling block has been the issue of how much, if anything, the plaintiffs and their attorney would be free to say about their case if they accept Prudential's offered settlement.
As is common in many securities cases, Prudential wants the disgruntled investors to agree not to comment publicly about the settlement itself. But Mr. Dozier said that Prudential is trying to push the terms a step further by barring the plaintiffs from any public discussion of "all facts and circumstances of the underlying matter."
Mr. Dozier said, "I don't know how they can expect that. Most of this is a matter of public record." Furthermore, he said, the case already has received wide publicity in the Miami area and across the country -- which would seem to make Prudential's concern about further public discussion somewhat belated, if not entirely moot.
Mr. Elias, who represents Mr. McCormick in this case, said he was pleased with the ruling dismissing the plaintiffs' original claims against his client. But he noted that the plaintiffs "have the ability to file a more limited amended complaint, and I believe they will file one." He added, "The court strongly felt that this matter should be resolved in mediation, and most likely we will begin those efforts in the next few weeks."
That will not quite close the books on the McCormick matter, however. Mr. Schillinger is also representing four more of Mr. McCormick's former clients, and will be filing cases on their behalf in the near future, he said.
And Mr. McCormick's professional conduct is still being examined by the National Association of Securities Dealers, which has licensed him as a broker. But Marc Nurik, the attorney representing the broker in that matter, said he has "no reason to believe that there will be any action by them."
His client, Mr. Nurik said, is still looking for a job in the brokerage industry. "There was so much smoke created, and no fire, that it created a real difficulty for him," he said. "Now that the dust is settling and people are starting to see the reality of the situation, he is becoming more hirable."
